The benchmark S&P/ASX200 index was down 123 points or 2.63% to 4584.8 at 11.40 AEST, while the Australian dollar also fell half a cent lower to US91c.
NAB shares lost 3.6% to $27.12, while Commonwealth Bank shares also fell 2.3% to $51.15. ANZ dropped 2.9% to $21.34, as Westpac also fell 3% to $23.34.
Investor confidence was shaken after a Dubai finance official said the government may delay repayment of billions of dollars in debt at two of its key firms in order to restructure investment company Dubai World.
But the decision has thrown financial markets into turmoil, with investors questioning the safety of the investment haven.
"We understand the concerns of the markets and the creditors, in particular. However, we have had to intervene because of the need to take decisive action to address (Dubai World's) particular debt burden," Sheikh Ahmed bin Saeed al-Maktoum, chairman of Dubai's Supreme Fiscal Committee, said in a statement.
"Our intervention in Dubai World was carefully planned and reflects its specific financial position. The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react."
Dubai World currently contains about $US59 billion in liabilities, taking up most of the country's debt of $US80 billion. The decision by the Government has sent costs of insuring Dubai's debt higher, while bond prices have declined.
Back home, department store David Jones has said it is confident its revamped Bourke Street store will be ready for its opening tomorrow, according to reports in the Herald Sun.
Chief executive Mark McInnes has reportedly said the opening will run on time, with higher sales expected during the first three weeks of December. But while good sales are expected, McInnes also warned that he is unsure whether consumer sentiment has totally recovered.
Macquarie media has entered a trading halt, with the television, radio and newspaper operator now completing a new share sale.
The company has announced it will sell about 41.4 million stapled securities, with the trading halt to remain until the company announces the outcome of the bookbuild, or at the start of trading on 1 December.
Telco reform bill delayed until 2010
In Canberra, the Federal Government will wait until February 2010 to debate the telecommunications reform legislation, as the Senate has run out of time to discuss the bill.
Time has run out after the Liberal Party has been thrown into turmoil regarding the Emissions Trading Scheme, with Tony Abbott likely to mount a leadership challenge against Malcolm Turnbull on Monday.
While communications minister Stephen Conroy had previously promised to pass the legislation, which will see Telstra split its retail and wholesale divisions, before Christmas, the developments will push the passage through to next year.
In response to the proposed trading scheme, BHP Billiton chairman Don Argus has said at the company's annual general meeting that he remained sceptical about such a plan.
"What I am sceptical about is if you will ever get CO2 (carbon dioxide) out of the atmosphere," he told reporters. "If you let a trader trade something, then he has a different objective. I don't mind what scheme we have as long as it is taking CO2 out of the atmosphere."
"In any situation where you've got multiple parties with multiple different vantage points, and things that they want to achieve, it is a little bit presumptuous to say that everything that is in there (the ETS) is exactly aligned with what my idealised outcome would have been."
Metcash is now looking to purchase a 50.1% stake in hardware chain Mitre 10 with a possibility of purchasing the entire group in 2012-13, the company has said in an announcement to the ASX.
"Recent developments in the hardware sector have materially changed the landscape and outlook for independent operators," Metcash chief executive Andrew Reitzer said.
"Based on our experience and success in the competitive food and liquor sector, a Metcash backed Mitre 10 wholesaler will enable Mitre 10's retail customers to compete more effectively in an increasingly competitive marketplace."
Deutsche Bank eyes Suncorp portfolio purchase
The Australian division of Deutsche Bank could be a candidate to acquire the non-core loan book of Suncorp Metway, worth $16.6 billion.
According to reports in the Herald Sun, sources have said the company is assessing the underlying value of the properties connected with the loans in the portfolio. However, other parties are also reportedly looking at a possible purchase.
Overseas, New Zealand kitchen and laundry appliance manufacturer Fisher and Paykel Appliances has announced a first-half loss due to asset writedowns and weak sales.
It announced a net loss for the six months to 30 September of $NZ82.4 million, with a writedown of $NZ55.6 million included in the figure along with restructuring costs of $NZ26 million.
But the company said the second half of the year should deliver better results, with a net profit expected of between $NZ16 million and $NZ23 million.
Trading in the US was suspended due to the Thanksgiving public holiday.
