The central bank said talks between senior executives of BNP, Societe Generale and Paribas, and Bank of France Governor Jean-Claude Trichet were unable to reach a compromise leaving all the bids open.

The news sparked a rise in the stock of all three banks as traders said the breakdown, foiling hopes for a friendly solution to keep the banks in French hands, revived the potential to speculate on another bidder.

They posted gains of between two and three per cent in early Paris dealings.

The failure of the talks is likely to be seen as a blow to the reputation of Trichet who said he wanted to find a third-way solution and had taken a high profile in the merger saga.

"It's a blow for Trichet," said one banking source. "I expected them to come up with some kind offace-saving solution."

BNP in February challenged Societe General's friendly offer for Paribas, bidding for them both to create a $1 trillion asset mammoth -- the largest in the world by this measure.

The move was fiercely resisted by SocGen and Paribas despite mounting pressure from the authorities.

The three banks had been talking to Trichet since last Wednesday, but the central bank last night said the talks "... did not lead to the consensual solution sought," the Bank of France said in a statement.

Trichet will now present the result of the talks to the credit institutions committee, which regulates the banking system and will make a decision on the case "in the light of the workings of the banking system", the statement added.

"At the close of the public offers, BNP's and Societe Generale's plans for Paribas and Societe Generale can go ahead ... when they allow one of the initiators to take control of the target institution of the offer," it said.

Trichet told the three banks that if at theclose of the offer period, there was no clear control, they should propose a consensual solution which respects their interests, which would be used by the committee to guide its decision.

Analysts said this was one crucial part of the statement, ending speculation that if, for example, BNP only won a minority of SocGen it would seek to control the bank anyway.

"The statement makes it clear that the authorities will not allow minority stakes, so there will have to be clear winners," said one analyst who declined to be named.

All three banks involved in the saga declined to comment on the outcome of the talks.

The focus of attention will now fall on the authorities with the credit institutions committee expected to sanction SocGen's increased offer for Paribas and the CMF market regulator expected next week to set a closing date for the offers which could be July 21.