Italian banking shares suffered hefty losses after Matteo Renzi’s heavy constitutional referendum defeat revived fresh concerns about the fragility of the country’s financial system.

In tumultuous trading, Italy’s banks index fell by as much as 4.8pc in early trade as investors feared efforts to raise capital for beleaguered banks could be derailed by political uncertainty. The index, which has plunged by 46.9pc so far this year, is now on track for its biggest annual fall since the height of the euro debt crisis in 2011.

Despite creeping into positive territory, the banks index closed down 2.2pc. Shares Monte dei Paschi tumbled 4.2pc, while UniCredit surrendered 3.3pc, Banca Popolare Milano dropped 7.9pc, and Mediobanco lost 4.2pc.