Mid-cap oil producer Afren (>> Afren Plc) plunged 71 percent after saying it was in talks with its largest bondholders over its liquidity and funding needs.
The benchmark FTSE 100 index <.FTSE> ended 0.6 percent lower at 6,811.61 points, also reacting to UK data showing gross domestic product (GDP) grew more slowly than expected in the last quarter of 2014.
"UK markets were hit by broad-based selling after UK growth estimates slipped ... with banks leading the declines under threat of a looming crisis in Greece spreading across the financial system," Jasper Lawler, analyst at CMC Markets, said.
The UK banking index <.FTNMX8350> fell 1.2 percent, tracking a 11.7 percent fall in Greek banks <.FTATBNK> to a record low, on worries Greece's new anti-bailout government would clash with the European Union over the nation's debts.
Barclays (>> Barclays PLC), Royal Bank of Scotland (>> Royal Bank of Scotland Group plc) and HSBC (>> HSBC Holdings plc) dropped 0.5 to 1.8 percent, with traders citing news of UK banks facing hefty mis-selling claims as one reason for their weakness.
Around two million Britons who may have been mis-sold insurance to cover events such as credit card fraud will be asked to vote for a scheme that could cost banks hundreds of millions of pounds in compensation.
The UK mining index <.FTNMX1770> fell 0.4 percent as copper prices
The UK Oil and Gas index <.FTNMX0530> also fell, down 0.4 percent.
"Oil prices are causing a great concern for some investors. People are getting into the mindset that there isn't going to be a quick fix," David Battersby, investment manager at Redmayne-Bentley, said, referring to the slump in crude prices.
Centrica (>> Centrica PLC) climbed 4.2 percent to 280.08 pence after Credit Suisse raised its stance on the stock to "outperform" from "neutral" and increased its target price to 310 pence from 290 pence.
(Additional reporting by Alistair Smout; Editing by Mark Potter/Ruth Pitchford)
By Atul Prakash
