Banks led markets sharply lower in early trading after a long-awaited report from Sir John Vickers and the Independent Commission on Banking proposed a radical shake-up of the sector.
The report said banks should split their investment and retail banking operations, as well as raise capital requirements sharply - above levels proposed by Basel III regulations.
In reaction, shares dropped sharply at open, dragging the FTSE 100 down over 2%, or 115 points, to 5,099.
Banks were the biggest losers in early trading, with Barclays off 2.9% or 4.15p, at 139.9p, Lloyds lower by 2.37p or 0.74p, at 30.3p, and RBS down 4.8%, or 1.03p, at 20.47p.
Asian-focused banks HSBC and Standard Chartered were more steady but still saw losses.
HSBC shed 1% or 4.9p, falling to 499.6p, while Standard lost 0.9%, or 12.5p, sliding to £13.12.
Banks are yet to respond to the proposals, which would need to be ratified by the government.
18 new entrants featured
Recommended cash offer
Latest news and analysis
Second London acquisition in three years
Partner Insight: Continuing the Architas education series for clients.