The credit downgrades of two major French banks will have a "limited" impact on the health of South Korean financial companies as their exposure to those lenders remain quite small, Seoul's financial watchdog said Wednesday.

Earlier, Moody's Investors Service, one of the world's major credit appraisers, cut its credit ratings of Credit Agricole SA and Societe Generale SA by one notch each, citing their exposure to Greece.

South Korea's stock markets tumbled on Wednesday, as investors dumped lenders on fears that the worsening situation in the eurozone might spill over into the financial market here.

"(The downgrade) will have a limited direct impact on the health of domestic financial companies," the Financial Supervisory Service (FSS) said.

The FSS said that South Korean banks' borrowing from the two French lenders amounted to US$510 million as of the end of May, which makes up just 0.4 percent of their total external loan exposure.

The financial watchdog still noted that it will continue to keep tabs on domestic and foreign financial markets to prepare for worsening situations where Europe's fiscal crisis could translate into a global credit crunch. (Yonhap News)