As Greece sits on the verge of a default, the French banks most exposed to Greek debt face a possible credit rating downgrade in the coming week.

Bloomberg, citing ‘two people with knowledge of the matter’, says that BNP Paribas SA, Societe Generale SA and Credit Agricole SA, which are France’s largest banks on a market value basis, could have their credit ratings cut by Moody’s.

The three banks had already been put under review by Moody’s back in June to look at “the potential for inconsistency between the impact of a possible Greek default or restructuring and current rating levels”.

The two people who refused to be named that they talked to, said Bloomberg, indicated that rating cuts are ‘likely’.

At present both BNP and Societe Generale have the third highest credit ratings of Aa2 and Credit Agricole has the second highest Aa1. The top grade is Aaa. Any obligations with an Aa1/Aa2/Aa3 rating are seen as a ‘very low credit risk’ but ‘their susceptibility to long term risk appears somewhat greater’.

According to Reuters, citing the Bank for International Settlements, France’s lenders do have the greatest overall exposure to Greek debt.

When putting the three banks under review Moody’s did say at the time that the downgrades were not likely to mean a reduction of more than one notch for Credit Agricole and BNP, but SocGen’s rating may be cut by up to two levels because of the ‘uplift it receives from systemic support, which is currently higher than average for the French banking system’ (i.e. the level of state aid it receives).

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