PRESS ASSOCIATION -- London's leading shares index has plunged into the red as shares in Britain's banks were hit by fears over a lawsuit launched against them in the United States.

Royal Bank of Scotland and Barclays both lost more than 7% while HSBC shed more than 1% after the Federal Housing Finance Agency (FHFA) filed claims against them and 14 other banks over the subprime mortgage scandal.

The wider FTSE 100 Index, still reeling from a dismal jobs report in the US on Friday and following a weak session in Asia, fell by more than 1% in early trading.

The FHFA claims the banks misrepresented the quality of billions of dollars of home loans sold to America's state-backed mortgage giants Fannie Mae and Freddie Mac.

RBS has said the allegations are unfounded and it will defend them vigorously.