The FTSE 100 closed 0.76% lower at 6007.60, fuelled by massive falls in banking stocks.
HBOS and Alliance & Leceister recorded significant falls of 10% and 5.23%, respectively.
HBOS sustained losses after its rival Bradford & Bingley reported shock profits and cut the offer price for its rights issue, while shares in Alliance & Leceister fell after reports that French bank Credit Agricole withdrew a bid for the lender.
Energy stocks were on the up following a fall in oil prices, with Tullow Oil (+2.53%) and British Energy Group (up 1.91%) featuring among the day’s biggest winners.
In the US, the Dow Jones had dropped 1.14% to 12497.06 by midday, with Amer Express Inc and Citigroup featuring in the afternoon’s biggest losers, having fallen by 2.93% and 2.33%, respectively.IFAonline
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till