Shares in Barclays, Lloyds, HSBC and RBS fell to levels last seen in early 2009 with Barclays and RBS down more than 11 per cent.
The FTSE 100 index ended the day down 4.5 per cent, the Dow Jones industrial average fell 3.68 per cent and the Nasdaq Composite Index dropped 5.22 per cent.
Analysts agree that the global uncertainty in the markets and worries about growth and the Eurozone crisis have all contributed to talk of a double dip. Grant Lewis Head of Economic Research at Daiwa Capital Markets said:
"People are nervous about the outlook for the global economy. Every piece of economic data that has come out recently has been weaker than expected."
Market worries centre on the ability of European banks to fund dollar assets after it was revealed an unnamed bank had tapped an emergency European Central Bank lending facility for $500m (£303m), the first time the window has been used in over a year.
And officials at the New York Federal Reserve are said to be "very concerned" at the funding difficulties facing European banks.
As investors start looking for safe havens for their cash, the price of gold continued to rise, hitting a new high of 1,826 an ounce.
Adding to fears of another recession, a survey of US Mid-Atlantic factory activity by the Philly Fed showed a decline in August to its lowest level since March 2009. Economists at Morgan Stanley slashed the outlook for global growth and said the US and the Eurozone are "dangerously close to recession."
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