Bank stocks took a hit in early afternoon trading after the Chinese central bank suspended at least three foreign banks from conducting some foreign exchange business, according to reports.
Shares in Royal Bank of Scotland were down 1.81 per cent at 304.5p per share, while HSBC shares fell 1.52 per cent to 536.35p per share and Standard Chartered dropped 1.52 per cent to 571.8p per share.
Barclays' share price also fell 0.84 per cent to 220.68p per share, as it was also dealing with the news of a $13.75bn fine.
The FTSE was trading 0.46 per cent down as a whole.
The People's Bank of China (PBoC) has suspended the banks from the business until the end of March, three sources who had seen the suspension notices told Reuters.
The sources revealed the notices sent to the affected banks by the PBoC contained no reason for the suspension.
Read more: SMEs take a hit on foreign exchange charges
They added that authorities had warned banks that if they took advantage of the different exchange rates and engaged in carry trade, the PBoC would "move to further block arbitrage channels".
The announcement follows a number of measures taken by the Chinese government earlier this year to keep the yuan stable since August, when it devalued the currency.