The main UK index recovered from a mixed morning as investors assessed the new coalition Government, closing up 46.24 points or 0.92% to 5,383.45.
Financials fell on the news the incoming Lib Dem-Tory administration will instigate sweeping reforms of the banking sector.
Mooted plans include a major loan guarantee scheme and the use of net lending targets for nationalised banks Royal Bank of Scotland (RBS) and Lloyds.
Both banks emerged as the biggest losers today.
Shares in RBS took the brunt of the hit, dropping 1.6p to 48.40 pence per share, down 3.2%.
Taxpayers bailed out the failed bank in 2008, and now own an 84% majority share in the institution.
Shares in Lloyds, 43% taxpayer-owned, also slid following this afternoon's announcement, falling 1.31% to close down 0.79p to 59.51p per share.
The two political parties also said they will establish an independent commission to investigate restablishing the split between retail and investment banking, created in part by Gordon brown's liberalisation of the banking sector.
In the US, the Dow was also up, gaining 107.60 points or 1% to 10, 855.95.
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