American credit shockwave reaches Europe! Bank stocks collectively plummet, marking the largest decline in two months.

European bank stocks fell on Friday as loan issues at several regional banks in the United States dampened market sentiment, sparking concerns about the credit market and dragging down the previously strong performance of the European banking sector this year. As of the time of writing, the Stoxx 600 Banks index fell by nearly 3%, marking the largest single-day decline since August 1st. Industry leaders such as Deutsche Bank Aktiengesellschaft (DB.US), Barclays PLC Sponsored ADR (BCS.US), and French Industrial Bank all saw declines of over 4%. While this pullback has narrowed the year-to-date gains, the cumulative increase in the sector since 2025 still remains above 40%. Panmure Liberum strategist Susana Cruz stated, "The market has shown a clear negative reaction, with concerns that the difficulties faced by Bank of America Corp may spread to the European market, reminiscent of the regional banking crisis in 2023. Considering that some bank valuations were already relatively high, it is not surprising that bank stocks are leading the decline this time." On Thursday, the stock prices of US regional banks Zions Bancorporation, N.A. (ZION.US) and Western Alliance Bancorp (WAL.US) saw significant declines. Both banks had disclosed that loans they had issued to funds investing in distressed commercial mortgage loans had been subject to fraud, leading to financial losses for the banks themselves. Recently, there have been multiple default events on loans, including issues at subprime auto loan firm Tricolor Holdings and the bankruptcy of automotive parts supplier First Brands Group (which owed over $10 billion to several reputable institutions on Wall Street). The revelation of the fraud incidents at US regional banks further dampened market sentiment. On the other hand, shares of Spanish Banco Bilbao Vizcaya Argentaria (BBVA.US) surged over 10% in early trading on Friday, while Banco Sabadell saw its stock price plummet by 8.6% as its shareholders rejected a takeover offer from BBVA.