UPDATE 1-Agricole seeks delay in Intesa SP conditions -source

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May 25 (Reuters) - French bank Credit Agricole SA (CAGR.PA: Quote, Profile, Research) is seeking a delay in the application of Italian antitrust conditions on its stake in Intesa Sanpaolo SpA (ISP.MI: Quote, Profile, Research), a source close to the matter said on Monday.

Under antitrust rules set up in 2006 when the watchdog approved the merger that created Intesa Sanpaolo, Credit Agricole had to cut its stake in Intesa to not more than 5 percent by Jan. 1, 2008, and to less than 2 percent this year.

In exchange for a delay in applying the antitrust rules, which would require it to reduce its 5.823 percent stake, Credit Agricole could offer to abstain from a governance role in Intesa Sanpaolo, Italy's biggest retail bank, said the source, who spoke on condition of anonymity.

Credit Agricole had no comment.

The antitrust authority is investigating whether Credit Agricole violated regulations when it entered into an Intesa Sanpaolo shareholder agreement last month with Italy's biggest insurer, Assicurazioni Generali SpA (GASI.MI: Quote, Profile, Research).

The stake held by Credit Agricole, France's biggest retail bank, when it made the deal was above a 5 percent limit set by the antitrust body. Generali has a 5.07 percent stake.

"What's being discussed at the moment is the possibility that Credit gets a delay from the antitrust on selling the stake and the suspension of its participation in shareholder bodies," said the source.

Credit Agricole wants to show that selling the stake is a non-starter, given the collapse of bank share prices with the economic crisis, the source said.