Europe Markets

European markets close lower; BMPS down 12%

European shares closed lower on Wednesday as concerns increased regarding the stability of the Italian banking system.

The pan-European Stoxx 600 ended 0.21 percent lower with most sectors in negative territory.

Banking stocks opened slightly higher on Wednesday but became one of the worst-performers following news the embattled Monte dei Paschi could run out of cash within four months. Shares of the Italian lender were briefly suspended in both morning and afternoon trade, before closing 12 percent lower down.

Oil stocks closed lower on Wednesday on news that the U.S. President Barack Obama had banned a new oil drilling in Alaska forever.

Meanwhile in the U.S., the Dow Jones industrial average was flat though investors remained wary the index could continue its march towards 20,000 having closed around 25 points away in the previous session.

Looking at specific stocks, Actelion ended close to the top of the pan-European index, jumping more than 6 percent. After the close of European trade, the Swiss biotech company said it was in exclusive talks with U.S. healthcare company Johnson & Johnson.

Mediaset outperformed most of its European peers. Its shares were 2.8 percent higher as the French media giant Vivendi said earlier this week that it intended to extend its share in the Italian company until the 30 percent threshold.

Spain's Banco Popular announced on Wednesday after the European close that its board had unanimously proposed Emilio Saracho as chairman and agreed to hold an extraordinary meeting in February in order for its shareholders to vote on the proposal. Its shares were the worst performing of the pan-European index on Wednesday and closed down 5.8 percent.

Shares of the German carmaker Volkswagen closed higher on Wednesday. The company has confirmed that it will spend an additional $1 billion to settle claims in the U.S. over the emissions test scandal.

German authorities continued searching for a suspect who drove a truck into a Christmas market in Berlin, killing 12 people and injuring 49 on Monday afternoon.

In Turkey, six people have been detained as authorities investigate the assassination of the Russian ambassador to the country on Monday evening.

The Swedish central bank decided Wednesday to keep its interest rate unchanged, but its extending its quantitative easing program. The Riksbank raised its bond-buying target by $3.22 billion until end of June.

Follow CNBC International on Twitter and Facebook.