The FTSE 100 posted its biggest loss since last July
Oh! Britain’s blue-chip share index posted its biggest one-day fall since last summer.
The FTSE 10 closed down 199.7 points at 7,548 tonight as markets were rocked by the collapse of Silicon Valley Bank.
That’s the FTSE 100’s lowest close since January 3, meaning it has lost most of its gains in early 2023 over the past few weeks, following a record high in February.
That’s down 2.58 percent, the biggest one-day drop since early July last year.
Bank shares ended with big falls Standard: Chartered decreased by 6.9% and Barclays losing 6.3%.
The FTSE 250 index of medium-sized British companies also had a difficult day, losing 2.75%.
But the big losses today remain in regional US banks, with some big names fueling some big declines;
US Regional Bank’s one-day earnings now.
1. Western bloc, $WAL:: -75%
2. First Republic, $FRC:: -65%
3. Zions Bancorp, $ZION:: -43%
4. PacWest, $PACW:: -41%
5. Comerica, $CMA:: -33%
6. Fifth third, $ FITB: -20%
Banks are in deep trouble. How will this pain spread?
— StockUp Finance (@Mohitmehta189) March 13, 2023
Charles Archermarket analyst at IG:writes that there are “real questions about whether regulators have now opened the financial floodgates” with last night’s bailout;
U.S. regulators announced late Sunday that “depositors will have access to all their money beginning Monday, March 13. The taxpayer will not suffer any loss related to Silicon Valley Bank’s decision.” They also guaranteed deposits at the smaller and equally troubled Signature Bank.
While shareholders, most creditors and the bank itself will be allowed to collapse if no buyer is found, there are now real questions about whether regulators have opened the financial floodgates. Depositors of any failed bank would now demand similar treatment of deposit security, and while this move was clearly necessary to maintain financial stability, there is an argument that this was a Pandora’s box that should have remained firmly shut.
Despite the regulatory assurance, shares of Western Alliance Bank fell 75%, First Republic Bank fell 67% and PacWest Bancorp fell 35%. Internationally, banks are as big as HSBC: and: Barclays to see smaller stocks fall in price while troubled Credit Suisse fell to its lowest ever market value as default swaps set another record.
There is a risk that depositors at smaller banks will pull cash in favor of those deemed too big to fail. Added to this risk is the speed of social media. panic can now spread at lightning speed.
Main events
Closing note
Speaking of going home from work… time to wrap up.
Our US Politics Live blog follows the latest developments from Silicon Valley Bank, here:
So here are our top stories on the banking crisis today.
Nils Pratley. Help for Silicon Valley Bank in the UK. Panic in the US
The fallout from SVB’s failure, plus the closure of Signature Bank, could get much worse, warns my colleague Nils Pratley, writing:
The good news is that it only took a long weekend to find a solution for the British end of the doomed Silicon Valley bank. Our tech leaders can stop writing emotional pleas to the Chancellor about their exceptional importance to the nation’s prosperity.
The bad news is that the settlement by US regulators for the much larger parent bank raised more questions than it answered. The fallout from SVB’s failure, plus the closure of Signature Bank, could still get much worse.
Back to Parliament, Conservative MP Louie French questions whether enough work is being done to stress-test the liquidity of UK banks and bond markets in light of the recent LDI crisis.
City Minister Andrew Griffith says the government will indeed learn lessons if it needs to.
But one of the lessons he wants to drive home is what a good job the government has done. Griffith states:
It is not necessary to look from the past, that today we have protected the customers, we have protected the taxpayers, the safety of the financial system.
Many, many people will go home from work today with much more confidence as the threat to the weekend has been lifted as a result of decisive action taken by the Government.
This gives the supporting blast of “hear hear” and the ministerial announcement is complete.
Hastily gathered WhatsApp group, then relief. UK tech companies respond to SVB
British tech firms breathed a “collective sigh of relief” on Monday after the bailout of Silicon Valley Bank’s UK arm was announced, amid fears that failure to broker a deal would plunge the industry into immediate crisis.
Industry insiders say a WhatsApp group called Save UK tech was hastily put together over the weekend as the sector tried to stave off the threat of financial trouble that hit tech firms as early as Monday. A crisis was averted, however, when the government helped broker the acquisition of SVB’s UK operations by HSBC for £1 in a deal announced on Monday morning.
Russ Shaw, founder of industry body Tech London Advocates, said tech companies and investors “breathed a collective sigh of relief” when the deal was announced.
More here:
Some good news from University of Liverpool School of Management Professor Kostas Milas. In the UK, however, there are no signs of financial stress.
Professor Milas explains that Bank of England policy makers will need to consider this issue when they meet to set interest rates this month.
The European Central Bank compiles systemic stress indicators for a number of countries.
For the UK, the index comprises 15 crude, mainly market-based measures of financial stress, divided equally into five categories, namely the financial intermediation sector, money markets, equity markets, bond markets and foreign exchange markets. The index is compiled daily and so far shows no signs of stress for the UK.
This is quite encouraging. If the index rises significantly, its negative impact on UK growth is expected (based on recent research) to continue for up to 20 months. I don’t expect that to happen, but in any case it is this possibility that MPC members will have to consider when deciding UK interest rates next week…
Labour’s Daniel Zeichner asks whether HSBC will provide the same support to small tech companies that Silicon Valley Bank UK has achieved.
Andrew Griffith, Minister for Municipalities says it is up to HSBC how they run their services, but it is a “remarkably successful” international institution. He claims to see the government committed to the technology and life sciences sectors.
SNP’s Anum Qaisar SVP asks whether the UK crisis highlights the dangers of deregulation of the banking sector, often touted as a benefit of Brexit.
Minister of the city Andrew: Griffith denied this, saying the government’s deregulation legislation was still going through parliament so the rules in place were from the pre-Brexit days.
Well done to the Bank of England, said Conservative MP Keith Malthouse, saying it got the chance to use its well-developed bank rescue skills last weekend.
Malthouse is relieved that taxpayers’ money was not used to bail out SVB UK, but shouldn’t capitalism be allowed to recycle distressed assets?
Griffith agrees that capital must be recycled for productive use. The Government’s priority was to find a private sector solution for SVB UK.
Is there a lack of variety in banking options for UK tech companies, it asks? Working Chi Onwurahand dependence on the USA?
And why didn’t any UK authorities notice the accumulation of US Treasury bills on their balance sheets and the exposure to interest rates?
Andrew Griffith says the UK has taken a former subsidiary of a US business and turned it into a thriving UK-listed business.
Labor MP Stephen Kinnock asks what risk assessment took place before SVB UK was granted a banking licence.
City minister Andrew Griffith said there was “risk in any financial system” and that SVB UK had taken part in stress tests carried out by regulators.
Liberal Democrat MP Sarah Olney said depositors who heard from Silicon Valley Bank UK executives last week would have suffered losses today if the bailout had not gone through.
Question. Will they face any consequences for breaking the rules?
Andrew Griffith said it was a “terrible weekend” for SVB depositors and everyone who depended on the bank.
However, it would be “inappropriate” for him to comment on what was said.