By Dominic Lau

LONDON (Reuters) - The top share index tumbled nearly 2 percent on Thursday after BNP Paribas froze redemptions from three funds over subprime trouble, spooking investors and raising concerns over a possible credit squeeze.

Financials led the FTSE 100 lower, as the BNP news triggered a major disturbance in the European money market and forced the European Central Bank to add almost 100 billion euros (67.6 billion pounds) of emergency funds to strapped banks.

The Federal Reserve also added $24 billion (11.8 billion pounds) in temporary reserves to the U.S. banking system.

With WestLB the latest German lender to disclose it had risky investments in subprime assets and Germany's central bank calling a meeting to discuss details of a rescue package put together for troubled lender IKB, investors were concerned about further banking losses from the recent turbulence.

The FTSE 100 closed down 122.7 points, or 1.92 percent at 6,271.2, but well off its day's low of 6,228.0. The benchmark index is still up 0.8 percent both for the week and for the year.

European shares also finished lower for the day.

"There is probably another 5 to 10 percent downside from where we are right now," said Graham Secker, equity strategist at Morgan Stanley.

"The market will be volatile. There will be up days, there will be down days. But we will not be out of the woods with news flows. It will get worse before it gets better ... (we're) just encouraging investors to stay clear."