European bank shares fall as market jitters return
A sharp sell-off of European banking shares resumed on Friday as market jitters about the health of the sector refused to go away.
Germany’s Deutsche Bank was one of the worst hit, with shares down 14%, while UBS, the Swiss bank that staged an emergency takeover of the rival Credit Suisse last week – was down 7%.
Europe’s Stoxx 600 banking index fell more than 5%, and the UK’s banking index fell 4%.
In London, banks led the UK’s blue-chip index lower, with Barclays down 6% and Standard Chartered and NatWest both off 5%. They helped to drag the FTSE 100 down by 1.8%.
Bill Winters, the chief executive of Standard Chartered, said earlier on Friday that the decision to wipe out $17bn (£13.9bn) of risky Credit Suisse debt as part of its rescue deal would have “profound” implications for global banking regulations.
As part of the historic government-brokered takeover of Credit Suisse by its larger rival UBS, the Swiss regulator determined that $17bn in additional tier 1 bonds held by investors would be wiped out.
The move spooked markets and sparked a sell-off in other bank debt earlier this week, as investors scrambled to assess whether the same could happen for their holdings of AT1 debt in other banks, a market worth more than $275bn.
“I think it had very profound implications for the regulation of banks, and for the way that banks manage themselves,” Winters said, speaking at a financial forum in Hong Kong.
“The issue isn’t so much do the regulators have confidence in our solvency? It’s does the market have confidence in our liquidity?”
In the past two weeks two US regional banks, California-based Silicon Valley Bank and New York’s Signature Bank, have collapsed because of heavy losses on their bond portfolios and a run on deposits
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