Greek party leaders gathered on Wednesday to agree reforms needed to secure a new EU/IMF rescue package necessary to avoid a chaotic default that would aggravate Europe's financial crisis.

Rating agency Standard & Poor's added pressure on negotiations between Greece and private bond holders by stating Athens will likely not achieve sustainable debt levels with a 70 percent reduction in the value of bonds held by its private creditors.

Uncertainty over Greece's future weighed on Britain's blue chip index, which closed 14.33 points lower, or 0.2 percent, at 5,875.93 points, having traded 92 percent of an already anaemic 90-day volume average and after hitting a six-month high of 5,916.20 in intra-day trade.

My central case is that they will vote to do the cuts and they will try above everything to stay in the euro, Jane Coffey, who manages a 326 million pounds ($515.68 million) UK equity fund for Royal London Asset Management, said.

There has to be a 20 percent risk that this is not possible and this is why I don't want to be completely on that bet.

The euro zone's debt crisis and sluggish growth prospects in Europe persuaded Coffey to reiterate her underweight stance on UK banks. She instead, expressed a preference for mining and oil & gas stocks, which offered attractive valuations and had all to gain from a pick-up in global economic activity.

Banking shares extended gains on Wednesday, boosted by positive broker comments as Citigroup suggested the recent rally had still some room to run.

Share observation of previous financial crises suggests that bank share prices usually trough only 1-2 years after the peak in loans and 3-5 years before the de-leveraging process completes. UK bank lending peaked in December 2009, Andrew Coombs, analyst at Citi said.

Societe Generale, meanwhile, highlighted Royal Bank of Scotland, HSBC, Standard Chartered, among those best positioned to navigate the current interbank lending drought.

Also strong was Reckitt Benckiser, which topped the FTSE 100 with a 2.9 percent rise, as the consumer goods group's full-year results beat market expectations.

BHP Billiton was among the worst performers, falling 2.3 percent as the world's biggest miner reported a rare fall in earnings.

SUBDUED OUTLOOK

March futures on the FTSE 100, which settled at 5,828, indicated the market had entered into a consolidation phase and further declines were likely, although their extent was expected to be limited, Nicolas Suiffet, a technical analyst at Trading Central, said.

Intraday momentum oscillators are turning down from their overbought territories and call for a further decline towards the 38.2 percent Fibonacci retracement level at 5,770, Suiffet said.