UBS shares fell by as much as 16 percent in early trading, their biggest one-day fall since 2008, amid concerns among investors about the long-term benefits of the deal and the outlook for banks in Switzerland, a country once seen a paragon of sound banking.

In a package engineered by Swiss regulators on Sunday, UBS Group will pay 3 billion Swiss francs (US$3.23 billion) for 167-year-old Credit Suisse Group and assume up to $5.4 billion in losses.

Investor focus has now shifted to the massive blow some Credit Suisse bondholders will take under the UBS acquisition, which has added to anxiety about other key risks, including contagion and the fragile state of United States regional banks.

European bank shares slumped, with an index of leading lenders down 5.8 percent. German banking giants Deutsche Bank and Commerzbank dropped 10.9 percent and 8.5 percent respectively, while France's BNP Paribas fell 8.2 percent.

Those sharp moves followed a day of heavy selling in Asian financial markets as early investor optimism about official efforts to stem a banking crisis quickly evaporated.

"It should be clear that after more than a week into the banking panic and two interventions organized by the authorities, this problem is not going away. Quite the contrary, it has gone global," said Mike O'Rourke, chief market strategist at Jones Trading.

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