LONDON/SINGAPORE, March 13 (Reuters) – Banking stocks in Europe and Asia plunged on Monday as the U.S. decision to guarantee deposits at collapsed tech lender Silicon Valley Bank failed to reassure investors of financial strength from other banks.
Europe’s STOXX banking index (.SX7P) fell 4.3%, after losing 3.78% on Friday, leaving it on track for its biggest two-day drop since Russia invaded Ukraine in February 2022.
Commerzbank AG fell 12%, Credit Suisse Group AG fell nearly 11%, with UK, Italian and Spanish lenders also falling.
Trading volumes were also strong, standing at 160% of the monthly average of the EURO STOXX 50 (.STOXX50E) according to a note seen by Reuters, while the European volatility index (.V2TX) reached its highest level since October 2022.
“There is a sense of contagion and where we see a revaluation in financial stocks is leading to a revaluation in all markets,” said Mark Dowding, chief investment officer, BlueBay Asset Management in London. He said he didn’t think many of the problems plaguing US banks would show up at their European counterparts.
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The bonds held by SVB “were worth next to nothing in a short period of time, so in that context it has an effect that translates to a broader base,” he added.
After a dramatic weekend, US regulators took action on Sunday after the collapse of SVB – the biggest US bank failure since 2008, which suffered a run after a big hit on a bond portfolio.
SVB customers will have access to all their deposits from Monday and regulators have introduced a new facility to give banks access to emergency funds. The Federal Reserve has also made it easier for banks to borrow in an emergency.
Regulators also moved quickly to close New York’s Signature Bank SNBY.O, which had come under pressure in recent days. Smaller banks remained under pressure, with US private bank First Republic Bank (FRC.N) plunging around 50% pre-market and PacWest (PACW.O) down around 26%.
First Republic Bank said on Sunday it secured additional funding through JPMorgan Chase, giving it access to a total of $70 billion in funds from various sources.
In Germany, the central bank convened its crisis unit on Monday to assess the possible fallout on the local market, even though no emergency action was planned in Europe.
A senior European oversight source told Reuters on Monday that the European Central Bank’s Single Supervisory Board had not held any emergency meetings and was not planning to hold one, with its next meeting due to take place on Monday. March 23 and 24.
A spokesman for the ECB, which oversees the biggest banks in the eurozone, declined to comment while a spokesman for the Banque de France said it had no crisis meeting in the works. .
Yet after marathon talks over the weekend, early Monday in London, HSBC (HSBA.L) announced it was buying Silicon Valley Bank UK, the UK arm of SVB, for 1 pound ($1.21) . He said the subsidiary had loans of around 5.5 billion pounds and deposits of around 6.7 billion pounds as of March 10.
While SVB UK is small – HSBC’s balance sheet exceeds $2.9trillion – fears that SVB’s failure could cause the UK start-up industry to stall has prompted the sector to ask the government to to intervene.
Meanwhile, a furious race to reassess interest rate expectations has also sent waves through markets as investors bet the Federal Reserve will be reluctant to raise next week amid feverish and delicate mood. .
Two-year US Treasury yields last fell 30 basis points to around 4.27% and were expected to see their biggest three-day drop since 1987, down 80 basis points in total. Along with the collapse of SVB comes the shutdown of crypto-focused bank Silvergate (SI.N), which last week unveiled its intention to cease operations and voluntarily liquidate, following the implosion of FTX last year.
U.S. banks lost more than $100 billion in market value at the end of last week after the collapse, while European banks lost about another $50 billion, according to a Reuters calculation.
(This story has been edited to correct the Credit Suisse stock movement in paragraph 3)
Reporting by Rae Wee in Singapore and Alun John, Amanda Cooper and Lucy Raitano in London; Additional reporting by Dhara Ranasinghe; Editing by Sam Holmes, Ed Osmond and Elisa Martinuzzi
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