Anxiety has surpassed traditional risk boundaries, spilling over into the broader market.
On Thursday, October 16, 2025, analysts and traders at Goldman Sachs experienced a nightmare scenario.
The violent swings in regional bank stocks triggered an avalanche of client reactions, with traders describing behavior that was “beyond control.”
According to Mike Washington of Goldman Sachs, the problems stemming from weak credit exposure forecasts led to the second-worst day for the sector since the collapse of Silicon Valley Bank in March 2023.
Uncertainty has spread widely, and as Washington noted, client calls to the banking desks asking “WHAT IS HAPPENING WITH FINANCIAL COMPANIES?” have surged dramatically.
Goldman Sachs, closely monitoring the situation of regional banks, remains on high alert over NDFI credit (loans to non-depository financial institutions) following Zions Bancorporation’s announcement of a $50 million loss from two risky loans.
Specifically, Zions Bancorporation confirmed in an official statement that it had identified serious irregularities and contract violations from two borrowers, forcing the bank to recognize a $60 million impairment, of which $50 million will be written off.
Although the bank insists this is an isolated incident, evidence suggests that other regional banks may also be exposed to the same borrowers.
Severe uncertainty grips markets
According to Goldman Sachs analysts, client concerns now revolve around three key questions:
1. How did such loans pass the approval process?
Questions about lending standards — such as those involving Jefferies — are increasing, and not just among regional and commercial banks.
2. How is it possible to uncover three separate cases of potential fraud in just six weeks?
Clients are expressing fear that “something is not right.”
3. Are smaller banks loosening lending standards to fuel loan growth?
This trend is particularly worrying, as non-depository financial institutions (NDFIs) have become an increasingly important source of loan expansion for regional banks. Reports suggest that major deviations from traditional standards may be occurring.
Market reaction
The situation is deteriorating, as Zions’ loss represents about 5% of its projected 2025 earnings.
Regional banks are reeling, and Jefferies has also seen a sharp drop.
Financial products tied to private-sector and consumer activity are suffering significant losses, while even traditionally defensive sectors — such as payment networks and exchanges (CME, CBOE) — are down 2–3%.
The prevailing tone across trading desks is that “something is happening,” with large and consequential market moves taking place.
Although Goldman Sachs’ clients acknowledge these may be isolated events, fear has now exceeded the boundaries of normal market risk, spreading into the broader financial landscape.
These developments could lead to further turmoil in regional banks and the wider financial system, with credit leverage risks taking center stage.
Markets are increasingly concerned about the future of regional lenders and the credit exposures now surfacing, and analysts warn that the coming weeks will be critical in determining the market’s direction.
bankingnews.gr
The violent swings in regional bank stocks triggered an avalanche of client reactions, with traders describing behavior that was “beyond control.”
According to Mike Washington of Goldman Sachs, the problems stemming from weak credit exposure forecasts led to the second-worst day for the sector since the collapse of Silicon Valley Bank in March 2023.
Uncertainty has spread widely, and as Washington noted, client calls to the banking desks asking “WHAT IS HAPPENING WITH FINANCIAL COMPANIES?” have surged dramatically.
Goldman Sachs, closely monitoring the situation of regional banks, remains on high alert over NDFI credit (loans to non-depository financial institutions) following Zions Bancorporation’s announcement of a $50 million loss from two risky loans.
Specifically, Zions Bancorporation confirmed in an official statement that it had identified serious irregularities and contract violations from two borrowers, forcing the bank to recognize a $60 million impairment, of which $50 million will be written off.
Although the bank insists this is an isolated incident, evidence suggests that other regional banks may also be exposed to the same borrowers.
Severe uncertainty grips markets
According to Goldman Sachs analysts, client concerns now revolve around three key questions:
1. How did such loans pass the approval process?
Questions about lending standards — such as those involving Jefferies — are increasing, and not just among regional and commercial banks.
2. How is it possible to uncover three separate cases of potential fraud in just six weeks?
Clients are expressing fear that “something is not right.”
3. Are smaller banks loosening lending standards to fuel loan growth?
This trend is particularly worrying, as non-depository financial institutions (NDFIs) have become an increasingly important source of loan expansion for regional banks. Reports suggest that major deviations from traditional standards may be occurring.
Market reaction
The situation is deteriorating, as Zions’ loss represents about 5% of its projected 2025 earnings.
Regional banks are reeling, and Jefferies has also seen a sharp drop.
Financial products tied to private-sector and consumer activity are suffering significant losses, while even traditionally defensive sectors — such as payment networks and exchanges (CME, CBOE) — are down 2–3%.
The prevailing tone across trading desks is that “something is happening,” with large and consequential market moves taking place.
Although Goldman Sachs’ clients acknowledge these may be isolated events, fear has now exceeded the boundaries of normal market risk, spreading into the broader financial landscape.
These developments could lead to further turmoil in regional banks and the wider financial system, with credit leverage risks taking center stage.
Markets are increasingly concerned about the future of regional lenders and the credit exposures now surfacing, and analysts warn that the coming weeks will be critical in determining the market’s direction.
bankingnews.gr
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