Zions, Western Alliance Plunge on Losses From Alleged Fraud (1)

Shares of two regional US banks tumbled Thursday after the companies said they were the victims of fraud on loans to funds that invest in distressed commercial mortgages, fueling concern that more cracks are emerging in the credit markets.

Zions Bancorp sank 13% after it disclosed a $50 million charge-off for a loan underwritten by its wholly-owned subsidiary, California Bank & Trust, in San Diego. And Western Alliance Bancorp tumbled almost 11% after it said it made loans to the same borrowers.

Zions and Western Alliance were the biggest decliners in the KBW Bank Index, which posted its ...