Banco Popular, one of the Spain's leading financial firms, caused mayhem after admitting that it needed billions to bolster its balance sheet.
Shocked investors dumped shares in the firm, with the bank stock's value plunging by 24 per cent this morning, after the cash call and plans to issue another 2 billion shares.
It resulted in €1.4billion being wiped off the value of the bank's share price.
And the worry spread to other Spanish banks with shares in Caixabank and Banco de Sabadell diving by 3.4 per cent and 4.5 per cent respectively.
It comes after the country announced record debt levels, owing its creditors €1.095 trillion.
Spain now owes more money than its entire economy generates in a year.
Spanish Prime Minister Mariano Rajoy is struggling to deal with the worst public debt since 1909
Spanish banks are among Europe's firms suffering enormously under the burden of the low interest rate environment that erodes lending profits.
Steen Jakobsen, the chief economist at Saxo Bank said that today's news "is a very clear illustration of how difficult the banking sector has it with zero interest rates and non-growth we've had".
In March, the European Central Bank dropped slashed core interest rates further into negative territory.
Today's cash call by Banco Popular is now a visible sign of the strain financial institutions in Europe are under.
The share price hit is the biggest one day loss the bank has ever seen, topping drops seen at the height of the financial crisis.
Credit to express.co.uk
http://www.express.co.uk/finance/city/674092/Eurozone-Spain-meltdown-shares-plummet-EU-Spanish-banks
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