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LONDON, March 18 (Reuters) - European bank shares fell morethan 2 percent on Monday as a plan by Cyprus to seize money frombank deposits raised fears savers elsewhere may not be safe andthe euro zone crisis could flare again.
Bail-outs in Greece, Ireland, Spain and Portugal have notimposed losses on small depositors and savers there should besafe, but the move in Cyprus over the weekend sets a worryingprecedent, analysts said.
"We see no reason why depositors in any of these countriesshould fear bail-in (suffer losses), today. However, in theevent...the peripheral economies require additional capital, therisk is that a precedent has been set," said John-PaulCrutchley, banking analyst at UBS.
By 0820 GMT the STOXX Europe 600 banking index wasdown 2.3 percent at 170.4 points, its lowest level for twoweeks.
Banks in Spain and Italy were hard hit, with Unicredit down 4.7 percent and Intesa Sanpaolo,Santander and BBVA all down more than 3percent. France's BNP Paribas PA> and SocGen were each down 4 percent.
Britain's Barclays was down more than 3 percent.
Investors across Europe were spooked by news that Cypruswould force all depositors to take a loss as part of a 10billion euro ($13 billion) bailout, breaking with previouspractice that depositors' savings were sacrosanct.
"The contagion from Cyprus is fairly limited but there is atail risk that this measure could backfire. Solvency andliquidity risk are back on investors' agenda," said EleniPapoula, analyst at Berenberg Bank. (Reporting by Steve Slater; Editing by Anthony Barker)
