Exchange traded funds that invest in Europe suffered heavy losses Thursday as the region’s debt crisis spiraled further. Renewed worries over the global economy added to the selling.

The European financial sector ETF reflected the heavy declines experienced by Eurozone banks on news that U.S. regulators will be inspecting bank assets of European banking units in the U.S.

iShares MSCI Europe Financials Sector (NasdaqGM: EUFN) was down 7% at last check Thursday.

Dexia SA led the plunge in European banking shares, plummeting 14%, along with Societe Generale SA, which fell 12%, and Barclays, which fell 11%, reports John Martens for Bloomberg. Overall, the Bloomberg Europe Banks and Financial Services Index dropped 7.6%, its largest fall since March 2009.

Single-country European ETFs absorbed across-the-board losses:

  • iShares MSCI Belgium (NYSEArca: EWK) was down 6%. Dexia is 1.16% of the fund. Financials are 23.69%.
  • iShares MSCI France (NYSEArca: EWQ) was also down 6%. Societe Generale is 2.87%. Financials are 16.77%.
  • iShares MSCI Germany (NYSEArca: EWG) fell 6%.
  • iShares MSCI Italy (NYSEArca: EWI) declined 6.4%.
  • iShares MSCI Spain (NYSEArca: EWP) slipped 4.5%.

The Federal Reserve is questioning European banks with U.S. branches about their capital requirements, report Douwe Miedema and Edith Honan for Reuters.