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By Sudip Kar-Gupta
LONDON (Reuters) - A rise in banking shares helped the FTSE 100 to erase early losses on Friday, although Britain's top equity index was still set to suffer a weekly decline. At 1023 GMT (11:23 a.m. BST) the index was down a slender two points at 6,637 (FTSE).
The FTSE 350 Banking Index (FTNMX8350) was up by 0.5 percent, as traders said the sector had been lifted by signs that a regulatory probe into alleged foreign exchange rate manipulation may soon be settled.
Britain's Financial Conduct Authority (FCA) held talks this week with six banks about an aggregate settlement of around 2 billion pounds after investigating allegations of collusion and manipulation in the global currency market, Sky News reported on Friday. The FCA declined to comment.
Justin Haque, a director at Hobart Capital Markets, said a settlement on this scale would be a relief for the sector.
Standard Chartered (L:STAN) and HSBC (L:HSBA), which have a big business presence in India, got a further lift as Indian shares rose after Standard & Poor's raised its sovereign credit outlook on India to "stable" from "negative".
Despite Friday's stabilisation on the UK stock market, some traders felt the FTSE 100 would make little progress in the near term.
U.S.-led air strikes against Islamic State militants have made some investors wary of buying up new equity positions.
Investors are also preparing for a possible end to the U.S. Federal Reserve's quantitative easing programme of economic stimulus measures next month, which some feel may pave the way for future interest rate rises.
(additional reporting by Francesco Canepa; Editing by Kevin Liffey)