PARIS (Reuters) - France's banking lobby said on Thursday the sector risked losing out to its British and U.S. rivals if European Union finance ministers back exemptions from planned trading curbs.
EU finance ministers are set to decide on a revised draft law that aims to end "to big too fail" banks at a meeting on Friday in Luxembourg.
Britain could win an exemption because it already requires the retail arms of its banks to hold extra capital, according to a document seen by Reuters.
"If the draft proposal is adopted in its current form, this would one of the most shocking financial scandals in European history," Marie-Anne Barbat Layani, chief executive of the French Banking Federation, said in a statement.
"French banks are being removed from the market and the funding of French companies is being placed in the hands of other players," she added.
The FBF said that as the law stood banks in the City of London would be entirely exempt, as would lenders with retail deposits under certain limits, which it said would leave U.S. banks free of curbs on their activities in Europe.
The federation said that without changes the regulations would only apply to French banks, which hold a lot of deposits on their books, and two or three other European banks outside of Britain.
"Such an exemption is not only unacceptable in terms of the most basic principles of competition, but also contradictory with the very objective of a European regulation, in other words ensuring a level playing field," the FBF said.
The draft law, designed to avoid bank bailouts such as those that cost taxpayers dearly during the 2008-2009 financial crisis, has already been the subject of fierce debate in Britain, France and Germany which have already adopted rules to rein in bank trading risks.