British banking stocks suffered significant losses on Thursday as government borrowing costs surged to their highest level since 1998, intensifying concerns over the country's public finances
and the potential economic impact of persistently high oil prices and inflation.
The sharp decline came amid a broader sell-off in European banking shares, triggered by falling government bond prices and rising yields across international markets. Britain's long-term borrowing costs were particularly affected, with yields on 30-year government bonds reaching levels not seen in nearly three decades.
Shares in some of the UK's largest lenders experienced substantial declines. NatWest recorded the steepest losses among major banks, falling 5.2%, while HSBC shares dropped 4.3%. Lloyds Banking Group declined by 4.4%, and Barclays lost almost 4%.
The FTSE 350 Banks index fell 4.1%, putting it on course for its largest single-day decline since May 5. The downturn was more pronounced than in the eurozone, where the banking sector index registered a comparatively smaller loss of approximately 3%.
Market pressure on British lenders intensified following a Sky News report that senior executives from the country's leading banks, including Barclays, HSBC and Lloyds, had been called to a meeting with Finance Minister John Healey scheduled for next week.
The reported discussions are expected to take place ahead of the government's Autumn Budget, due on October 28, amid growing speculation that the Treasury could introduce additional taxes on banks.
The prospect of new fiscal measures has added another source of uncertainty for investors already concerned about the UK's rising borrowing costs, inflationary pressures and exposure to fluctuations in global energy prices.
The Treasury declined to comment on the reported meeting when approached by Reuters.
The combination of higher government bond yields and uncertainty surrounding potential tax changes has placed additional pressure on British financial stocks, with investors closely monitoring developments ahead of the forthcoming budget.
