MINT·2025-10-16 19:09Core Viewpoint - Shares of regional US banks Zions Bancorp and Western Alliance Bancorp fell significantly due to disclosures of fraud related to loans for distressed commercial mortgages, raising concerns about the stability of credit markets [1][2]. Group 1: Company Disclosures - Zions Bancorp reported a $50 million charge-off linked to a loan from its subsidiary, California Bank & Trust, which contributed to a 12% drop in its stock price [2]. - Western Alliance Bancorp's stock fell nearly 11% after revealing it also made loans to the same borrowers involved in the fraud [2]. - Both banks were the largest decliners in the KBW Bank Index, which experienced its steepest decline in six months [2]. Group 2: Broader Industry Impact - The recent fraud incidents add to a series of loan failures in the industry, including the bankruptcy of subprime auto lender Tricolor Holdings and auto-parts supplier First Brands Group, which resulted in significant losses for larger banks like JPMorgan Chase & Co. and Fifth Third Bancorp [3][4]. - Analysts noted that while larger banks can absorb these losses, regional banks face more significant impacts from such loan problems [4]. Group 3: Legal and Financial Details - California Bank & Trust provided over $60 million in revolving credit facilities to borrowers for purchasing distressed commercial mortgage loans, with a first-priority security interest in the collateral [5]. - Investigations revealed that many of the mortgage notes and properties were transferred to other entities, leading to foreclosures [6]. - Western Alliance's lawsuit indicated that the borrower created fake title policies and drained collateral accounts, with only $1,000 remaining in a required $2 million average balance [8].