Europe's banks suffer worst day in 9 months after sharp sell-off in U.S. banks

The global rout in bank stocks was prompted by Silicon Valley Bank (SVB), which was forced to raise fresh capital after selling a package of bonds at a loss to meet depositor demands for cash

European bank shares tumbled on March 10 in the wake of a dramatic sell-off in U.S. lenders as concern spread that the sector will be vulnerable to the rising cost of money.

Europe's STOXX banking index fell more than 4%, set for its biggest one-day slide since early June, with declines for most major lenders, including HSBC, down 4.5%, and Deutsche Bank, down 7.9%. Shares in Italy's UniCredit and Intesa Sanpaolo also fell sharply.

The global rout in bank stocks was prompted by Silicon Valley Bank (SVB), a major banking partner for the U.S. tech sector, which was forced to raise fresh capital after selling a package of bonds at a loss to meet depositor demands for cash.

"The market is treating this as a potential contagion risk," said Antoine Bouvet, senior rates strategist at ING in London.

"It makes sense to me that a remote probability of a U.S. banking system-wide crisis should also come with a small probability of contagion to Europe," he said.

Already bruised, the sector could face another bout of turmoil later on Friday if U.S. employment data points to a further racheting up of interest rates.

Shares in major U.S. banks such as JPMorgan Chase & Co and Citigroup were set to fall again when Wall Street reopens.