* Euro STOXX 50 set for biggest weekly drop since Dec
* Sunday's Greek referendum on bailout a major focus
* Banks under the spotlight after more regulatory issues emerge
By Alistair Smout and Liisa Tuhkanen
LONDON, July 3 (Reuters) - A top euro zone share index was set for its biggest weekly fall this year on Friday, with many investors focusing on the Greek referendum on bailout terms, which could determine the country's future in the euro zone.
The euro zone Euro STOXX 50 index was on track for its worst week since December. The index was down 1 percent at 3,427 points, marking a weekly fall of around 5.4 percent since last Friday.
The FTSEurofirst 300 slipped 0.9 percent while Germany's DAX equity index retreated 0.8 percent.
European stock markets have been hit by concerns over mounting tensions between Greece and its international creditors since the government in Athens announced a surprise referendum on the terms of a new bailout programme.
Ahead of Sunday's vote the two campaigns were finely balanced between the 'Yes' supporters of the bailout terms and those prepared to vote 'No' to them.
Peter Oppenheimer, chief global strategist at Goldman Sachs, said a worst-case scenario in case the Greeks voted "No" to the bailout programme could see the Euro STOXX fall to 3,150 points.
"Our clients are certainly not panicking, but they're generally holding back from taking up new positions," added Rupert Baker, equity sales executive at Mirabaud Securities.
Banks were also in the spotlight, with Royal Bank of Scotland declining by 2.2 percent after news that the state-backed British bank may need to pay $13 billion to settle claims it misled investors in mortgage-backed securities, according to documents filed in a U.S. court.
Fifteen of the world's largest banks are also under investigation on suspicion of rigging the Brazilian currency, the first such probe in one of the busiest foreign exchange markets globally.
"Obviously there are number of other investigations still ongoing ... but certainly it won't be a positive addition to sentiment on the sector," Richard Hunter, head of equities at Hargreaves Lansdown, said.
Fiat Chrysler Automobiles NV also fell 1.5 percent after a senior executive with the automaker said it has fallen short on the execution of auto safety recalls. A U.S. regulator said Fiat Chrysler could face action on its performance as soon as this month.
Europe bourses in 2015: link.reuters.com/pap87v
Asset performance in 2015: link.reuters.com/gap87v
Today's European research round-up (Additional reporting by Sudip Kar-Gupta; Editing by Catherine Evans)