Global markets gripped by Silicon Valley Bank collapse as banking shares slide – business live

SVB Financial Group and two top executives have been sued by shareholders over the collapse of Silicon Valley Bank, as global stocks continued to suffer on Tuesday despite assurances from US president Joe Biden.

The bank’s shareholders accuse SVB Financial Group chief executive Greg Becker and chief financial officer Daniel Beck of concealing how rising interest rates would leave its Silicon Valley Bank unit “particularly susceptible” to a bank run.

The proposed class action was filed on Monday in the federal court in San Jose, California.

It appeared to be the first of many likely lawsuits over the demise of Silicon Valley Bank (SVB), which US regulators seized on 10 March after a surge of deposit withdrawals.

Good morning.

The collapse of Silicon Valley Bank is gripping the financial markets, as global bank shares slide despite reassurances from President Joe Biden on Monday.

There have been fresh losses in Asia-Pacific stock markets today, as bank stocks continues to fall.

Japan’s Topix Banks index is on track for its worst day since March 2020, early in the pandemic, currently down 7.4%. Mitsubishi UFJ Financial Group is down 8.66%, with Mizuho Financial Group losing 7.1%

This has pulled Japan’s Topix index down by 2.7%.

Elsewhere, Hong Kong’s Hang Seng index has dropped by 2.35%.

South Korea’s KOSPI index has lost 2.4%, with its Hana Financial Group down almost 4%. Australia’s S&P/ASX is down 1.4%.

Stephen Innes, managing partner at SPI Asset Management, says:

The collapse of Silicon Valley Bank on Friday has brought on the highest volatile market conditions of 2023 so far.

Shares in a number of America’s regional banks closed sharply lower on Monday night, hours after president Joe Biden tried to reassure depositors and investors, saying:

Americans can rest assured that our banking system is safe.

Your deposits are safe.

On Sunday night, the Federal Reserve and Treasury boosted lenders’ access to quick cash, and guaranteed deposits at Signature Bank (which was closed down on Sunday night) and Silicon Valley Bank.

But other regional banks still came under pressure, with San Francisco-based First Republic losing 62% and Arizona-headquartered Western Alliance Bank off 47%.

On Monday, there were heavy falls on European stock markets, with the UK’s FTSE 100 index sheddding 200 points, or 2.58%, to end at 7548 points, the lowest since the start of January.

Markets are expected to open calmer today, though….

Silicon Valley Bank’s collapse last week was the largest bank failure in over a decade.

It came after SVB made a $1.8bn loss on a sale of securities, due to the drop in prices of government bond and mortgage-backed securities as interest rates have risen. That left it struggling to meet withdrawal requests from customers.

Expectations of further sharp rises in borrowing costs are being reassessed too, with central banks likely to be warier of breaking another part of the financial system.

Yesterday was “a wild session on Wall Street as the failure of Silicon Valley Bank revealed the unintended consequence of the Fed’s tightening cycle”, says IG analyst Tony Sycamore:

As noted in recent months and in wider financial circles, the Fed has historically continued tightening until something breaks.

While the Fed’s move to backstop uninsured deposits will likely prevent further banking runs, a potential banking crisis threat trumps high inflation any day of the week.

Reflecting this, the rates market experienced the most significant 2-day fall in U.S. treasury yields since the 1987 crash (yields are now at 4% from 5.08% last week). After being 70% priced for a 50bp rate hike last week, there is now just 12bps priced for next week’s FOMC meeting.

The agenda

• 7am GMT: UK unemployment report

• 8am GMT: European finance ministers hold an ECOFIN conference

• 10.15am GMT: MPs hold hearing on “Prepayment meters: warrants and forced installations”

• 12.30pm: US CPI inflation report for February