UPDATE 2-Bank CEOs say trading curbs will stifle French economy
* Bosses say planned reform puts France at disadvantage
* Prop trading is around 1 pct of banks' revenue -SocGen CEO
* Critics say planned law is too lax
* FinMin open to amending the bill to protect economy (Adds Moscovici quote)
By Lionel Laurent and Matthias Blamont
PARIS, Jan 30 (Reuters) - The heads of France's top three banks said tougher laws to curb risky trading would put the country at a competitive disadvantage as it struggles with record unemployment and a grim economic outlook.
The CEOs of BNP Paribas SA, Societe Generale and Credit Agricole SA, who were appearing before a parliamentary committee on Wednesday looking into curbing proprietary trading, defended their trading businesses as low risk and vital to the economy.
Proprietary trading is when a bank uses its own capital and balance sheet to carry out trades rather than on behalf of a customer.
The draft law will demand banks separate such activities from client-linked business and has been hailed by France as a model for the rest of Europe.
But critics say the law, which falls short of the suggested ring-fencing of investment banking in Britain's Vickers' reform, for example, breaks President Francois Hollande's campaign pledge to get tough on finance.
France's unemployment rate is at its highest in 13 years as the country struggles with stagnant growth and a pullback in bank credit as lenders across Europe slim down to meet incoming post-crisis Basel III capital requirements.
"Given the significant number of reforms that have come out... This (French) law is neither pressing nor a priority," Jean-Paul Chifflet, Credit Agricole's chief executive, told the panel.
The three heads addressed each other by name and echoed each other's arguments that the proposed law would put them at a disadvantage against their international rivals.
When asked how much of their revenue came from prop trading, SocGen CEO Frederic Oudea admitted the figure was small, at around 1 percent of French banks' total group revenues.
"Within the 15 percent of revenue that comes from capital markets... (prop trading) is less than 10 percent, though it varies depending on the bank," Oudea said.
Citing plans for a banking union in Europe with the European Central Bank as its supervisor - as well as the Basel III global rulebook designed to crack down on risk after the 2008 financial crisis - the bankers said France was in danger of going it alone by forcing lenders to carve out "speculative" activities.
"It would be shocking to have a French law that is not compatible with Europe," BNP head Jean-Laurent Bonnafe said.
Several lawmakers mocked the CEOs for criticising a law that would only impact a tiny slice of business. "If I understand correctly, this law doesn't bother you that much," said Socialist deputy Karine Berger.
Speaking to the same committee, French Finance Minister Pierre Moscovici said he was open to the possibility of amending the bill in parliament so that some market-making activities might be put into the prop basket as well - but urged caution.
"Yes, let's be reformers, but let's not be total masochists when it comes to our economy," Moscovici said.
Brussels-based group Finance Watch has called for the French reforms to be toughened by asking banks to separate more of their activities, and to put a precise number on the reform's impact.
"(Our recommendations) aim to give banks greater capacity to serve the real economy and to protect the taxpayer from a potential bank failure," Finance Watch's Thierry Philipponnat said.
Analysts have said the earnings impact of separating activities as proposed by the draft reform would be "limited" or "marginal". (Editing by Daniel Magnowski and Mike Nesbit)
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