Shares in banks across the world tumbled today as fear over the future of the financial system took hold.

The extraordinary weekend of bad news on Europe's banks, coupled with doubts over the likely success of $700 billion Wall Street bailout, triggered waves of selling from Japan and Korea to London and Paris.

Even rumours of an emergency cut in interest rates by the US Federal Reserve were not enough to ease concerns about the creditworthiness of
the world's banks.

Although there were reports that a statement from European leaders would be made this afternoon, traders fretted about the lack of any co-ordinated plan in Europe to deal with
the crisis, partic­ularly following the unilateral German move to guarantee all deposits.

That, alongside the near-collapse and bailout of Germany's Hypo Real Estate mortgage lending giant, gave investors little option but to sell.
Confirmation of the Fortis rescue also did little to calm nerves.

In London, HBOS tumbled 13% amid renewed concerns about whether Lloyds TSB shareholders would be prepared to stick with the bank's original offer price for the company.

HBOS shares fell 29.4p to 171.1p. Lloyds TSB shares also tumbled, losing 24p to 266.25p. At those levels, its all-share offer for HBOS is worth just 222p — way above today's price. Other banks also tumbled in London, with Royal Bank of Scotland down 28.7p at 157.5p and Barclays 44p weaker at 324p.

On the Continent it was the same story, with 7% falls in financial stocks Société Générale, Allianz and Axa. UBS slid more than 9%. Taken as a whole, the European banking index fell more than 3%. In Asia, Japan's biggest bank, Mitsubishi UFJ, lost 9% of its value — its biggest one-day percentage loss since October 2003.

One of the lowest fallers was BNP Paribas, whose shares shed just over 2%. It was shielded from some of the rout by a positive response to its take­over deal for the giant Fortis bank.

Following the deal, terms of which were confirmed this morning, BNP becomes the biggest deposit taker in the eurozone.

BNP gets 75% of Fortis Bank Belgium and all of the group's Belgian insurance operations. In exchange, the ­Belgian government will receive an 11.7% stake in the French giant.

BNP has been relatively unscathed by the credit crisis that has laid low so many of its rivals in the US and Europe.

Only a week ago the Benelux governments rejected its approaches. However, as the global banking picture worsened dramatically last week, ministers contacted BNP chief exec­utive Baudouin Prot again to resume negotiations.

The Fortis deal is the biggest cross-border rescue since the full credit crisis swept into Europe with its full force last month.
Prot today said the deal represented BNP's “big message of confidence” in Fortis, which had “a formidable business base”.