The Athens bourse's banking index ended 27 percent lower, bringing the three-day plunge since Monday's open to 63 percent. The rout dragged the wider market down 2.5 percent although non-financials generally outperformed banks.

"With bank shares continuing their dive for a third day in a row, the rest of the market's effort to stabilise was dampened. A tail of unexecuted sell orders on shares of Alpha and Piraeus indicate there may be more pressure on Thursday," said Takis Zamanis, chief trader at Athens-based Beta Securities.

Alpha and Piraeus Bank both closed 29.6 percent lower, effectively at the 30 percent daily loss limit. The former has 1.06 million shares on offer and the latter 2.8 million shares. There were no buyers for either.

But peers Eurobank and National Bank, which also fell sharply, attracted buyers towards the close, ending down 26.7 and 24.3 percent, respectively.

Greek banks are in dire need of recapitalisation after a flight of euros from deposits for most of this year and mounting bad loans. But that will hurt existing shareholders, when it comes, by diluting the value of their holdings.

Athens and its international lenders share the view that banks must complete their recapitalisation by the end of this year and avoid a haircut on large depositors, the country's finance minister said on Wednesday.

The European Central Bank is intensely monitoring Greek banks and any capital shortfall identified in an upcoming review could be plugged using part of the country's bailout money, Daniele Nouy, the ECB's banking supervision chair, said.

Banks comprise about 20 percent of the main Athens index and their continued plunge dragged it lower, reversing a small opening gain.

The new price levels mean big losses for bank shareholders, including Greek bank rescue fund HFSF, which holds majority stakes in three of the four big lenders, hedge funds and other long-term foreign investors.

Foreign market participants accounted for about 67 percent of stock market turnover on Tuesday, a senior Athens stock exchange official told Reuters.

Some shares in the Athens bourse's large-cap share index managed to rebound, however, with 13 of its 25 constituent stocks scoring gains on Wednesday.

"The market is looking for the bottom. We are not far away from it," said Alexander Moraitakis, head of Athens-based Nuntius Securities. "But bank shares are still pounded by selling pressure due to dilution fears, given their need to recapitalise."

(Reporting by George Georgiopoulos; Editing by Jeremy Gaunt; editing by Ralph Boulton)

By George Georgiopoulos and Jeremy Gaunt