Major US stock markets closed down after confidence in the banking sector was dented further by the resignation of Citigroup's chief executive.
Shares in the US have followed the pattern in Asia and Europe
Markets in Europe and Asia had also seen falls in reaction to Charles Prince's exit, the second departure of a leading banking boss within days.
At close the Dow Jones had fallen by 0.38% to 13,543, the Nasdaq by 0.54% to 2,795.18, and the S&P by 0.5% to 1,502.
Stock markets in London, Paris and Frankfurt all declined on Monday.
The FTSE 100 benchmark index closed down 1.06% at 6,461.4 at the end of the trading session in London, with Barclays, Northern Rock and Alliance & Leicester among the financial stocks seeing the largest falls.
In Frankfurt, the Dax index ended 0.53% lower at 7,807.55, while in Paris the benchmark Cac index slipped 0.63% to 5,684.62.
By the close of trade in Asia the Hang Seng index was down 5% at 28,942.3 in Hong Kong, while in Japan the Nikkei had fallen 1.5% to 16,268.9.
Worries over banks' exposure to US sub-prime related debts has been causing market instability for several months.
Shares in Citigroup fell 4.85% to $35.90 in New York trade on Monday.
Meanwhile Lehman Brothers slipped 2.63%, Goldman Sachs fell 4.88% and Merrill
Lynch fell 2.44%.
Hong Kong shares were also battered by further delays to a scheme which will allow Chinese investors to access the city's market.
'More to come'
"The risk in the market is credit risk," said Jim Awad, chairman of WP Stewart Asset Management in New York.
"You're getting plenty of indications that there are more write-downs to come. The fear is that if you get the credit market seizing up again, that could affect the economy going forward."
It is feared that the current credit squeeze - triggered by banks' unwillingness to lend while they assess the size of potential sub-prime mortgage related losses - will hit growth in the global economy.
Citigroup disclosed that its losses stemming from bad sub-prime related investments could amount to between $8bn and $11bn (£3.8bn and £5.2bn).
Mr Prince's departure followed the departure of Merrill Lynch boss Stan O'Neal last week after the firm suffered its first quarterly loss in five years.
Traders digesting the scale of the crisis in the US banking sector are worried about the exposure of European banks to worthless sub-prime related assets.