London’s FTSE 100 Index has tumbled further as banks remained in the red amid fallout from the collapse of Silicon Valley Bank despite emergency action in the US to protect customers and a rescue deal in the UK.

The top tier was trading down more than 2% at around midday on Monday, down 158 points at 7,590, with banks and financial stocks extending share losses seen on Friday.

HSBC’s £1 deal to take over the UK arm of failed Silicon Valley Bank (SVB UK) did not halt the slide on the London market as fears over contagion mounted.

The US government took extraordinary steps to stop a potential banking crisis, moving to protect all depositor cash after last Friday’s collapse of California-based SVB.

It came as the spread began to take hold, with regulators announcing that New York-based Signature Bank had also failed and was being seized on Sunday.

In the UK, banks were heavily lower after steep falls on Friday, with shares in Standard Chartered dropping by 4% and Lloyds down 4%, while NatWest and HSBC were 3% lower.

Other financial stocks were also caught up in the rout, with international bank Standard Chartered leading the FTSE 100 fallers with a 5.4% drop and insurer Prudential down 5% around midday.

Other insurers such as Aviva and Legal & General and banks including Barclays and Lloyds were likewise down sharply.

Meanwhile the yield on UK Government gilts dropped significantly as demand for the bonds increased.

Investors see gilts – essentially Government IOUs – as safer bets during tough times.

When demand for gilts rises, the yield on gilts tend to fall. By around midday on Monday the yield on UK two-year gilts had dropped 7.7%.

Yields on gilts maturing in 2051 dropped by slightly less, down 4.5%.

It was a similar picture across Europe, with the Dax in Germany 2.3% lower and France’s Cac 40 off 2.2%.

Neil Wilson, chief market analyst at Markets.com, said: “Bank stocks fell again as sentiment towards the sector remains shaky, dragging the major European indices into the red.

“The FTSE 100 trades below 7,700 and is now almost 5% below its all-time high struck a month ago.”

He added that while SVB operated in a niche corner of the market, the co-ordinated action on both sides of the Atlantic suggested concerns over damaging shockwaves across the global financial system.

He said: “It’s not a real bailout in terms of using cash to prop up a bank by buying out shareholders.

“But does such co-ordinated intervention signal that regulators are really worried about the US banking system? Would they step in if all were really well elsewhere?”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, warned that jitters will remain over the long-term repercussions of the collapses.

She said: “There remains an unease about the damage wreaked as the era of cheap money has hurtled to an end.

“With niggling concerns that mild recessions could be on the way being replaced by a wall of worry about a looming tech crunch, investors will stay on tenterhooks about the direction of interest rates so this week’s CPI inflation numbers in the US will be sharply in focus.”

But the pound was holding firm in spite of the stock market woes, with sterling up at 0.4% at 1.21 US dollars and largely flat at 1.13 euros.