Shares in US regional banks fell on Thursday after two lenders disclosed that they were exposed to alleged fraud by borrowers, raising broader concerns about the health of bank loan portfolios.

The disclosures by Western Alliance Bank and Zions Bank follow the recent failures by car parts maker First Brands and auto lender Tricolor, which have left credit investors nursing losses and are under scrutiny from the US Department of Justice.

The KBW regional banking index, which comprises 50 smaller banks, fell more than 5.8 per cent on Thursday, on course for its lowest closing level since June. Shares in Zions had dropped 12 per cent and Western Alliance was down by more than 10 per cent. The two are members of the KBW bank index, which comprises 24 of the country’s leading lenders and was 3.3 per cent lower.