More than £3 billion was wiped off the value of HSBC’s share price after journalists published revelations from a cache of leaked documents which fuelled money laundering concerns.
The slump added to unease among investors, as worries over a spike in Covid cases pushed down most of the other stocks.
The leak contains thousands of suspicious activity reports (SARs) which banks have to file if they notice their account holders acting suspiciously.
The BBC, which was given access to the leak through the International Consortium of Investigative Journalists, reported that HSBC allowed fraudsters to transfer millions of dollars around the globe.
Its shares fell by more than 6%, sending them to their lowest point since 1996.
The release also revealed questions over how Barclays Bank might have been used by a close ally of Vladimir Putin to avoid sanctions.
“To make matters worse for HSBC over the weekend the Global Times, a newspaper that is controlled by the Chinese government, revealed that the bank might be put on Beijing’s unreliable entities list,” said CMC Markets analyst David Madden.
“Should that be the case it would make it hard for the bank to make further inroads into mainland China.”
Other analysts said that worries over the Covid-19 pandemic was also pushing down many British shares.
The country could face 50,000 new cases every day by the middle of next month, the Government’s chief scientific adviser Sir Patrick Vallance said on Monday.
Worries over an economically tough second lockdown helped send the FTSE 100 down by 3.38%, or 202.76 points, to 5,804.29 at the close of play.
Richard Hunter, head of markets at interactive investor, said: “With no confirmed vaccine for the coronavirus as autumn approaches, there is likely to be additional strain on government resources as they attempt to stave off a second wave, as the colder weather inevitably brings further cases to contend with.
“Prospects for a sharp economic recovery have all but disappeared, as global growth receives the new threat of a resurgent pandemic.”
But the index was also weighed on by Rolls-Royce as the aeroplane engine maker confirmed reports from over the weekend that it might tap the market to raise £2.5 billion. Its shares dropped by as much as 11.1%.
Meanwhile, British Airways owner IAG fell by 15%, as it also raises funds from shareholders.