The US "bad bank" plan is the subject of some nervousness, causing falls on the index today.
London's flagship FTSE 100 stock exchange dropped sharply again today, as investors reacted to the apparent worsening of the credit crunch.
As of 14:29 BST, the index stood at 4944.217, 2.84% down on the day.
This morning brought the news that the government was to take over Bradford & Bingley due to increasing concerns over the firm's financial stability. Benelux bank Fortis was also revealed to be set for partial nationalisations by three European governments.
This increase to taxpayers' obligations signals a further stage in declining investor confidence in the financial services sector. Banks have already lost in excess of £250 billion in the credit crunch, due to their exposure to complex financial instruments which depended on rising house prices to hold their value.
Even the announcement of an agreement from the US Congress over a £350 billion "bad bank" bill, which is expected to become law later today following a vote on Capitol Hill, appears to have failed to calm investor nerves. The bill would see the creation of a new institution, designed specifically to buy devalued mortgage-backed instruments from banks - and therefore to encourage them to lend more freely to each other and boost the economy once more.
Commenting on the FTSE's drop today, Joshua Raymond of City Index told the BBC that investors were remaining cautious ahead of the US vote. "No one is taking any chances and we must wait until the vote to confirm [the bail-out deal] has passed," he said.
