TORONTO (Reuters) - The Toronto Stock Exchange's main index closed at its lowest level in more than three months as intensifying concerns over global credit markets sparked a broad sell-off that was led by banks.

The S&P/TSX composite index closed down 280.18 points, or more than two percent, at 13,478.01, after gaining nearly 200 points the day before.

Banks, which led all equities higher yesterday, reversed course sharply as worries over lending markets rose.

Several major US financial institutions reported losses while BNP Paribas, France's biggest listed bank, froze $2.2 billion worth of funds. In each case, blame fell on the meltdown in the US subprime mortgage sector and investors responded by liquidating equities on European and North American markets.

"I don't think we know the size and scope of the mortgage loan situation, so therefore we get a wild day like this where it just goes nowhere but down," said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc. in Vancouver, British Columbia.

"It doesn't matter what boat you're in Canada or the US, you get tarred with the same brush ... but I'm not ready to call this a bear market quite yet."

The TSX financials sector, which represents about a third of the overall index, fell 2.7 percent to log its steepest decline of the year.

The two biggest weighted losers were Royal Bank of Canada , down C$1.69, or three percent, at C$53.65, and Toronto-Dominion Bank, off C$2.77, or 3.9 percent, at C$67.98.

Manulife Financial, which reported strong quarterly earnings and surged the day before, sagged 72 Canadian cents, or 1.8 percent, to C$40.03.

The latest lending market scare prompted central banks to step in with soothing words and injections of money. The Bank of Canada said Thursday it had injected a larger than normal C$1.64 billion into money markets to meet liquidity needs.

But stocks plunged across the board with a drop of more than one percent in all but three sectors utilities, consumer staples and consumer discretionary.