British banks ordered to disclose debt exposure amid contagion fears

Turmoil on Europe's markets continues, as bank shares suffer rollercoaster ride

The Financial Services Authority (FSA) has stepped up scrutiny of UK banks' exposures to foreign government debt as fears of European sovereign debt contagion sent markets into a renewed frenzy yesterday.

Click HERE to upload graphic (237k jpg)

The City watchdog is in talks with Britain's banks and their auditors to ensure consistent disclosure of their sovereign holdings according to the standards of the recent European stress tests in their year-end results.

As fears over which banks could be hit by downgrades of sovereign bonds continue to rattle markets, the FSA has also upped its day-to-day monitoring of UK lenders' exposures.

An FSA spokeswoman said: "We have been holding discussions with the banks and their auditors in relation to their sovereign exposures. What we are looking for is greater consistency and disclosures across firms to give the market clear information."

Yesterday marked another round of turmoil for Europe's banks as fears about exposures to debt-stretched economies made investors question their ability to fund in the market.

Shares in Société Générale gyrated as the French lender sought to stamp out doubts about its financial strength. The bank was the focal point of Wednesday's rout of bank shares.

SocGen's chief executive, Frederic Oudea, staged a fightback overnight, dismissing negative speculation as "absolute rubbish". He called for the French market regulator to investigate the source of market rumours.

"People are scared so the tiniest information touches off irrational fears," he said. "[Our clients] should not listen to this stuff, which is totally baseless."

His comments rallied the shares but they then fell more than 9 per cent in a day of frenzied trading before closing up 3.7 per cent. Speculation about a European ban on short selling helped boost shares. BNP Paribas, France's biggest bank, closed up slightly after falling up to 7.5 per cent earlier.

However, average short interest across the Euro Stoxx banks sector was 2.85 per cent, only marginally above the average for European companies in general, according to Data Explorers figures. Short interest in SocGen was 1.23 per cent and was 1.95 per cent for BNP Paribas.

The figures suggest short selling was not a major factor in the banks' declines, though rumours planted by a few short sellers can wreak havoc.

The cost of insuring SocGen's senior bonds hit a fresh record, according to data provider CMA. Speculation about a downgrade of France's sovereign debt, a bigger bailout for Greece and the bank's ability to raise funds put SocGen shares under pressure.

Banks' overnight borrowing from the European Central Bank hit a three-month high as prices for inter-bank lending showed Europe's banks increasingly unwilling to lend for longer than overnight.

Analysts at Royal Bank of Scotland said SocGen was among European banks that rely most heavily on short-term wholesale funding.

"The mix of euro doubts and rating fears in recent days and weeks may have dented the confidence of funding counterparties, which has then fed back into equity markets," they said.

Markets rebounded after heavy falls the day before but sentiment was highly volatile. The FTSE 100 dropped as much as 1.3 per cent but rounded off the day up 3.1 per cent at 5162.83. The rally was led by Barclays which jumped 8.6 per cent and recovered almost all Wednesday's losses.

European shares registered their biggest surge for 15 months as the Stoxx 600 index jumped 3.2 per cent. However, the index has fallen 21 per cent since it hit a high for the year on 17 February.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project