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Silicon Valley Bank: FTSE 100 tumbles 2.5%; HSBC rescues SVB UK – as it happened

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Mon 13 Mar 2023 14.39 EDTFirst published on Mon 13 Mar 2023 02.32 EDT
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‘Banking system is safe’: Biden reassures markets after Silicon Valley Bank collapse – video

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FTSE 100 posts biggest loss since last July

Ouch. Britain’s blue-chip share index has posted its biggest one-day fall since last summer.

The FTSE 10 index has just closed for the day down 199.7 points at 7548 tonight, as the markets were rocked by the fallout from the collapse of Silicon Valley Bank.

That is the FTSE 100’s lowest close since 3rd January, meaning it has lost most of its gains in early 2023 in the last few weeks since hitting record hight in February.

It’s a fall of 2.58%, the biggest one-day fall since early July last year.

Bank shares ended in the big fallers, with Standard Chartered down 6.9% and Barclays losing 6.3%.

The FTSE 250 index of medium-sized UK companies also had a rough day, losing 2.75%.

But the big losses today remain in US regional banks, where some big names are nursing some major falls:

One day returns of U.S Regional Bank Stocks Now:

1. Western Alliance, $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 this pain will spread?

— StockUp Finance (@Mohitmehta189) March 13, 2023

Charles Archer, markets analyst at IG, writes that there are “real questions over whether regulators have now opened the financial floodgates” with last night’s rescue package:

Late on Sunday, US regulators announced that ‘depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.’ They also guaranteed deposits at the smaller and similarly troubled Signature Bank.

While shareholders, most creditors, and the bank itself will be allowed to collapse unless a buyer can be found, there are now real questions over whether regulators have now opened the financial floodgates. Depositors at any failed bank will now demand similar treatment over deposit security, and while this step was clearly necessary to maintain financial stability, there is an argument to be made that this was a Pandora’s Box that should have stayed firmly shut.

Despite regulatory reassurance, Western Alliance Bank has seen shares fall by 75%, First Republic Bank by 67%, and PacWest Bancorp by 35%. Internationally, banks as large as HSBC and Barclays see smaller share price falls, while troubled Credit Suisse has fallen to its lowest ever market value as default swaps hit another record.

There is a risk that depositors at smaller banks will withdraw cash in favour of the security of those presumed to be too big to fail. This risk is compounded by the speed of social media — panic can now spread at lightning speed.

My summary of the Silicon Valley Bank crisis for IG below.

Just the beginning imo. Not advice.#SVB #SiliconValleyBank #SVBCollapse #interestrates #JeromePowell #powell #Fed #silvergate #SignatureBank https://t.co/b6kJZzu61W

— Charles Archer (@that_stocks_guy) March 13, 2023
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Closing post

Speaking of going home from work….. it’s time to wrap up.

Our US politics Live blog is tracking the latest developments on Silicon Valley Bank, here:

So here are our main stories on the banking crisis today:

‘Banking system is safe’: Biden reassures markets after Silicon Valley Bank collapse – video
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Nils Pratley: Relief in the UK over Silicon Valley Bank. Panic in the US

The fallout from the failure of SVB, plus the closure of Signature Bank, could get a lot worse yet, my colleague Nils Pratley warns, writing:

The good news is that it took only a long weekend to find a fix – a good one – for the UK end of the doomed Silicon Valley Bank. Our tech executives can stop writing emotional pleas to the chancellor about their unique importance to the nation’s prosperity.

The bad news is that US regulators’ solution for the very much larger parent bank raised more questions than it answered. The fallout from the failure of SVB, plus the closure of Signature Bank, could get a lot worse yet.

Back in parliament, Conservative MP Louie French asks if enough work is being done to stress-test the liquidity of UK banks and the bond markets, given the recent LDI crisis.

City minister Andrew Griffith says the government will indeed learn lessons if they need to be learned.

But one lesson he’s keen to hammer home, is what a good job the government has done. Griffith declares:

We should not look past the fact that today we have protected customers, protected the taxpayer, and the security of the financial system.

Many, many people will go home from work today much more confident, with the jeopardy of the weekend having been removed as a result of the decisive action the government has taken.

This yields a supportive blast of ‘hear hears’, and the ministerial statement is over.

A hastily assembled WhatsApp group, then relief: UK tech firms react to SVB

UK tech firms breathed a “collective sigh of relief” on Monday after a rescue of Silicon Valley Bank’s British arm was announced, amid fears that failure to broker a deal would have plunged the industry into an immediate crisis.

Industry insiders said a WhatsApp group called “save UK tech” was hastily assembled over the weekend as the sector attempted to stave off the threat of financial problems swamping tech firms as soon 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, the founder of Tech London Advocates, an industry body, said tech firms and investors heaved a “collective sigh of relief” when the deal was announced.

More here:

Some good news from Professor Costas Milas, of the Management School of University of Liverpool – there are not signs of financial stress in the UK, yet anyway.

Professor Milas explains that Bank of England policymakers should consider this issue when they meet to set interest rates this month:

Tthe European Central Bank compiles systemic stress indicators for a number of countries.

For the UK, the index includes 15 raw, mainly market-based financial stress measures that are split equally into five categories, namely the financial intermediaries sector, money markets, equity markets, bond markets and foreign exchange markets. The index is compiled daily and does not, so far, indicate any signs of stress for the UK.

This is quite reassuring. If the index were to rise significantly, its negative impact on UK growth would be expected to last (based on recent research) for up to 20 months. I do not expect this to happen but, in any case, this very possibility is something for the MPC members to consider when deciding on 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 achieved.

Ctiy minister Andrew Griffith says it’s up to HSBC how they run their services, but it’s a '“prodigiously successful” international institution. He claims it sees that the government is committed to the tech and life sciences sectors.

The SNP’s Anum Qaisar asks whether the SVP UK crisis highlights the dangers with deregulating the banking sector – something often touted as a benefit of Brexit.

City minister Andrew Griffith doesn’t accept this, saying the government’s deregulation legislation is still going through parliament, so the rules being used were from pre-Brexit days.

Bravo for the Bank of England, says Conservative MP Kit Malthouse, saying it got a chance to put its well-honed bank rescue skills into use last weekend.

Malthouse is relieved that taxpayers money wasn’t used to rescue SVB UK, but shouldn’t capitalism be allowed to recycle distressed assets?

Griffith agrees that capital should be recycled to productive uses. The government’s top priority was to find a private sector solution to SVB UK.

Is there a lack of diversity in banking options for UK tech firms, asks Labour’s Chi Onwurah, and a dependence on the US?

And why did no authorities in the UK notice the build-up of Treasury bills on its US balance sheet, and its exposure to interest rate rises?

Andrew Griffith says the UK has taken a former subsidiary of a US business and put it into a thriving UK-listed business.

Stephen Kinnock, Labour MP, asks what risk assessment took place before SVB UK was given its banking licence.

City minister Andrew Griffith says there is ‘risk in any financial system’, and that SVB UK has taken part in stress tests conducted by regulators.

Liberal Democrat MP Sarah Olney says that depositors who listened to Silicon Valley Bank UK executives last week would have faces losses today if the rescue deal hadn’t been done.

Q: Will they face any conseqences for rule breaches?

Andrew Griffith says it was a ‘terrible weekend’ for SVB depositors and everyone who depended on the bank.

It would be ‘inappropriate’ for him to comment on things which have been said, though.

More on this story

More on this story

  • Trading halted in shares of two more US lenders as fears of banking crisis mount

  • JP Morgan boss plays down risk of crisis after second biggest bank failure in US history

  • Time running out for US financial firms to bid for ailing bank First Republic

  • Allowing Silicon Valley Bank UK to fail would have caused domino effect, FCA suggests

  • Silicon Valley Bank: most of failed lender bought by First Citizens

  • Silicon Valley Bank’s collapse will not be a one-off – a banking crisis was long overdue

  • UBS agrees to takeover of stricken Credit Suisse for $3.25bn

  • Credit Suisse shares continue to fall despite efforts to calm nerves

  • What is happening in financial markets and could there be a global crisis?

  • SVB collapse may be start of ‘slow-rolling crisis’, warns BlackRock boss

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