London  - A short-lived rally on the London stock market evaporated Tuesday after big falls in bank shares pulled down the Financial Times Index wiping out an initial rise of 2.6 per cent.

Shares in the Royal Bank of Scotland (RBS) at one point slumped by 40 per cent, following reports that it was among three leading British banks that asked the government for a possible capital injection.

The request by RBS, Lloyds TSB and Barclays was reported to have been made during a meeting of their chief executives with Alistair Darling, the Chancellor of the Exchequer, late Monday.

The government is believed to be working on a bank stabilization scheme that could be announced later this week.

The FTSE 100 Index was down by 1 per cent, or 5.72 points, to 4,583.47 points in mid-trading, after a 2.6-per-cent rise at the opening to 4,711.48 points.

The index fell by a dramatic 8 per cent Monday in the largest one-day percentage decline since 1987. (dpa)