Banking stocks and bonds plummeted on Monday as the hit to investors from UBS Group's state-backed takeover of Credit Suisse fanned concerns about the health of the global banking sector.

UBS shares fell by as much as 16% in early trade, their biggest one-day fall since 2008, amid concerns among investors about the long-term benefits of the deal and the outlook for banks in Switzerland, a country once seen a paragon of sound banking.

In a package engineered by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs ($3.23 billion) for 167-year-old Credit Suisse Group AG  and assume up to $5.4 billion in losses.

Investor focus has now shifted to the massive blow some Credit Suisse bondholders will take under the UBS acquisition, which has added to anxiety about other key risks including contagion and the fragile state of U.S. regional banks.

European bank shares slumped, with an index of leading lenders down 5.8%. German banking giants Deutsche Bank and Commerzbank dropped 10.9% and 8.5% respectively, while France's BNP Paribas  fell 8.2%.

Those sharp moves followed a day of heavy selling in Asian financial markets as early investor optimism about official efforts to stem a banking crisis quickly evaporated.

Credit Suisse shares slumped 62%, reflecting the huge loss its shareholders will see in their investment in the bank.