Banks weigh on Britain's FTSE on Cypriot deposit tax
The Cypriot levy, which has to be approved by the country's parliament as part of a bailout deal, broke the tenet that depositors' savings are protected, triggering a selloff in banking shares across Europe.
But investors took comfort from the fact there was no sign of a run on banks elsewhere in the euro zone.
The FTSE 100 closed down 31.73 points, or 0.5 percent, at 6,457.92 points, well off an intra-day low of 6,386.17 and just 1.1 percent off a 5-year closing peak hit on Thursday.
"The volatility created by the Cyprus situation might be a good opportunity for some investors to re-enter," Didier Duret, global chief investment officer at ABN-AMRO Private Banking, which manages about $200 billion.
"The Cyprus bailout is a special case regarding the disproportionate weight of the financial sector against the (island's) GDP. It's a one-off and we don't expect a spillover into the financial system in Europe."
Investors cautioned that parliamentary approval of the rescue deal, scheduled for Tuesday, was key to Cypriot banks avoiding a collapse that could set a dangerous precedent for lenders in other struggling euro zone countries.
Shares in UK-listed banks, which are exposed to the euro zone through the wholesale funding market, fell 1.3 percent, with state-rescued Royal Bank of Scotland down around 3.4 percent.
"There are doubts about whether the
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