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European shares dropped to their lowest level in more than three years today as fears about the health of the world's financial system grew.

The ISEQ index of Irish shares closing figure this evening was its lowest for more than five years.

The Dublin index closed down 155 points or 3.7% at 4,050.

Meanwhile, the FTSE in London ended down 179 points or 3.4% at 5,026

The declines follow the collapse yesterday of the US investment bank Lehman Brothers.

Central banks have been pumping vast amounts of extra cash into world financial markets in an attempt to keep them liquid.

Earlier, Asian markets all reacted badly to the collapse of Lehman, with the Tokyo market slumping almost 5% - also a three-year low.

Shares in South Korea and Hong Kong shed almost 6% in value. Shanghai's index fell by about 3%.

Last night on Wall Street the Dow Jones closed almost 4.5% lower, its biggest one-day fall since the 11 September attacks in the US in 2001.

AIG shares slide

Shares in American International Group slid 70% as the US markets opened amid heightened fears of bankruptcy at what was once the world's largest insurance company.

Shares fell 70% to $1.31 a day after a plunge of over 60%.

AIG has a workforce of almost 400 in Ireland.

Yesterday, a plan was brokered to help the company to raise $20bn in fresh capital.

AIG is a huge risk underwriter of US mortgage debt.

The group is being allowed to raise $20bn from transferring assets in subsidiaries to the parent company.

So far that means no exposure for the US taxpayer.

The Federal Reserve has asked two other banks, Goldman Sachs and JP Morgan, to organise loans worth around $70bn to the company.