When Bank of England governor Mark Carney put the markets on notice yesterday morning that the risks he had warned of ahead of the Brexit vote were beginning to crystallise, the dominoes had already started to drop.
Standard Life Investments sent shockwaves through the real estate sector on Monday evening when it suspended trading in its flagship £2.9 billion commercial property fund, one of the largest in the UK.
But even as the markets were still digesting Carney’s latest assessment of the challenging times ahead, two more funds followed suit, including the mighty £4.4 billion M&G Property Portfolio, the biggest in the £35 billion UK commercial property fund market.
Hours earlier, the £1.7 billion Aviva Investments UK Property Trust became the second fund to call a halt to trading, citing the “extraordinary market circumstances” for its decision to bar investors from withdrawing their cash.
The attraction of commercial property funds is a better return for investors in times of low interest rates. But the nature of the assets - the properties have to be sold to meet withdrawals - makes the funds particularly vulnerable to a collapse in confidence. As it delivered its update on the nation’s financial stability, the Bank revealed that it had already started to look at the structure of such funds.
Investors began to withdraw large amounts from the sector in the run up to the referendum, prompting a number of funds to cut returns to investors, but the flood has become a torrent. Now investors in all three funds are locked in, as their managers attempt to avert a forced sale of assets under the weight of investors scrambling to cash in their holdings.
The three funds together account for more than a quarter of the sector and the domino effect is likely to see other funds raising the shutters too in the days and weeks ahead, just as they did during the financial crisis. Given the difficulty of selling property assets in a falling market, investors could face being locked in for six months or more.
One fear is that the contagion could spread to the residential sector and shares in house builders - already among the biggest losers in the immediate aftermath of the shock referendum result - suffered fresh declines. Sterling, meanwhile, slithered through the 1.31 level against the dollar to a new 31-year low.
The signs of stress in the real estate sector came as Carney made his third public appearance since June 24th, this time to deliver the Bank’s latest financial stability report and to unveil further action to ease the Brexit-inspired turmoil.
In moves aimed at averting a new credit crisis, the governor relaxed capital rules for the banking sector, effectively releasing up to £150 billion of funds for immediate lending. He made it clear the cash should go to businesses and individual borrowers rather than being spent on bonuses for bankers or dividends to shareholders.
Britain's leading banks, which met with chancellor George Osborne yesterday, have agreed that they will make more money available to households and business customers during this "challenging time." That's always assuming, in this post-referendum maelstrom, that anyone has the confidence to take on additional debt.
In his two previous appearances since the Brexit vote - his televised statement on the day of the result and a speech last week - Carney stressed that the Bank was well prepared for the Brexit fallout. He also made it clear, and again yesterday, that the Bank could only do so much to ease the turmoil.
Unlike the political classes, who have disgraced themselves with in-fighting, indecision, disappearing acts and backstabbing, Carney has been a beacon of calm over the last 12 tumultuous days - “the only adult in the room” as one observer described him.
His latest appearance was again hailed as a statesmanlike performance and one that political leaders should attempt to emulate. "The governor of the Bank of England, once again, is offering clear leadership and boosting business confidence," said the British Chambers of Commerce's Adam Marshall. "Government must do the same."
Carney will be centre stage once again next week, when the Bank’s monetary policy committee makes its decision on interest rates and quantitative easing.
The governor has already indicated that rates will need to be reduced from their record low of 0.5 per cent - where they have been since March 2009 - perhaps to zero or even into negative territory. Most economists now expect rates to be cut to 0.25 per cent, if not next week, then in August.
Fiona Walsh is business editor of theguardian.com