* French ban had been due to expire on Friday, Italy eyed
* UK outvoted on short selling curbs powers given to ESMA
* UK watchdog FSA says no plan to limit short-selling
James Regan and Huw Jones
PARIS/LONDON, Nov 10 France extended its short-selling ban on the shares of 10 financial institutions by three months from Friday as the euro zone debt crisis spreads beyond Greece to Italy.
"This ban could be lifted before the end of this period if market conditions allow," Finance Minister Francois Baroin said in a statement on Thursday.
The move comes after France's AMF stock market regulator said market conditions did not allow for the ban to be lifted, according to the statement.
The ban, introduced on Aug. 11, is designed to discourage speculative trading on French financial institutions after banking stocks took a beating in early August.
Shares in French banks were mixed, with Societe Generale up 1 percent and BNP Paribas 3.3 percent ahead, outperforming gains in the broader European market.
But Credit Agricole sank 1.5 percent after saying it was preparing for "difficult" times ahead after third-quarter profits slumped on the back of Greek sovereign debt losses.
The bank is also among the most exposed to Italian debt.
Currently France, Italy, Greece, Spain and Belgium have short-selling curbs in place.
Italy's curbs are due to expire on Friday.
The limits in Belgium, Spain and Greece are effectively open-ended until local regulators feel markets have stabilised.
Short-selling is a common way for hedge funds and other investors to bet on falling share prices, whereby traders borrow stocks to sell them in the hope of scooping them up later at a lower price and pocketing the difference.
The European Securities and Markets Authority (ESMA), a European Union regulator, said it does not expect to make any announcement following the French decision.
Most of the curbs were introduced in August but so far have failed to shield local banking shares from heavy selling as investors worry about exposures to the euro zone's sovereign debt problems.
Other major stock markets, including in Britain and the Netherlands, have declined to impose short-selling curbs.
"We have no plan to issue any restrictions on short-selling at the moment," a spokesman for the UK's Financial Services Authority regulator said on Thursday.
ESMA will be given powers to impose a more unified approach to short-selling under a draft EU law being finalised next week.
The European Parliament is set to give the green light on Tuesday to a new law aimed at avoiding unilateral, national short-selling curbs that have confused investors.
The EU assembly votes on a text already agreed with EU states, whose ambassadors meeting in Brussels on Thursday voted to give their formal endorsement.
Britain abstained from the vote because it could not agree with the new powers being given to ESMA.
ESMA will be able to intervene and impose short-selling bans in national markets in times of market turmoil.
The UK thinks such strong powers are "unlawful" for what is an agency of the EU, citing a landmark EU court case to back its argument.
Britain told the meeting it would be "considering how best to ensure legal certainty is provided" in the new EU law, without elaborating on what steps it could take.
The European Court of Justice is the ultimate arbiter on EU law and Britain is already suing the European Central Bank in a separate case of what it sees a EU regulatory overreach.
The spat is the latest sign of how Britain, the bloc's biggest money centre, is becoming more assertive in the face of EU rules it fears could threaten London as a global financial centre.
Earlier this week, UK financial services minister Mark Hoban hinted Britain may wield a little used national veto process though legal experts poured cold water on this tactic.