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The FTSE has suffered sharp falls in afternoon trading with banking stocks leading the plunge into the red amid renewed euro debt concerns.
Shortly after 2.30pm, London's leading share index was down 3.4%, or 185 points, to 5146.
Barclays and Lloyds Banking Group have both tumbled more than 8% with Royal Bank of Scotland down 7.9% after fresh fears over the European banking sector sent investors into panic mode.
Banks shares plunged after the European Central Bank (ECB) lent dollars to an unnamed eurozone bank, reports the BBC.
The ECB intervention - the first of its kind since February - further stoked euro concerns after France and Germany set out plans for a controversial tax on financial transactions.
In Germany, Commerzbank has slipped 5%, with Deutsche Bank falling more than 4%.
Mirroring the FTSE's fall, the Dax is 4.8% in the red whilst France's Cac 40 is down nearly 4%.
Banking woes added to fears the global economy is stalling, with Morgan Stanley earlier warning the world is on the brink of a double-dip recession as it cut its growth forecast for this year.
Across the Atlantic, the Dow is 3.86% in the red shortly after opening with Bank of America, down 8.4%, the day's biggest loser.
Labor Department figures showing the number applying for unemployment benefit climbed by 9,000 last week served to underline the fragile state of the US economy just weeks after the country was dramatically downgraded by S&P.
Meanwhile, news Japanese exports fell 3.3% in July further pointed to a worrying slow-down in the global economy.
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FTSE dives into red on banking woes
Are we surprised, you have the German & French attempting to prop up the disasterous Euro,and build the Fourth Reich, its only time before better off countries get fed up with bailing out the weak members, or should I say the electorate of those countries when they toss out at election times the hairbrained politicians that have cost so much of there taxes, and revert to there own currencies. Then we have the banks who are in deep with lending to eurozone banks, not to mention "Neville Chamberlain" Cameron, who gives in to the Euro masters, no bailout of Euro, then he allows money to go to the IMF who in turn pass it on to the Euro banks???? We have politicians who do not care a jot about the voters, and are only interested in power for themselves, so we will continue to see this problem, as a country we need to have a referendum, get out of Euro interference and non stop regulations,scrap the so called "Human Rights Act"and stop all immigration immediatley, those illegal asylum seekers should be sent home fast and nil benefits paid to non UK citizens until they have paid in to the system on tax for at least 5 years, this would at least help England..crazy left will put paid to any sensible ideas..so the slide will regretfully continue, until, Merkel & her French poodle,are sitting alone in their bunker dreaming of world domination.
Posted by: clifford C. Linsdell IFA