Sarkozy steps up pressure on French banks

French President Nicolas Sarkozy put more pressure on the country's banks on Thursday, demanding that the least top bankers could do was temporarily cancel their bonuses.

The French government has unrelentingly demanded that the banks should do more to lend to businesses, in order to keep the economy ticking over in the face of the worst financial crisis since the 1929 stock market crash.

Addressing a gathering of businessmen and local dignitaries, Sarkozy said that a "minimum" gesture would be to suspend bonuses, given the state of world markets.

He also attacked banks that used state aid to buy back their own shares to boost investor returns and said banks ought to make "moderate" dividend payouts for 2009.

"Banks have responsibilities towards the economy and towards French people," he said.

Earlier this month, French Economy Minister Christine Lagarde said the government was working on the imminent launch of a second tranche of 10.5 billion euros ($13.80 billion) aid to support the country's banks.

An initial tranche of 10.5 billion euros was given to the banks last year.

France agreed to subscribe to subordinated debt issued by Credit Agricole, the country's biggest retail bank, for 3 billion euros.

BNP Paribas, France's top bank by market capitalisation, got 2.55 billion, while Societe Generale and Credit Mutuel got 1.7 billion and 1.2 billion respectively.

France also lent 1.1 billion to Caisse d'Epargne and 950 million to Caisse d'Epargne's merger partner, Banque Populaire.

Along with their exposure to the U.S. subprime mortgage crisis, the banks have also been affected by the alleged $50 billion fraud by U.S. financier Bernard Madoff.

On Thursday, French Prime Minister Francois Fillon told Reuters that the full extent of French banks' exposure to toxic assets remained uncertain.