European bank stocks slumped on Monday after the restructuring of the Cypriot financial sector was held up as a template for future sovereign rescues by the head of the eurogroup of eurozone finance ministers.
Jeroen Dijsselbloem, the Dutch finance minister and head of the eurogroup, said the Cyprus rescue programme represented a new template for resolving the eurozone’s banking problems and that other countries may have to follow suit.
Banks across the periphery were hit by the comments, leaving Italy’s Intesa Sanpaolo 6.2 per cent lower at €1.15 and rival UniCredit down 5.8 per cent to €3.37. In Spain, BBVA lost 3.6 per cent to €7.03, and Santander slid 3.2 per cent to €5.41.
“Eurozone policymakers are once again walking down the slippery path of unintended consequences,” said Divyang Shah at IFR Markets. “The haircut for depositors is no longer seen as a one-off for Cyprus.”
The comments hurt banking shares across the region. In France, Société Générale shed 6 per cent to €25.78, while Credit Agricole lost 5.8 per cent to €6.18.
Troubled Spanish lender Bankia, meanwhile, slumped 41.4 per cent to €0.147 after a recapitalisation left its shareholders nursing heavy losses.
The FTSE Eurofirst 300 index, which had earlier been as much as 1 per cent higher, ended 0.1 per cent lower at 1,186.45 following Mr Dijsselbloem’s comments.
Italy’s FTSE MIB index fell 2.5 per cent to 15,644.36 as Italian consumer confidence fell in March, while bond yields crept higher at an auction of two-year debt.
“Italian households are wary of the future, having been hit by a massive fiscal austerity package in 2012 and higher unemployment,” said Annalisa Piazza at Newedge Strategy.
Spain’s Ibex 35 slid 2.3 per cent to 8,140.6. Banco Popular Espanol was down 2.9 per cent to €0.61 after Standard & Poor’s cut its long-term credit rating by one notch to BB+, a non-investment grade.