Bank of France Government Jean-Claude Trichet was continuing his mediation efforts late Thursday with top executives of both banks, but chances of a concerted solution remained elusive, according to people close to the situation.

The discussions took place just hours ahead of a crucial meeting by French banking regulators that will determine the outcome of the fight in the absence of an accord. Led by Trichet, the regulators are expected to decide late Friday whether or not BNP can retain the large minority stake it garnered through its unsolicited bid for Societe Generale.

BNP's bid was part of its effort to create Europe's biggest bank in terms of assets through simultaneous unsolicited offers for both Societe Generale and Paribas SA, which were in the process of completing afriendly merger. BNP succeeded in thwarting that marriage by winning clear control of Paribas, but it fell short of a majority in Societe Generale, winning 37.1 per cent of the bank's shares and 31.8 per cent of voting rights.

BNP says that stake, which makes it by far Societe Generale's biggest shareholder, gives it "effective control" of the bank and is arguing that it should be allowed to retain its stake. But Societe Generale claims that BNP's bid was clearly rejected by about two-thirds of the bank's shareholders and it should be obliged to return its shares to the market. Trichet has been seeking to break the logjam, but while both sides state their willingness to negotiate and have made conciliatory steps, so far they are refusing to budge from their basic premises.

BNP has offered to maintain Societe Generale as an autonomous unit rather than merge with it. It also says it is prepared to limit cooperation at first to fields agreed with Societe Generale, and Thursday it offered that SocieteGenerale have board representation on the new bank that will result from the likely merger of BNP and Paribas. However, it insists on retaining its full stake in Societe Generale and says its ultimate aim remains a three-way merger. For its part, Societe Generale says it is prepared to cooperate with BNP in several areas -- but only if its stake in Societe Generale is significantly lowered, if not canceled.

Meanwhile, even as they negotiate, there were signs of a hardening of positions.

The Wall Street Journal