Banks stocks fall as FSA calls for tighter regulation

The FTSE 100 was pegged back by miners and banks in early trading as the Eurozone continued the struggle to dig itself out of the sovereign debt crisis

Domestically the decision by the Government to shun a Eurozone agreement on closer fiscal ties was sinking in with cracks appearing in the coalition over the move.

However the Liberal Democrats remained in harness despite their criticism of David Cameron's veto as polls showed the public approved of the strategy.

Meanwhile the debate over regulation rages on with the publication of the long awaited Financial Services Authority report today.

The document heavily criticised the management of RBS which it said brought the bank to its knees by gambling on the acquisition of ABN Amro.

It also said major bank takeovers in future should require formal consent from the regulator, and the FSA also recommended a firm should obtain independent advice on a deal, from an adviser whose pay is not linked to a successful transaction.

Markets were jolted as copper prices fell in Asian trade as the prospects for global growth remained grim, with commodity stocks coming under pressure.

Elsewhere bleak data showed that Indian factory output has slipped five per cent.

The blue chip index's biggest loser in early trading was miner Eurasian, down more than three per cent. Also in the sector Xstrata and Kazakhmys slipped by more than 1.5 per cent.

In banking RBS was down more than two per cent as the FSA report's findings laid bare previously flawed management at the lender which was bailed out by taxpayers.

Lloyds was also down more than two per cent and Barclays 1.4 per cent, while Asia focused Standard Chartered was off by 1.6 per cent.

On the positive side retailer Next lifted by more than one per cent, while supermarket Group Morrisons nudged up by 0.3 per cent.

Cruise ship giant Carnival was also up 0.3 per cent.

In Asia the Nikkei closed by 1.3 per cent while the Hang Seng hardly moved.