STORY: Shockwaves from the collapse of U.S. lender Silicon Valley Bank hammered global stocks again on Tuesday (March 14).

Japan’s banking index was among the hardest hit, ending the day down over 7%.

In Hong Kong, the Hang Seng banking index lost around 3%.

Europe then saw a steadier open, but still saw the STOXX banking index fall around one percent from the open.

That all follows devastating drops on U.S. markets on Monday, with smaller regional banks the worst hit.

First Republic shed over 60%.

Investors seemingly weren’t reassured by comments from U.S. President Joe Biden that day:

“Americans can have confidence that the banking system is safe. Your deposits will be there when you need them.”

U.S. watchdogs have stepped in to take over SVB, and have guaranteed depositors access to their money.

But there is still concern about contagion to more lenders.

That may be driving a surge of cash to bigger banks.

The FT says JPMorgan and Citibank have seen money flood in from smaller rivals.

Though in the UK, Lloyds said there was not yet any such sign of a so-called “flight to quality” there.

Central banks will be watching events carefully too.

Baader Bank head of capital markets analysis Robert Halver:

“There is a conviction here that central banks will have to intervene in an emergency. Something like in 2008 won’t happen when a small fly turned into an elephant with the Lehman collapse and almost brought down the entire system. But there is definitely a lot of nervousness around.”

Investors bet a rethink on rates could be one outcome, with central banks reluctant to add to market strains.

Traders think the U.S. Federal Reserve, ECB and Bank of England are all now less sure to press ahead with hikes.