The comments came as Les Echos reported on Monday that lending to hedge funds and private equity will be part of the risky activities French banks will have to house in a separate entity from July 2015.

"The banking reform proposals currently have no equal anywhere in Europe," said Jean-Paul Chifflet, head of Credit Agricole and also of the French Banking Federation lobby group.

"It is going to become extremely difficult for French banks to lend to the economy."

Les Echos, citing France's draft bank reform law due to be unveiled next month, said high-frequency trading and proprietary trading of commodity derivatives would be forbidden in those separate units. Banks' market-making activities will be spared, as Reuters reported on November 15.

Chifflet criticized the crisis resolution section of the law, flagged by French Finance Minister Pierre Moscovici earlier this month, which he said would call on all banks to suffer the cost of rescuing a rival if it collapsed.

He also warned the rules would come on top of a raft of additional taxes charged to the banking sector and the post-crisis package of capital and liquidity rules known as "Basel III".

Commenting on the U.S. decision to delay application of Basel III, which has sparked ire in Europe, Chifflet said: "I hope European Internal Market Commissioner Michel Barnier will be attentive to what is being done in the United States before applying the Basel III rules to avoid penalizing Europe.

(Reporting by Alice Cannet and Lionel Laurent; Editing by Mark Potter)

• A Permanent Economic Emergency