Around midday, shares in Italian lenders Unicredit and Banco Popolare were down four percent compared with Friday's closing levels.
The poor sentiment extended to the rest of Europe, with Royal Bank of Scotland shedding 2.6 percent, Deutsche Bank losing 2.1 percent and Societe Generale down 1.6 percent.
Tensions between Italian Prime Minister Matteo Renzi and the EU have reached a boiling point ahead of Sunday's referendum on constitutional reform.
"It's a key moment for Italy's banks," noted Neil Wilson, senior market analyst at ETX Capital. "Sunday's referendum on constitutional reform is Italy's Brexit moment and a No vote would send tremendous shockwaves through the markets and the banking system.
"It could also heap pressure on the euro. Already crushed post-Trump, the euro could hit parity with the dollar if Renzi loses as Italy's place in the eurozone could be in doubt," Wilson predicted.
Focus was also on the oil market ahead of a key OPEC output meeting on Wednesday.
"Equities have started the week on the back foot, with investors concerned about Wednesday's OPEC meeting being a waste of time and next Sunday's Italian referendum having potential to send shivers through Europe's banking sector," said Mike van Dulken, head of research at Accendo Markets.
Crude prices saw fresh losses, after both main contracts slumped around four percent on Friday on disagreements over plans to cut output, with Iran and Iraq pressing to be excluded and Russia suggesting it will only freeze output.
Key figures around 1130 GMT
London - FTSE 100: DOWN 0.6 percent at 6,801.54
Frankfurt - DAX 30: DOWN 0.8 percent at 10,616.83
Paris - CAC 40: DOWN 0.6 percent at 4,522.52
EURO STOXX 50: DOWN 0.6 percent at 3,028.91
Tokyo - Nikkei 225: DOWN 0.1 percent at 18,356.89 (close)
Hong Kong - Hang Seng: UP 0.5 percent at 22,830.57 (close)
Shanghai - Composite: UP 0.5 percent at 3,277.00 (close)
Shenzhen - Composite: DOWN 0.1 percent at 2,126.82 (close)
New York - Dow: UP 0.4 percent at 19,152.14 (close)
Euro/dollar: UP at $1.0634 from $1.0595 Friday
Dollar/yen: DOWN at 112.39 yen from 113.15 yen
Pound/dollar: DOWN at $1.2430 from $1.2478
Oil - West Texas Intermediate: DOWN 33 cents at $45.73 a barrel
Oil - Brent North Sea: DOWN 30 cents at $46.94