The FTSE 100 Index fell 117.9 points, or 2.1%, to 5533.9 amid worries that a raft of Spanish regions were poised to ask for government bailout funds, increasing the likelihood that the country itself will turn to the EU for help.
The fall wiped nearly £30 billion from the value of London's leading shares index, with all 100 companies losing value and banks falling up to 4%.
More top news
A 28-year-old man has been charged over the stabbing of a surgeon outside a mosque.
A quiet night to come across the UK.
Tom Watson will outline plans to force bookmakers "driven by greed" to pay a new levy to help fund NHS treatment of problem gamblers.