Global stocks fell, the euro sank to a 20-month low against the dollar and oil retreated by midday as the deepening economic slump sapped corporate profit.
Royal Bank of Scotland Group dropped 9 per cent and the pound tumbled to a five-year low after Bank of England Governor Mervyn King said the country probably is in a recession.
BHP Billiton, the world's largest mining company, slipped more than 7 per cent after saying "uncertainty" will persist in China as the economy slows.
In Dublin at noon the Iseq index of Irish shares was down 3.6 per cent at 2,808 with banking stocks suffering steep declines. Bank of Ireland shares were down over 16 per cent while Irish Life and Permanent was almost 10 per cent lower.
London's Ftse 100 was just over 3 per cent lower at 12pm with RBS down over 9 per cent and Barclays off over 5.5 per cent.
The MSCI World Index lost 2.5 per cent to 948.35 at 10.39am in London. The index has lost 40 percent this year and oil has tumbled more than 50 percent from its peak in July as concern deepened government bailouts to save the global banking system won't avert a recession.
"We are still very cautious on the market," said Philippe Gijsels, Brussels-based senior equity strategist at Fortis Global Markets with $62 billion under management.
"You see the slowdown in companies and economies and this is only the beginning. You will see a very nasty shakeout." The final bottom in the market "will come far into 2009 or maybe into 2010," Mr Gijsels said.
Europe's Dow Jones Stoxx 600 Index declined 3.3 per cent with Home Retail Group retreating on a first-half loss and writedown of its Homebase retail chain.
Tenaris SA and Repsol YPF SA declined as Argentina's planned seizure of pension funds stoked concern the nation is headed for its second default in a decade.
Borrowing costs for developing countries climbed to a five- year high, while Russia's rubble and the Korean won slumped.
The MSCI Asia Pacific Index decreased 5.4 per cent. Mitsubishi UFJ Financial Group lost 8.8 per cent after a newspaper said earnings probably dropped by half.