Regulators ‘hold call with banks’ as pound and stocks tumble

Britain’s biggest banks have reportedly been summoned for a call with City regulators over market turbulence after Government Brexit resignations sent the pound and stocks tumbling.

Bank of England governor Mark Carney personally ordered the call to be held between regulators and lenders, according to the Reuters report.

It is understood major UK banks were asked for their feedback on the market reaction to the shock resignation of Brexit Secretary Dominic Raab, which was followed shortly after by Work and Pensions Secretary Esther McVey.

A spokesman for the Financial Conduct Authority said: “As you would expect, in this type of situation, we have regular contact with firms and will continue to engage with them.”

The pound fell sharply against most major currencies, falling 1.5% to 1.28 US dollars and was also 1.5% down at 1.13 euros as Theresa May’s draft Brexit deal was thrown into chaos.

Stocks exposed to the UK economy dived into the red, with housebuilders and banks the worst affected.

Experts said sterling will remain under pressure as the Prime Minister now fights to save not only her Brexit deal but also her position.

James Hughes, chief market analyst at Axi Trader, said: “Sterling previously moved on clarity rather than positive and negative headlines.

“This has now changed and it seems sterling is now a barometer of the PM’s ability to hold onto her job.”

He added: “If the discontent and resignations continue then the pound will remain under pressure.”

David Cheetham, chief market analyst at online trading group XTB, said the currency reaction was “reminiscent of the Chequers deal in the summer where initial support from the Cabinet has proved short-lived for Theresa May”.

Foreign exchange experts at ING predicted the pound could fall another 3% to 4% “unless the threat of a leadership challenge is quashed or there are clearer signs that the withdrawal agreement can garner more support in Parliament”.

On the FTSE 100 Index, Taylor Wimpey and Charles Church owner Persimmon were the biggest casualties of the Brexit chaos, both suffering 8% falls.

Lender Royal Bank of Scotland led falls in the banking sector, down 6%, with Lloyds Banking Group also falling 5% and Barclays 4%.

Retailers, whose fortunes are also seen linked to the health of the UK economy, were likewise deep in the red.

Shares in high street bellwethers Marks & Spencer and Next both fell 5%.

The wider blue chip share index edged 12.4 points higher to 7046.2 as these falls were offset by share gains for global firms, such as mining groups, which benefit from falls in the pound as they make their money overseas.