Credit rating agency Moody's has downgraded two French banks because of their exposure to Greek debt.Credit Agricole was cut from Aa1 to Aa2 and Societe Generale from Aa2 to Aa3.A third bank, BNP Paribas, was kept on review for a possible downgrade.German Chancellor Angela Merkel and French President Nicolas Sarkozy are due to hold talks on Wednesday with Greek Prime Minister George Panandreou, in response to growing market fears of an imminent debt default by Greece.Moody's said it was also planning to extend its review of all three banks "to consider the implications of the persistent fragility in the bank financing markets, given the banks' continued reliance on wholesale funding".This further review could result in an additional one-notch downgrade, the agency warned.The markets for short-term cash lending between European banks have become increasingly stressed in recent days, while share prices in European banks have fallen sharply.Credit Agricole and Societe Generale have seen their share prices fall by about two-thirds since February, while BNP has fallen by more than half.In the first hour of trading on Monday, BNP dropped a further 3.1% and Societe Generale 1.7%, while Credit Agricole rose 2.5%.Both BNP Paribas and Societe Generale have rushed out statements in recent days to clarify the extent of their exposure to Greece and other troubled eurozone economies.Moody's backed up the two banks, saying they both had enough capital to provide "an adequate cushion to support its Greek, Portuguese and Irish exposures".Nonetheless, it decided to downgrade Societe Generale, as it felt the bank no longer benefited from a higher level of French government support than itstwo rivals.All three banks' ratings have been on review since 15 June, and Moody's decision had been widely anticipated by the markets.Moody's said all three banks were strong enough to absorb the losses emanating from any Greek debt default.French central bank head Christian Noyer welcomed the downgrade decision as "relatively good news"."French banks have an excellent rating, the same level as other major European banks - HSBC, Barclays, Deutsche Bank, Credit Suisse," he said."It's a very small downgrade, and Moody's had a higher rating than the other agencies so it's just put them on the same level or slightly better than the others."However, the downgrade is likely to put further pressure on the banks, as many investors limit how much they are willing to lend to them or invest in their shares based on their credit ratings.Credit Agricole said that it had decided to extend a guarantee to its investment banking subsidiary in response to the rating review.Meanwhile, BNP Paribas joined Societe Generale in announcing large asset sales in order to reduce its total exposures.The bank said on Wednesday that it would sell 70bn euros of assets, or 10% of the bank's entire balance sheet, with a focus on its dollar-denominated loans.On Tuesday, BNP denied a report in the Wall Street Journal claiming the bank was no longer able to borrow in dollars.Moody's review focused on the banks' exposure to the Greek economy, although the recent market sell-off reflects a broader concern over the health of other southern European countries such as Italy, as well as over the political will to sustain the euro.SocGen has a total exposure to Greek government and commercial debts equal to 6.6bn euros, while Credit Agricole has 27bn euros, according to their disclosures to the European Banking Authority. From / BBC