Bank of America Corp (BAC.N) shares fell as much as 9.5 percent to their lowest level since April 2009 on Monday morning over fears of a slowing U.S. economy and challenges to a multi-billion dollar mortgage settlement.

Bank stocks broadly fell after Standard & Poor's stripped the United States of its top credit rating and the European Central Bank intervened in bond markets, triggering fears that the global economy is destabilizing.

Bank of America's shares fell more than most of its peers after insurer American International Group (AIG.N) said it would sue the bank to recoup more than $10 billion in mortgage bond losses.

Bank of America shares were down 8.4 percent at $7.48 in morning trading. The KBW Bank Index .BKX fell 2.97 percent.

Analysts said investors were reacting to the latest challenge to Bank of America's $8.5 billion proposed settlement with mortgage investors over repurchasing toxic home loans.

"It makes investors question whether the bank will need to raise capital," said Keefe, Bruyette & Woods Inc analyst Jefferson Harralson.

Citigroup Inc (C.N) shares fell 5.4 percent to $31.60, JPMorgan Chase & Co (JPM.N) fell 2.1 percent to $36.80 and Wells Fargo & Co (WFC.N) shares dipped 1.3 percent to $24.87.