UK's FTSE 100 fell on Monday, with banks extending losses as shock waves continue to reverberate through financial markets after U.S. regulators closed Silicon Valley Bank (SVB).
The blue-chip FTSE 100 (.FTSE) lost 2.4%, falling to an over two month low.
Shares of Europe's largest bank HSBC (HSBA.L) fell 1% after saying it will acquire the UK subsidiary of SVB for 1 pound, rescuing a key lender for technology startups in Britain.
UK banks (.FTNMX301010) slid 4.3%, hitting an over two-month low and extending last week's declines of over 6%.
"It's contagion risk (SVB collapse) that is resulting in investors pulling out investments in case it does have a domino effect in the UK," said Giles Coghlan, chief market analyst at HYCM.
In contrast, Britain's finance minister Jeremy Hunt said UK's banking system is extremely secure, adding that the rescue of SVB's UK arm was necessary to help protect some of the UK's most strategic tech companies.
Prior to recent losses, British lenders started the year on steady ground as some positive earnings kept the sector ticking in a high-rate environment.
On the earnings front, Direct Line (DLGD.L) fell 7.4% after the motor insurer reported a 95% slump in 2022 operating profit.
The more domestically-focussed FTSE 250 midcap index (.FTMC) fell 2.9%.
British American Tobacco (BATS.L), the manufacturer of Lucky Strike cigarettes, fell 3.1% after JP Morgan cut the stock's rating to "neutral" from "overweight."
Bucking the sombre mood, precious metal miners (.FTNMX551030) gained 1.4% as gold prices edged higher against a weakening U.S. dollar.
The focus is now shifting to UK's spring budget due to be unveiled later in the day.
