Britain's FTSE falls as banking stocks lose ground

(ADVISORY - Follow European and UK stock markets in real time on the Reuters Live Markets blog on Eikon, see cpurl://apps.cp./cms/?pageId=livemarkets)

* FTSE 100 ends down 0.3 pct at 6,710.28 points

* Hefty Deutsche Bank demand hits banks

* FTSE 100 still up around 8 pct so far in 2016

By Alistair Smout

LONDON, Sept 16 (Reuters) - Britain's top share index fell on Friday to record a second straight week of losses as heavyweight bank stocks dropped after U.S. regulators demanded $14 billion from Deutsche Bank (LSE: 0H7D.L - news) to settle claims over misselling mortgage-backed bonds.

The blue-chip FTSE 100 index closed down 0.3 percent at 6,710.28 points, posting a loss of around 1 percent over the week.

Royal Bank of Scotland (LSE: RBS.L - news) fell 4.4 percent while Barclays (LSE: BARC.L - news) declined by 2.8 percent, with the European bank sector as a whole hit by an 8.5 percent slump at Deutsche Bank.

Deutsche Bank dropped after getting the $14 billion demand from the U.S. Department of Justice to settle claims that it missold mortgage-backed securities. The figure was well above what Deutsche had expected and the bank said it would fight for a reduction.

"Investors in the sector have been spooked by this fine. It remains to be seen exactly how much Deutsche Bank pays, but it's a reminder of all the regulatory issues that the banks still face," IG (Frankfurt: A0EARV - news) market analyst Chris Beauchamp said.

"There are concerns that there could be more fines further along the road."

Some healthcare stocks managed to rise and outperform the weaker overall market.

AstraZeneca (NYSE: AZN - news) rose 2 percent after the company said combining its Forxiga type-2 diabetes drug with older medicine Bydureon was more effective at controlling blood sugar levels than treatment with either drug on its own.

Spire Healthcare (Frankfurt: S00.F - news) , a FTSE 250 mid-cap stock, also surged 8 percent following a media report of bid interest from Mediclinic. Mediclinic fell 2.4 percent.

The FTSE 100 is still up around 8 percent since the start of 2016, as record low interest rates from the Bank of England have hit returns on bonds and cash and driven investors to seek better returns available from the stock market. (Additional reporting by Adela Suliman and Sudip Kar-Gupta; Editing by Louise Ireland/Keith Weir)