Two of France's leading banks were forced to deny that they needed emergency funding yesterday as the Government expanded the terms of its €360 billion (£282billion) rescue plan. After sharp falls in their share prices, BNP Paribas and Crédit Agricole issued formal rebuttals after speculation arose that they were preparing to tap the facility.

As part of an internationally co-ordinated set of state interventions designed to stabilise the banking system, France said this week that it would guarantee bank loans up to €320billion. A further €40billion will be available to take stakes in banks as necessary. Georges Pauget, chairman of the French Banking Federation, said yesterday that banks could also use the facility to refinance specific maturing loans. Despite denying the need for state funds, both BNP Paribas and Crédit Agricole reserved the right to do so if the terms were commercially attractive.

At the same time, Christine Lagarde, the French Finance Minister, appeared to backtrack on earlier plans to force banks to operate minimum Tier 1 ratios - a measure of financial strength that compares debt to equity levels - of 9percent. Clarifying the Government's position, Ms Lagarde said that it had no plans to set targets. The European Union said that the City should brace itself for tighter regulation, including a crackdown on executive pay. Successive British governments have resisted EU red tape binding London's financiers, but José Manuel Barroso, the President of the European Commission, said that the rules of the game would change. “There must be no more business as usual,” Mr Barroso said before an EU heads of state meeting today in Brussels. “We must rethink regulation and supervision rules for financial markets including banks, mortgage lenders, hedge funds and private equity.”