European stocks drifted lower on Tuesday as mounting concerns about the health of the financial sector hit banks.
Shares in Royal Bank of Scotland and HBOS plunged nearly 40%. Commerzbank fell 14%, Barclays shed 17% and Lloyds TSB slipped 13%.
The FTSEurofirst 300 index of top European shares provisionally ended 0.2% lower at 1,003.07 points after witnessing its worst one-day percentage fall on record on Monday.
The index is down about 33% so far this year.
In Paris, the CAC 40 gained 1.95% while the Frankfurt Dax added 1.51%.
In Britain, the FTSE 100 closed 16 points, or 0.4%, higher at 4,605.2 points in a volatile session.
The index lost 7.85% to hit a four-year low on Monday and is down 28.7% for the year.
The Dow Jones index is down about 2%.
Russia has negotiated an emergency bailout for Iceland and announced an aid package for its own banks.
President Dmitry Medvedev announced an extra 950 billion roubles ($US36.4 billion) of long-term help for banks.
Iceland has asked Russia to extend a 4 billion euro ($US5.4-billion) loan to strengthen the island's currency.
Finance Minister Alexei Kudrin said Moscow viewed the request "positively".
Iceland's banking debts are now several times greater than the entire economy.
In the United States, the Federal Reserve announced the creation of a new commercial paper facility that would buy short-term, highly rated debt, funding corporate borrowing for the first time.
The Fed stepped in as a lender of last resort with the US Treasury's blessing, with a programme that is in addition to a $US700 billion bailout that was approved by the US Congress on Friday.
The International Monetary Fund increased its estimate of global losses from the financial meltdown to $US1.4 trillion and warned that the world's economic downturn was deepening.