The European financial sector is on shaky ground as investors fret over a potential Greek default and the stability of French banks is questioned. The exchange traded fund tied to European financials, iShares MSCI Europe Financials Sector Index Fund (NYSEArca: EUFN), lost 3% Monday amid the new twists in Europe’s debt crisis.

The ETF, which has seen its assets under management drop to $4.3 million, is down 33% year to date.

Shares in BNP Paribas and Societe Generale, two French banks, fell about 12% on Monday, reports Liz Alderman for The New York Times. French banks are the top lenders to Greece, according to a report by the Zurich-based Bank for International Settlements. This year alone, the aforementioned French banks have fallen more than 45% on concerns about losses they face if Greece, Ireland, Spain or Italy can not repay their debt.

“No matter what the Greek scenario, and whatever measures must be passed, French banks have the means to face up to it,” Christian Noyer, France’s central bank governor, said, according to the NYT. [Europe ETFs Sink on Debt Fears]

The perceived stability of the largest French banks is a critical issue. According to Bloomberg, Moody’s Investors Service could cut the banks’ credit ratings this week. [European Financial ETF Plunges on Debt Crisis]

iShares MSCI Europe Financials Sector

Tisha Guerrero contributed to this article.

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