French banks have the highest stake in Greece with 56.7 billion dollars. They began to reduce the book value of holdings in Greek government bonds, but they are assessed as not being quite combative.

As per the media reports, BNP Paribas and Credit Agricole could face one-notch downgrade and Societe Generale could see a two-notch decline by Moody"s. Present ratings issued by Moody"s to BNP, SocGen and Credit Agricole are Aa2, Aa1 and Aa2, respectively.

The move wouldn't be a surprise because in June, the three banks were placed on review by Moody's by keeping their outlook to negative. The agency generally, makes a rating decision within three months after depreciating an outlook of any bank.

The risks come from the banks" holdings of government bonds that would turn to losses if Greece can"t pay its debts in full, Moody"s mentioned in June while placing a negative outlook for the banks.

Credit Agricole has only a small exposure to Greek government debt, but it owns Athens-based bank Emporiki, which Moody"s had already downgraded.

Societe Generale also owns a small Greek bank, Geniki, but the main risk comes from its holdings of Greek government debt, reported to be 2.5 billion euros at the end of the first quarter.

BNP Paribas"s holdings of Greek government debt are twice that, 5 billion euros, but unlike the others it has no local subsidiary.

The impact could spread beyond France, Moody"s warned while placing a negative outlook for the banks. Moody's is closely monitoring the risks of a Greek default scenario, including the impact on weaker countries, capital markets, and funding conditions.

A downgrade could be another setback for the market sentiments which investors could discount in equities and commodities.

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