Hunt insists UK can weather the storm as turmoil grips markets, Credit Suisse begs for help and the Footsie suffers worst day in a year
Jeremy Hunt maintained that the British banking system was stable as panic ripped through global financial markets.
In his budget, the Chancellor said Britain’s banks were “safe, sound and well-capitalised” even as shares in some of the UK’s largest financial institutions plummeted and the FTSE 100 experienced its worst day of declines since Ukraine’s invasion of Ukraine. February last year.
“British banks are well placed to deal with this volatility,” he said, adding that regular stress tests by the Bank of England “ensure they are able to weather economic shocks.”
Confident: Chancellor Jeremy Hunt said UK banks were ‘safe, sound and well capitalised’ even as shares in some of the UK’s largest financial institutions plummeted
The brutal sell-off in financial markets came as the value of Zurich-based Credit Suisse plunged 24 percent to an all-time low as it pleaded with the Swiss National Bank and regulators to reassure markets about its financial health.
Matters were made worse when Credit Suisse’s largest shareholder, Saudi National Bank, ruled out providing more cash due to regulatory issues.
Reports circulated that French financier BNP Paribas decided to stop lending to Credit Suisse, a major red flag that raised new fears for the future.
The selloff hit bank stocks around the world amid fears that a Credit Suisse collapse could become a “Lehman moment,” a reference to the U.S. investment bank whose 2008 bankruptcy exacerbated the global financial crisis.
The drop also fueled contagion concerns following last week’s collapse of three US lenders – Silicon Valley Bank (SVB), Signature Bank and Silvergate.
“Credit Suisse is basically a much bigger concern for the global economy than the regional US banks that were in the firing line last week,” said Andrew Kenningham, chief European economist at Capital Economics.
He warned that the bank “has a much larger balance sheet than SVB and is much more globally connected,” adding: “Credit Suisse is not just a Swiss problem, but a global problem.”
London-listed financial stocks took a beating as investors worried about their exposure to the Swiss lender.
Barclays ended the day down 9.1 percent, while Standard Chartered lost 7.7 percent, NatWest lost 5.7 percent, HSBC lost 5 percent and Lloyds lost 4.6 percent.
Losses: London-listed financial stocks took a beating as investors worried about their exposure to Credit Suisse
In Europe, GDP closed 10 percent lower while French rival Société Générale fell 12 percent.
In Germany, Deutsche Bank fell by 9.3 percent and Commerzbank by 8.7 percent. The panic continued after the opening bell on Wall Street, with US banks also recording losses.
JP Morgan fell 5 percent while Morgan Stanley lost 4 percent, Goldman Sachs eased 3.1 percent, Citigroup lost 5.4 percent and Bank of America fell 0.9 percent.
The fall in UK banks weighed heavily on the FTSE 100, which closed 3.8 per cent or 293 points lower at 7344, erasing all gains made since the start of the year.
Oil prices also took a hit, with international benchmark Brent crude falling 8.7 percent to $72.35 a barrel amid fears banking sector turmoil will spread to the wider economy and demand will affect.
The drop had a knock-on effect on energy stocks, with Shell losing 8.5 percent and BP losing 8.3 percent.
Growing panic around the stability of the financial system led to a flight to safety, with yields on both US and European government bonds falling sharply as investors poured in.
The price of gold, the traditional safe haven, rose about $1,915 an ounce, its highest level since early February.
“It’s hard to look past Credit Suisse and its obvious crisis of confidence,” said Craig Erlam, senior market analyst at Oanda.
“We are no longer talking about a few regional US banks. We are talking about a major European bank and the shock waves are going through the entire financial markets.’