Obama has new sources of income

bbc:Bank stocks decline on Obama bold plans

Banking shares have dropped following President Barack Obama's far-reaching plans to curb the activities of the biggest banks in the US.

Barclays shares dropped 4% and the Royal Bank of Scotland fell by 2.9%. German and French banks also declined.

US shares also opened lower. Stocks such as Bank of America and American Express dropped for the second day.

Mr Obama - who said he was "ready for a fight" with banks - plans to limit their size and restrict risky trading.

"Never again will the American taxpayer be held hostage by banks that are too big to fail," Mr Obama said.

Japan's Nikkei closed at a three-week low, after the US Dow Jones industrial average had its worst fall since October.

In Europe, Deutsche Bank on Friday fell 4.3%. Societe Generale dropped 6%.

Politicians in the UK were quick to sign up to Mr Obama's proposals.

The Treasury said it would consider the US bank reform plans "very carefully," while City Minister Lord Myners said the US proposals were "very much in accordance with the direction we have been setting".

The government has recently focused mainly on tackling bankers' large bonuses - a source of public outcry - with a one-off "super-tax" and other measures.

Meanwhile, the Financial Services Bill is making its way through Parliament, aiming to give the Financial Services Authority more powers to regulate banking behaviour.

It would also force banks to hold more money in reserve, as well as creating a new Council for Financial Stability, which is intended to consist of Treasury, Bank of England and FSA officials.

But none of the planned legislation goes as far as what the US president has now proposed.