Bank of America stock closes below $5

Bank of America's shares have plunged this year but are still above the all-time low of $2.53 hit in February 2009. Click chart for more on the stock.

NEW YORK (CNNMoney) -- Bank of America's shares closed below $5 per share Monday, their lowest level since the worst of the financial crisis in March 2009.

Bank of America (BAC, Fortune 500) fell more than 5% to as low as $4.92 in late afternoon trading. Investors fear that the move below $5 -- while largely psychological -- could also cause some investors to shed their holdings. Shares closed at $4.99.

"It doesn't mean that everyone will drop the stock tomorrow," said Paul Miller, a banking analyst at the investment bank FBR Capital Markets. "Stocks trading below $5 historically have a hard time recovering. You run the danger of a dead stock."

Below the $5 threshold, many broker-dealers will not allow investors to buy or short a stock on margin. Buying on margin means that an investor can simply put down 50% of the price of a stock initially, and the trading firm advances the rest.

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Additionally, certain mutual funds will not hold stocks below $5. Still, such forced selling would probably not be imminent.

With its sub-$5 stock price and its stock down more than 62% this year, Bank of America could follow Citigroup's lead and consider a reverse stock split. This move doesn't change the value of the company. Instead a reverse split lowers the number of shares, but puts them all at a higher value.

In March 2011, with its stock at $4.50, Citigroup announced it would do a reverse stock split. In doing so, it reduced its 29 billion outstanding shares to 2.9 billion, and multiplied its share price by 10. In other words, the market value of the bank did not change.

Still, even with a $24 share price now, Citigroup's investors have lost 45% since the March announcement.

"Historically, reverse splits suck for investors," said Dan Greenhaus, chief global strategist at BTIG. "But it would get them away from that $5 level."

A spokesperson for Bank of America said the company had no comment about its stock price or a potential reverse split.

It's been a tough year for Bank of America. In late August, the bank finally appeared to catch a break when legendary value investor Warren Buffett purchased $5 billion of its preferred shares. Despite giving the stock the "Buffett bounce," shares of dropped more than 28% since Buffett announced his investment.

Among other challenges, Bank of America has mounting problems related to its mortgage business.

The bank's rapidly declining share price is likely to increase pressure on the bank to slim down and sell assets. Bank of America has already said it plans to lay off 30,000 workers over the next several years.

However, Bank of America's shares are still relatively far from the stock's all-time intraday low of $2.53 hit on Feb. 20, 2009.

Bank stocks across the board took a beating Monday on continuing fears over how the sovereign debt crisis in Europe could affect the long-term health of the financial sector.

Shares of Morgan Stanley (MS, Fortune 500) dropped the furthest, closing down 5.5%. Citigroup (C, Fortune 500) dropped 4.7%. JPMorgan Chase (JPM, Fortune 500) moved down 3.7% , and Goldman Sachs (GS, Fortune 500) fell 2.7%.

Traders and analysts said much of the selling was due to negative headlines coming out of Europe as well as reports that tougher regulations on banks could come to pass sooner than expected.

As part of the Dodd-Frank financial regulatory reform, a rule could be proposed this week requiring banks with more than $50 billion in assets to take on less leverage and less risk, said a source close to the situation.

Miller said that investors are also worried about a Wall Street Journal article that described a proposed US accounting rule that would force banks to hold more assets to protect against future losses. The current model solely forces banks to hold more assets after they've generated these losses.

Meanwhile, European Central Bank President Mario Draghi, speaking before the European Parliamentary Commission Monday, also failed to promise any plans to buy more debt of troubled European nations in order to help the economy as a whole and banks.

"Financial and market participants want him to come and say 'We'll buy bonds,' and there's no indication that he's any closer to doing that," said BTIG's Greenhaus. "The financial sector is the most exposed to that."

CNNMoney's Jennifer Liberto contributed to this story.