The FTSE Italia All-Share Banks Sector Index IT8300, +0.29%  slumped 3.9% to 7,381.57, for its lowest close since Aug. 19, according to FactSet data.

Italian voters next Sunday will be asked in a referendum to approve changes to the country's constitution, which have been called the most sweeping since the end of World War II. The proposed reforms would cut the Senate's size by two-thirds and reduce powers held by the country's 20 regional governments. Italian Prime Minister Matteo Renzi believes the changes will aid efficiency in parliament.

The reforms could also "make it easier to implement important legislation (such as measures to assist the country's ailing banking sector) without the threat of a government collapse during periods of political disagreement," said Peter Donisanu, global research assistant at Wells Fargo, in a note published Nov. 11.