Germany, Europe's largest economy, along with the Netherlands and Finland want conditions attached to any ESM involvement to prevent the clean-up costs being foisted on them.
"France defends the possibility of using the European Stability Mechanism as a backstop within the banking union," Moscovici said.
Bank health checks by the European Central Bank are a critical step in establishing a single banking framework for the euro zone, giving credibility to ECB supervision and paving the way for the bloc to cooperate on saving failing banks.
The divisions in the 17-nation currency area were underlined by Moscovici's blunt criticism of Germany before the meeting.
(Read more: EU lawyers warn of limits in building banking union)
In a new book to be published this week, he accused Berlin of holding up progress on banking union to protect its own 'strange' financial system of regional banks that are "deeply intertwined ... with local political circles".
"What Germany fears ... is ... a loss of political control over its banks, which means in the final analysis a loss of sovereignty," Moscovici wrote in "Battles to resurrect France".
Germany's finance minister, Wolfgang Schaeuble, was not present because of talks to form a new German government.
To complicate matters further, Britain, which is outside the euro zone, has repeatedly refused to sign off on the first pillar of banking union, the supervision.
London has demanded assurances that Britain will not face interference from the ECB-led banking union.
"Don't speak loosely"
Asked to outline the hurdles that remain on banking union, Jeroen Dijsselbloem, who chaired the meeting of euro zone finance ministers, replied: "How much time do you have?" before listing a range of issues such as establishing a fund and agency to close or salvage troubled banks.
(Read more: Euro thrives as ECB's Draghi stays course)
The acrimony between the euro zone's two largest economies, France and Germany, will complicate EU efforts to strike a deal by December on how to salvage failed banks, as set out by Europe's leaders to give time for the agreement to be signed into EU law in 2014.
A failure to do so would put the ECB out on a limb when it begins supervision of euro zone banks late next year, without any means to shut or save banks in trouble.
Although nobody knows the true scale of potential losses at Europe's banks, the International Monetary Fund hinted at the enormity of the problem this month, saying that Spanish and Italian banks face 230 billion euros ($310 billion) of losses alone on credit to companies in the next two years.
Dijsselbloem said ESM direct aid for banks would only be available under strict conditions, and could not say if this possibility would be ready in time for the bank health checks.
Ending their meeting, the ministers restated the urgent need for progress but acknowledged the breadth of differences that must be overcome. The debate continues on Tuesday when ministers from the wider European Union gather.
With the euro zone barely out of recession, a failure to put aside money to deal with the problems revealed could rattle fragile investor confidence and compound borrowing difficulties for companies, potentially killing off the meek recovery.
(Read more: Euro zone moving from economic to political crisis)
The discord helps explain why five years after the United States demanded its big banks take on new capital to reassure investors, Europe is still struggling to impose order on its financial system, having given emergency aid to five countries.
The debate also comes at a delicate moment for the euro zone, with Spain and Ireland planning to end their reliance on the aid that was given to save their banks. Question marks remain over both countries and the true health of their banks.
Ireland's banks, which nearly drove the country into bankruptcy three years ago, face further losses, with increasing numbers of homeowners falling behind in repaying their loans as the economy continues to stagnate.
Olli Rehn, the EU's Economic and Monetary Affairs Commissioner, sought to play down those concerns, however, saying: "Let's not jump the gun. Let's first establish the facts... And in the meantime, don't speak loosely."