Bank fears drag RBS shares down

The latest decline came as London's leading share index opened in positive territory after Monday's 7.8% fall wiped £93 billion from the value of the country's leading shares.

But amid reports that bosses of the UK's major banks met Chancellor Alistair Darling on Monday night to ask for billions of pounds of funding, the sector came under heavy selling pressure, helping to pare back gains to less than 10 points by the end of the first hour of trading.

Royal Bank of Scotland - whose boss reportedly was among those who met Mr Darling, according to the BBC - was the worst casualty, down 41.5p to 106.6p. Lloyds TSB also fell more than 12%, with Barclays down 8%.

Monday's dramatic session saw the Footsie slump 391 points, its largest one-day points fall amid evidence the global banking crisis was intensifying across Europe. The market opened up 120 points thanks to a late rally on Wall Street and a bigger-than-expected cut in Australian interest rates which offered some respite for beleaguered investors.

Mr Darling is to join fellow European Union finance ministers for talks on the global financial crisis as traders were braced for another turbulent day on the markets.

Although no major announcements are expected from the meeting in Luxembourg, Mr Darling is likely to urge ministers not to risk worsening the crisis by taking unilateral action to protect their own banks which could have damaging repercussions for other member states.

Meanwhile, New York mayor Michael Bloomberg said that international leaders must work together to tackle the global financial crisis.

After breakfast talks with Prime Minister Gordon Brown in Downing Street, Mr Bloomberg criticised the unilateral actions of some governments.

Referring to Mr Brown, the New York mayor said: "He's got a tough road to hoe, representing the UK, representing Europe, representing the world. All of these leaders have to work together. This is a crisis that no one country can solve on their own."