Obama crackdown plans give bank shares a battering

The President's plans to ban retail banks from using their own money in investments and to restrict banks' abilities to make high-risk trades dented stocks on both sides of the Atlantic.

The Conservatives expressed support for Mr Obama's moves, with leader David Cameron calling them a "breath of fresh air".

"This is a really important intervention because this will work best if the whole world agrees, otherwise there is a danger the banks will just rotate themselves wherever the regulation is lightest," he said.

Barclays' shares fell another four per cent after Thursday's six per cent slide, as banks with exposure to the US were hammered.

Barclays is seen as being the most at risk of the UK banks after snapping up Lehman Brothers' North American trading and investment banking assets last year.

Part-nationalised Royal Bank of Scotland, which also has a large

exposure to the US, lost two per cent.

Inter-dealer brokers such as ICAP and Tullett Prebon – both down six per cent – were also punished amid worries over lower share dealing volumes. The London Stock Exchange fell four per cent.

IG Index's chief market strategist David Jones said: "Not surprisingly the likes of ICAP, Barclays and the LSE have remained under the cosh as investors deserted the shares until there is at least some more clarity on exactly what form curbs on trading will take."

Shore Capital analysts said the scope of the US plans was highly likely to capture US operations of UK banks and drive concerns that

international policymakers could follow suit.

Capital Economics' Paul Ashworth said it was clear from the US plans the "tide had turned".

"President Obama's announcement ... sends a very clear message: the Democratic administration has decided to take a much tougher line on banking reform," he added.

Bank of England Governor Mervyn King expressed his own frustration with the pace of reform this week.

He told an audience at the University of Exeter: "The question of whether basic reforms to the structure of banking and the international monetary system will be made before another crisis engulfs the world economy remains unanswered."