Last checked at 
HSBC falls after taking over SVB's UK arm
*
British American Tobacco down after JPM downgrade
*
Bank sector index hits over two-month low
*
FTSE 100 down 2.6%, FTSE 250 off 2.8%
March 13 (Reuters) - London stocks fell on Monday as banks extended their losses on continued fears of contagion risks from the Silicon Valley Bank (SVB) fallout, while strength in the pound added to losses in the exporter-heavy FTSE 100.
The blue-chip FTSE 100 lost 2.6%, falling to an over two month low, while the FTSE 250 midcap index fell 2.8%.
Shares of Europe's largest bank HSBC slid 4.1% after acquiring the British subsidiary of SVB for one pound, rescuing a key lender for technology startups in Britain.
UK banks dropped 4.9%, hitting an over two-month low.
"It's contagion risk (SVB collapse) that is resulting in investors pulling out investments in case it does have a domino effect in the UK," said Giles Coghlan, chief market analyst at HYCM.
In contrast, Britain's finance minister Jeremy Hunt said Britain's banking system is extremely secure and that the rescue of SVB's British arm was necessary to help protect some of the UK's most strategic tech companies.
Earlier, U.S. authorities had announced plans over the weekend to limit the fallout from the collapse of SVB, while investors wagered that a rate hike by the U.S. Federal Reserve this month was no longer a certainty.
Prior to recent losses, British lenders started the year on steady ground as some positive earnings kept the sector ticking up in a high-rate environment.
The pound rose 1.1%, weighing on dollar earners including Burberry Plc and Ocado Group.
Bucking the sombre mood, precious metal miners gained 4.3% as gold prices edged higher against a weakening U.S. dollar.
Among other major movers, oil giants BP Plc and Shell Plc fell 4.8% and 4.1% respectively as oil prices dropped.
British American Tobacco, the manufacturer of Lucky Strike cigarettes, fell 3.2% after JP Morgan cut the stock's rating to "neutral" from "overweight."
Direct Line fell 4.8% after the motor insurer reported a 95% slump in 2022 operating profit.
Investor focus will now shift to UK's spring budget scheduled to be unveiled later in the week. (Reporting by Shashwat Chauhan and Shristi Achar A in Bengaluru; Editing by Sherry Jacob-Phillips, Dhanya Ann Thoppil and Angus MacSwan)