The company will be floated on the stock market by the end of June, with institutional investors holding no more than one-third of the shares.

Another 10% will be made available to employees and managers of the bank, while the government will retain a 10% stake.

The government has been hoping that a combination of the major French commercial banks will take a core stake in Credit Lyonnais.

But the bitter battle among them may have upset those plans. Banque National de Paris is trying to takeover both Societe Generale and Paribas, who have already announced a friendly merger.

The privatisation could raise between $4bn and $5bn, with the total market value of the bank reaching up to $8bn.

Glory days long gone

Credit Lyonnais was once one of Europe's biggest banks, with assets of $300bn. But it expanded rapidly in the 1990s, buying MGM Studios and other loss-making operations.

After two years of massive losses, the bank had to be rescued twice by the French Government, after the first rescue package proved inadequate.

The privatisation is part of a deal with the European Commission, which had questioned the cost of the bailout which it said could reach $150bn.

The bank has been forced to lay off large numbers of staff, with its workforce shrinking from 72,000 to 51,000 in three years as the bank returned to profitability.

And the job losses are likely to continue after privatisation.

"Unless there is a good surprise, such as a sharp rise in turnover, we will have to keep reducing jobs -- at a slower pace than in the past -- that is at a pace of around 1,000 positions per year," Chairman Jean Peyrelevade said.

Credit Lyonnais returned to profit in 1995, but most of its $176m profit last year was repaid to the French government as part of the rescue deal.

It reports its 1998 results on March 18.