Bank shares dive amid turbulence

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Barclays shares were down more than 24% at one point, while Royal Bank of Scotland - which is almost 60% owned by the UK taxpayer - saw declines of more than 16%.

The falls come on a day that US financial giant Citigroup announced it had suffered a quarterly loss of 8.29 billion US dollars (£5.5 billion), following news that Bank of America was granted 20 billion dollars (£13.7 billion) in State aid.

In Ireland, Anglo Irish Bank is to be nationalised by the Irish Government after a dramatic announcement on Thursday night, while the UK is reportedly thrashing out proposals for another round of bank rescue measures.

UK banking stocks had earlier shown signs of recovery having suffered a week of steep falls, but those reversed towards the end of the day.

The falls come on the day that the ban on short-selling - imposed by the Financial Services Authority last September - expired.

Confidence in the financial sector has collapsed recently, with fears ahead of the forthcoming results season.

There are concerns that the sector is set to announce yet more hefty writedowns on bad debts which could wipe out the Government's £37 billion capital cash injection.

Both RBS and Barclays lost around 40% of their share price this week. And there was speculation in the market that Barclays might not benefit from UK Government help after turning it down last year. HSBC, which also snubbed the bail-out but is widely rumoured to be next in line to call on State aid, has sunk 16% in the past week.

Meanwhile, Lloyds TSB saw its shares topple 30% this week as it gears up for the finalisation of its merger with HBOS on Monday. It is understood that ministers are planning an urgent bank package, which could pave the way for more taxpayer money to be pumped into the sector to offset losses on soaring bad debts.