Paris - France will inject 10.5 billion euros (14 billion dollars) into the country's six biggest banks by the end of the year in an effort to provide capital for business and consumer lending, Finance Minister Christine Lagarde announced late Monday.

The government is to subscribe to subordinated five-year debt issued by the six banks, which will be taken over by a new government body, the SPPE, but it will not hold voting rights.

Lagarde said that another 10.5 billion euros would be allocated for 2009 "if market tensions persist."

In exchange, the French banks committed themselves to increase their loans to individuals and companies by 3 to 4 per cent and to avoid giving executives extravagant severance payments known as "golden handshakes."

The aim of the capital injections is to prevent "healthy" French banks from suffering from a competitive disadvantage with American or British banks that dispose of a higher percentage of capital resources and better credit standing because of state subsidies.

On Tuesday, BNP Paribas became the first of the six banks to take advantage of the offer, accepting the 2.55 billion euros the government had earmarked for it.

Among other banks concerned by the injection, Credit Agricole is to receive 3 billion euros and Societe Generale 1.7 billion euros.

In all, Paris could eventually inject 40 billion euros into the financial system by this method, as part of the 360-billion-euro rescue package the government forged earlier in October.

However, the French daily Le Monde reported that the American investment bank Merrill Lynch has estimated that if the global economy were to slump into a worst-case recession, French banks would require an additional 73 billion euros in capital to survive.