By Alistair Smout
LONDON (Reuters) - Britain's top share index fell on Friday, setting it up for a second straight week of losses, as the heavyweight banking sector dropped after U.S. regulators fined Deutsche Bank more than expected for misselling mortgage-backed bonds.
Royal Bank of Scotland (L:RBS), Standard Chartered (L:STAN) and Barclays (L:BARC) were down between 2.2 percent and 4 percent, making them the top three fallers on the FTSE 100.
Traders cited readacross from a slump in Deutsche Bank (DE:DBKGn), which fell nearly 8 percent.
"Investors in the sector have been spooked by this fine. It remains to be seen exactly how much Deutsche Bank pays, but it's a reminder of all the regulatory issues that the banks still face," IG market analyst Chris Beauchamp said.
"There are concerns that there could be more fines further along the road."
The FTSE 350 banks sector (FTNMX8350) fell 1.1 percent, taking weekly losses to 3.3 percent, its biggest weekly drop since June.
The FTSE 100 (FTSE) was down 20.33 points, or 0.3 percent, at 6,709.97, by 0809 GMT. It was down 1 percent for the week.
The top riser was Morrison (L:MRW), up 1.5 percent, benefitting from target price upgrades from Barclays, Bernstein and UBS after well-received results on Thursday.
"With sales, profits and cash better than we expected, it is hard to be anything other than complimentary about Morrison's (first half). However, we need to consider what happens next rather than looking backwards," Barclays said in a note.