Everything you need to know about the financial market chaos after bank shares crash

THE financial markets have been a roller coaster for the past week and shares in banks have been crashing, leading to fears that we are on the edge of a 2008-style credit crunch.

Sun Business takes you through the last action-packed seven days and explains why — fingers crossed — we’re not facing the same type of financial crisis this time.

2

WHY are people talking about banks and bailouts?

It has been a wild ride for financial markets.

First the UK arm of US lender SVB — used by thousands of British tech start-ups — had to be rescued by HSBC after it emerged the bank had not protected itself enough from interest rate rises.

A day before its collapse, customers withdrew $42billion in a single day.

Markets then worried other banks might have the same weaknesses.

Another US lender, First Republic, had billions pumped into it by bigger banks to keep it afloat. Two other US regional banks then went bust.

Then, Credit Suisse was hit by its biggest investor — Saudi National Bank — saying it was not going to put any more money in to help prop up the troubled bank, seeing shares tumble.

But did Credit Suisse go bust?

No. After frantic talks, arch-rival UBS is buying it in a cut-price £2.6billion takeover.

The Swiss government and central bank have provided billions to underwrite the deal, which they said was essential to restore calm to the markets.

It is a big blow to shareholders in Credit Suisse, which was once worth £90billion, but a bigger hit to some bond investors who have been wiped out.

Thousands of jobs will likely be lost as the two banks merge.

Credit Suisse shares crashed by another 60 per cent yesterday.

SO is this a bit like the 2008 financial crisis?

Well, no. Not yet. Britain and Europe’s banks are much stronger because of all the financial regulation that came in after the last credit crunch.

The Bank of England said our banking system “remains safe and sound”.

In 2008, banks’ risky financial products led to the sub-prime crisis.

This time it is central banks’ decision to rapidly hike interest rates to combat inflation that is causing the biggest pain.

A decade of cheap money has suddenly been turned off by rising rates — pushing up the cost of borrowing and lowering the value of government bonds.

Technology assets — often loss-making but cash-hungry — took a big battering.

CAN we all relax?

Not quite. The biggest worry is the problems ­lurking in banks’ balance sheets.

Simon French, economist at Panmure Gordon, said: “If everyone starts to doubt everyone else, the fear factor starts spreading”. Banking relies on confidence.

One problem is that, compared to 2008, social media plays a huge part.

The SVB bank run was largely led on WhatsApp and shows how automated payments allow billions of pounds to be pulled in fractions of seconds.

A second issue is the last financial crisis, pandemic and Ukraine war put economies in a lot more debt.

WHAT does this all mean for me?

The biggest worry is the fear-factor causes banks to tighten lending to other businesses and individuals, making it harder to get a loan, mortgage or financing.

SO should I keep my money in the banks?

Yes. Customer deposits in UK banks up to £85,000 are protected by the Bank of England.

The US ­protects deposits up to £200,000.

One other option is transferring to Premium Bonds, which are fully backed by the government.

Bank shares are likely to slump this year and investors are seeking safe havens for their money, pushing up the price of gold to $2,000 an ounce.

9K MORE AMAZON JOBS GO

AMAZON is cutting an extra 9,000 jobs in a second cull that means the tech giant will have slashed 27,000 jobs this year.

The cuts come just two months after Amazon said that it would cut 18,000 jobs and shut three UK warehouses and seven delivery stations.

2

Amazon, like its other online peers, is having to rapidly adjust to slowing growth and falling revenues after years of uninterrupted growth.

Chief executive Andrew Jassy said in a letter to employees that job cuts were necessary because of the economic uncertainty — and blamed the staggered timing on some divisions not finishing their staffing analysis in time.

Mr Jassy said that it was important for Amazon to be “leaner”.

Amazon said jobs would also be lost in its Amazon Web Services cloud computing division — whereas earlier cuts had been made in e-commerce, devices business and human resources.

OFWAT IN PAY ALERT

WATER companies will be blocked from paying out millions of pounds in dividends to shareholders if the regulator believes it means they can’t afford to clean up their act.

Ofwat has said that if firms fail to hit performance and environmental targets it would hold its owners to account.

Firms have been criticised for lack of investment in their water systems — while more than £65billion has been paid out by the nine biggest companies in the last 30 years.