Europe's markets fell on Wednesday after the large take up rate by banks for cheap European Central Bank loans worried investors about the banks' funding needs and raised doubts they would use the money to buy the region's peripheral debt.

Demand for the ECB tender was way above the 310 billion euros expected by traders polled by Reuters, with traders saying it highlighted the pressure banks are under, making it unlikely they would use it to buy more of the region's risky debt.

On Wednesday, London's FTSE 100 closed down 30 points to 5,390, Germany's DAX closed down 56 points to 5,792, and France's CAC 40 finished 25 points lower to 3,030.

The take up rate was higher than expected and it is not good if the banking sector requires that amount of funding, said Angus Campbell, head of sales, Capital Spreads. It raises serious questions about the stability of the banking sector.

The problem is there is a major risk with banks buying the region's peripheral debt. If the economies in Spain and Italy can't grow next year, all of a sudden European banks are in a bigger hole than were before.

The FTSEurofirst 300 index of top European shares provisionally closed down 0.5 percent at 970.97 points in relatively thin volumes.

Technology stocks were the biggest fallers in Europe, with the STOXX Europe 600 Technology index down 2.8 percent after U.S. major Oracle's results missed expectations.