FTSE: 5,102.58 (–189.45) Mid-250: 10,084.11 (–296.91) Small Cap: 2,942.42 (–42.05):UK STOCKS declined for a second day, led by banking shares, amid concern Europe's sovereign-debt crisis will worsen.

The FTSE 100 fell 189.45 points, or 3.6 per cent, to 5,102.58 in London.

The measure slumped 7.2 per cent last month, the most since February 2009, as concern that the global economic recovery is faltering and Europe’s sovereign debt crisis is spreading wiped more than $300 billion off the value of UK shares.

The FTSE All-Share Index dropped 3 per cent yesterday.

“There is a serious risk of a further escalation of the crisis,” Tammo Greetfeld, a Munich-based equity strategist at UniCredit wrote in a report.

“We remain underweight euro zone equities and reiterate our cautious stance,” he said.

The FTSE 100 climbed 3.2 per cent last week after the August slump dragged equities to their cheapest price to earnings ratio since March 2009.

“This is really about fears about liquidity and solvency now,” said Andrew Lim, a banking analyst at Espirito Santo Investment Bank.

“US money markets are lending less for a second month to European banks, particularly French banks. Banks are having to come back to the market to complete their 2011 borrowing programs and if they fail in that respect that’s going to create a lot of risk,” he said.

RBS slid 12 per cent to 21.78p. Barclays lost 6.7 per cent to 154.15p.

Lloyds Banking fell 7.5 per cent to 30.65p, HSBC slumped 3.8 per cent to 504½p and Standard Chartered shed 5.4 per cent to £13.

In Europe, Deutsche Bank fell 8.9 cent to €23.72 on news that securities it packaged were among a number of deals being examined by the UK’s Serious Fraud Office.

Basic resources sectors added weight to the losses as miners and oil producers fell in tune with sharp drops in energy and metals markets.

Chilean copper miner Antofagasta lost 5.2 per cent to £12.33, Eurasian Natural Resources fell 5.1 per cent to 625p, while Essar Energy slid 4.5 per cent to 235.1p.

Berkeley Holdings rallied 4.8 per cent to 1,236p as the UK’s largest home builder by market value said it may reach a goal of doubling pretax profit two years earlier than forecast. – (Copyright The Financial Times Limited 2011/ Bloomberg)