FTSE 100 falls amid fears that turmoil at troubled US tech lender could cause contagion across sector
are closely monitoring the UK banking sector, after the troubled tech lender Silicon Valley Bank was forced to shut by US regulators., amid fears that turmoil at the bank – which developed quickly over the previous 24 hours – could put customers’ deposits at risk and lead to further contagion across the financial system.
The bank lost the funds when it sold a portfolio of bonds in response to a decline in customer deposits. Those bonds had dropped in value as a result of rising interest rates, leaving SVB with a shortfall.Its US-listed shares initially plunged 60% on Thursday, and were halted on Friday after tumbling 66% in pre-market trading, before regulators stepped in.
However, those troubles raised broader fears that the recent increases in interest rates have affected the value of other banks’ bond portfolios, which tend to fall in price when interest rates rise. Those fears prompted a drop in UK banking stocks, which the Bank of England’s regulatory arm, the Prudential Regulation Authority , is closely monitoring.
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