U.S. President Joe Biden has promised to take whatever action is necessary to address a banking crisis that is threatening to destabilize markets worldwide. Over the weekend, the United States moved to guarantee deposits at Silicon Valley Bank (SIVB.O), but the move failed to convince investors that other banks were safe. The collapse of SIVB and Signature Bank (SBNY.O) has resulted in emergency measures by regulators to mitigate the impact of the banking crisis.

The fallout has affected big banks like JP Morgan Chase (JPM.N), Morgan Stanley (MS.N) and Bank of America (BAC.N), causing a tumble in the stock market. Furthermore, the STOXX banking index (.SX7P) in Europe saw its largest one-day fall in over a year. German banks like Commerzbank (CBKG.DE) fell as much as 12.7%, while Credit Suisse (CSGN.S) hit a new record low after falling 15%.

President Biden reassured Americans that the banking system is safe and asked Congress and regulators to strengthen bank rules. Despite this, a closely-watched indicator of credit risk in the U.S. banking system edged up, and the volatility index (.V2TX) in Europe jumped to its highest level since October 2022. The price of gold also surged, as investors sought safe havens amid the crisis.

In addition to the banking crisis, a re-pricing of interest rate expectations has sent waves through the markets, with investors betting the Fed will be reluctant to hike next week. This has resulted in a drop in two-year U.S. Treasury yields, which is set for its biggest one-day fall since 1987.

The collapse of SIVB has also resulted in the closure of crypto-focused bank Silvergate (SI.N), which last week disclosed plans to wind down operations and voluntarily liquidate. The banking crisis has wiped out over $100 billion in stock market value for U.S. banks, with European banks losing a similar amount.