France rejects special treatment for UK banks in EU package

(Recasts with finance minister)

PARIS, Feb 10 (Reuters) - France's finance minister said on Wednesday British banks must not win special treatment under a proposed European Union reform package aimed at keeping Britain in the bloc after French banks warned the proposals were unfair.

"There are several proposals, several ambiguities, in the texts that could allow one to think there may be a difference in treatment between London and the others. That's not possible," Michel Sapin told members of the finance commission in the lower house of parliament.

"Treatment has to be as identical as possible and that's why we are fighting," Sapin said.

The head of the French Banking Federation, Societe Generale (Swiss: 519928.SW - news) Chief Executive Frederic Oudea, said in a letter to President Francois Hollande that the package raised major problems. The letter was also addressed to Sapin.

European Council President Donald Tusk has proposed a reform package, which EU leaders will have to approve at a summit later this month, in the hope of persuading Britons to vote to stay in the European Union in an upcoming referendum.

Sapin said Tusk's proposals needed to be clarified to root out any ambiguity.

The measures could in particular let non-euro zone countries such as Britain have different banking rules to those inside the shared currency bloc, which Oudea said would spell the end of the single rule book for European banks.

"If the plan is adopted in its current state, it would put an end to fair competition between financial actors while non-euro institutions would continue to benefit from a European passport," Oudea wrote in his letter, dated Feb. 5, referring to the possibility of operating freely across the EU.

"It would create a risk of 'regulation at the lowest common denominator' and arbitrage between financial centres," Oudea said in the letter, echoing concerns voiced by the EU banking watchdog.

Oudea also said euro zone countries should not be forced to help foot the bill for potential financial sector failures in Britain as London would get that right vis-a-vis the euro zone as the package stands now.

In a similar vein, Oudea said the euro zone should have a say over decisions by non-euro zone countries affecting it if Britain were granted that right. (Reporting by Marc Joanny; Additional reporting by Yann Le Guernigou and Michel Rose; Writing by Leigh Thomas; Editing by Alister Doyle/Mark Heinrich)