MILAN/LONDON: European shares fell on Thursday, with banking stocks dragging regional equity indexes towards their lowest point in almost four months in a market dominated by concerns over next week's EU membership vote in Britain.
The risk of Brexit and fresh signs that interest rates would stay low for longer added to uncertainly surrounding the banking sector, already hit by slow growth and expectations of capital increases from southern European lenders.
A warning from the Swiss National Bank (SNB) that UBS and Credit Suisse would likely each need to raise an extra 10 billion Swiss francs to meet new leverage requirements added to the gloom.
"Regulation once again about to tighten, coupled with low rates for longer across the board, are clearly unsupportive for the banking sector," said Stephane Ekolo, Chief European Strategist at Market Securities in London.
The pan-European STOXX 600 and FTSEurofirst 300 indexes fell 0.6 and 0.7 percent respectively by 1059 GMT.
The pan-European bank sector index was the second biggest sectoral faller after miners, while the euro zone bank sector fell as much as 2.8 percent to touch its lowest since August 2012.
Shares in UBS and Credit Suisse fell 1 and 2.6 percent respectively, while other European bank stocks also underperformed, with Deutsche Bank briefly touching a record low as it fell 2.3 percent.
Earlier on Thursday, the SNB kept rates steady, as did the US Federal Reserve earlier this week, with both central banks citing uncertainty surrounding the UK vote.
Although betting odds still point to Britain deciding to stay in the EU, opinion polls have shown growing support for the "Leave" campaign.
"Brexit is becoming a lot more likely than initially expected and the market is indeed becoming more fearful. It is very much a binary event and until then buying dips and selling rallies seems the sensible idea," said Hampstead Capital hedge fund manager Lex Van Dam.
The Fed's latest policy moves pushed up gold prices, with shares in gold miner Randgold rallying 3.8 percent.
Gold's relative appeal is enhanced when the Fed decides against raising rates, while its safe-haven status is boosted in times of economic uncertainty.
Some traders saw the rising gold price as another sign of worries over Brexit.
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