The French government’s latest €10.5bn ($13.4bn) capital injection offered to six banks is aimed more directly at bolstering the banks’ balance sheets.

This time banks can take preference shares without voting rights, which would count towards “core” tier one capital – a rigorous measure of balance sheet strength that excludes debt such as instruments.

The downside is that they are more expensive than the subordinated loans that are also on offer, carrying a coupon rate twice that of the debt.

In December the state provided €10.5bn in subordinated loans to BNP Paribas, Société Générale, Crédit Agricole, Caisse d’Epargne, Banque Populaire and Crédit Mutuel.

This time, French president Nicolas Sarkozy has also increased the number of conditions for the second tranche of state aid, which banks have until August 31 to take up.

These include curbs on dividend payments, a ban on executive bonuses and a pledge to finance €7bn of export contracts in addition to the requirement to boost annual lending to the economy by 3-4 per cent.

The banks have fallen into line. On Tuesday, Daniel Bouton and Frédéric Oudéa, respectively SocGen’s chairman and chief executive, renounced their bonuses, as did Georges Pauget, chief executive of Crédit Agricole. This followed a similar decision last week by Michel Pébereau and Baudouin Prot, respectively chairman and chief executive of BNP.

The requirement to limit dividend payments has been met with delight by some bankers as an additional measure to conserve capital.

The choice of instruments was granted after it became clear that the banks were divided in what they wanted.

Some would prefer to take the subordinated loans instead of the more expensive and potentially dilutive preference shares.

The government plan also envisages the banks paying a higher coupon the longer they hold on to the preference shares. This requirement was inserted to comply with European Union rules on state aid.

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