Banks will have to boost the amount of funds they set aside under proposals by a body which guides global financial regulation.
The Basel Committee of central bankers and supervisors wants the stricter rules to prevent a repeat of this year’s financial crisis.
European equities ended Thursday’s session over one percent lower, but trading was thin as the end of the year approaches.
Bank shares were the worst performers across Europe, partly in response to the Basel committee’s report, as investors worried tighter capital requirements could force banks to issue more shares to raise funds.
Investors were also concerned by the fact that Citigroup’s offering of new shares attracted only weak demand.
HSBC, Barclays, Lloyds Banking Group and Banco Santander were all down
The Federal Reserve’s growing optimism about the US economy boosted the dollar against major currencies and it hit a three month high versus the euro.
That knocked down prices for crude oil and base metals which put shares of commodity companies under pressure.