PARIS, Sept.15 (Xinhua) -- Trapped in the financial turmoil in recent weeks, France's leading banks suffered a new blow on Wedensday after Moody's Investors Service downgraded French biggest banks of Societe Generale and Credit Agricole.
The downgrade was likely to hamper efforts of eurozone policymakers to quell investors's fears and may deepen falls in the price of French banking shares.
But officials painted a rosy picture stressing bank's ability to absorb any eventual losses due to their exposure to the Greek debt crisis.
In an interview by the local broadcaster RTL, Bank of France Governor Christian Noyer said the effects of Moody's downgrade of Credit Agricole and Societe Generale were "very small."
"I do not think (the situation will deteriorate) and I may surprise you but I think even that (the two banks' downgrade) is relatively a good news," the French central bank governor said.
"French banks keep an excellent rating, the same level as other major European banks ... There's no really bad news on the way, and Moody's says the level of capital of French banks allows them to absorb any potential losses on sovereign debt," Noyer added.
On Wednesday, The U.S.-based agency has cut Credit Agricole's rating from Aa1 to Aa2 and Societe Generale from Aa2 to Aa3, citing Greek exposure for the former and funding and liquidity problems for the latter.
In previous weeks, French banks suffered from sharp decline led by growing worries over French bank's exposure to the sovereign debt in the region and rising fears over their short-term funding.
Banking stocks closed in red down by 12.74 percent in a week. Shares of the country's biggest bank, BNP Paribas, were down by 3.93 percent while Societe General narrowed its losses to 2.88 percent. Prices of Credit Agicole shares rose by 1.22 percent after falling by 2.13 percent in early trading.
In a move to regain investors' confidence, BNP Paribas, whose ratings remain on review, unveiled a plan to sell 70 billion euros (95.95 billion U.S. dollars) of risk-weighted assets.
Early this week, Societe Generale, France's second biggest bank, announced a new business plan on Monday aimed at tightening costs and streamlining its business to ease investor fears about the bank's leverage and funding
The French bank pledged to trim costs by 5 percent and post a profit of 4 billion euros (5.43 billion dollars) by 2013 after selling some of its assets.
"There is neither funding problem nor solvency or liquidity problem ... French banks are very strong and kept very good rating," Valerie Pecresse, the budget minister stressed after a weekly cabinet meeting.
"French banks have withstood stress tests that were extremely exigent few weeks ago," she added.
On the eve of the third anniversary of Lehman Brothers collapse, which triggered a global financial turmoil and economic downturn, French banks' outlook remained clouded by possible impact of an eventual Greek default.
However, a major bankrupt of the domestic financial institutions is not expected, according to Phillipe Dessertine, a director of Haut Finances Institute.
"For a long time we heard a soothing speech on banks which unfortunately has led them not to recapitalize when they could do that ... and they believed the good news which they give to themselves and ended by not taking decisions when they were necessary," the analyst said to RTL radio channel.
"Tomorrow, there won't be large bankruptcy of banks because governments understood that leaving banks to be bankrupt can be dramatic not only for the financial system but for the world economy too," he added.