Investors' fears have been stoked in recent days by talk of negative interest rates being introduced by more central banks.
"It is an uncharted territory and no-one know what are the repercussions of this. It is this fear which is giving a birth that perhaps we are going to face the worst market turmoil of all times," Naeem Aslam, chief market analyst at AvaTrade, wrote in a Friday note.
Fears over central bank interest rates and bad loans hit shares of European lenders earlier this week.
However, banks rebounded on Friday thanks to positive earnings and news from Deutsche Bank. Germany's biggest bank by market capitalization announced it would buy back more than $5 billion in senior debt, sending its shares up 11.8 percent.
Germany's Commerzbank posted fourth quarter net profit in line with analyst expectations, thanks to lower provisions for bad loans; its shares closed 18 percent higher.
Many of the Italian banks — which have been under pressure — rebounded too, though troubled lender Banca Monte dei Paschi di Siena slipped 5.2 percent after larger rival UBI Banca ruled out a tie-up. UBI Banca finished up over 10 percent.