In New York, the Dow fell 369.88 points, or 3.58%, to end at 9,955.50 - falling below the 10,000 point barrier for the first time since 2004.
The falls follow a series of events including:
The German government was forced to salvage a 50bn euro ($69bn; £39bn) rescue package for mortgage provider Hypo Real Estate
Denmark, Sweden, Iceland and Spain increased the amount of protection depositors in their banks receive.
EU leaders issued a joint statement saying they would take the necessary measures to protect both the system and individual depositors.
Iceland announced emergency legislation to salvage its battered banking sector.
Central banks across Europe - including the European Central Bank and Bank of England - offered more than $74bn to banks in short-term loans in separate efforts aimed at trying to make cash available for the banking sector
Shares in Fortis were suspended, a day after France's BNP Paribas said it would take a 75% stake in the Benelux bank.
Mr Darling told the Commons that an emergency meeting would be held in Luxembourg on Tuesday, where he hoped that all EU member states would agree to act together to avoid confusion.
The chancellor said that 98% of UK bank accounts will be covered by deposit protection once the increase in the amount of bank deposits guaranteed by the government takes effect on Tuesday.
The threshold has increased from £35,000 to £50,000 and Mr Darling said that the Financial Services Authority was looking at whether to increase this further.
The Shadow Chancellor George Osborne reaffirmed the Conservative Party's commitment to work with the Government to help ease the crisis.
"If the banking system fails it's not just the banks that go bust: businesses fail, families can't get mortgages, people lose their jobs, not just in the banks but across the wider economy," Mr Osborne said.
Vince Cable, Liberal Democrat Treasury spokesman, asked the Chancellor to consider overriding the Bank of England's right to change interest rates.
He said the central bank's mandate must include responsibility for averting a meltdown in the financial and economic system.
"Of course the issue is about the availability of credit, but it's also about official interest rates and the implications for mortgage borrowers and small businesses," he said.
The Bank of England meets this week to decide on interest rate policy.
Many economists expect a cut from the current rate of 5%.
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