Online Desk : Shockwaves from the collapse of Silicon Valley Bank pounded global bank stocks further on Tuesday as assurances from President Joe Biden and other policymakers did little to calm markets and prompted a rethink on the interest rate outlook.

Biden`s efforts to reassure markets and depositors came after emergency US measures to shore up banks by giving them access to additional funding failed to dispel investor worries about potential contagion to other lenders worldwide.

Banking stocks in Asia extended declines, with big Australian banks, Westpac and NAB all down more than 2% and Japan`s banking subindex .IBNKS.T falling 6.7% in early trade to its lowest since December.

A furious race to reprice interest rate expectations also sent waves through markets as investors bet the Federal Reserve will be reluctant to hike next week.

"Even if the collapse of several mid-tier banks doesn’t develop into a full-blown systemic crisis, it will more than likely trigger a credit crunch," said Paul Ashworth, Chief North America Economist at Capital Economics.

Traders currently see a 50% chance of no rate hike at that meeting, with rate cuts priced in for the second half of the year. Early last week, a 25 basis-point hike was fully priced in, with a 70% chance seen of 50 basis points.

With investors fearing additional failures, major US banks lost around $90 billion in stock market value on Monday, bringing their loss over the past three trading sessions to nearly $190 billion.

Regional US banks were hit the hardest. Shares of First Republic Bank tumbled more than 60% as news of fresh financing failed to reassure investors, and so did Western Alliance Bancorp and PacWest Bancorp.

Europe`s STOXX banking index closed 5.7% lower. Germany`s Commerzbank fell 12.7% and Credit Suisse slid 9.6% to a record low.

Biden said his administration`s actions meant "Americans can have confidence that the banking system is safe," while also promising stiffer regulation after the biggest US bank failure since the 2008 financial crisis.

"Your deposits will be there when you need them," he said.