The troubles at two regional banks that helped drive Thursday’s stock market pullback could have been idiosyncratic, but one thing is clear: Just in case, Wall Street is now on alert for systemic credit risk. Stocks fell Thursday, with the Dow Jones Industrial Average closing down by more than 300 points, thanks to worries about the health of regional banks. The SPDR S & P Regional Banking ETF (KRE) dropped by more than 6%. Shares of Zions Bancorporation in Utah and Western Alliance in Arizona, the two banks at the center of the turmoil, slid more than 13% and 10%, respectively. The early take from bank analysts suggests that the events could be one-offs. What happened at Zions and Western Alliance appears related to a handful of bad borrowers, analysts say, instead of the broader risk to private credit flagged by recent bankruptcies at First Brands and Tricolor Holdings . (On Friday, Baird upgraded shares of Zion to outperform from neutral, saying the bank has been unduly punished; the stock remains a consensus hold among other analysts on Wall Street). But the quick succession of bad loans, and the poor stock market reaction, shows that investors are now alert to greater risk. That was colorfully communicated this week by JPMorgan CEO Jamie Dimon, who said there may be more cockroaches in the industry after the country’s largest bank took sizeable charge-offs in the third quarter for exposure to Tricolor. “I asked Jamie Dimon the question about these problems, and you heard, ‘when you see one cockroach, there’s probably a few more,'” Wall Street bank analyst Mike Mayo said. “So, I think investors are looking around for cockroaches. That’s what’s happening.” NFDIs The broader concern is the amount of lending done to nondepository financial institutions, or NDFIs. NDFIs, including mortgage companies, insurers and private asset managers, give borrowers an alternative source of capital beyond traditional banks. However, NDFIs are neither as transparent nor as regulated or ordinary banks, meaning the risk of unknown leverage could have repercussions for the broader financial system. Loans to NDFIs by commercial banks in 2025 have jumped by more than 50% year over year, according to the Federal Reserve, the largest change in data going back to 2016. “The scary element of this story is with NDFI’s less stringent lending standards, we must assume there is more out there,” wrote Peter Corey, chief market strategist at Pave Finance, who cited the big jump in loans to NDFIs. “The fact that Private Credit is so opaque, there is the risk of a major wave of concern without really knowing if there is even a problem.” “The argument that Tricolor and First Brands were siloed events loses credibility quickly as we get news about Zions and Western Alliance Bancorp,” Corey said. “And will get worse on any future news.” What’s more, private credit is also an asset class that’s yet to be tested in a weakening economy, highlighting the importance of future jobs data — currently on hold due to the government shutdown. Believers in the private asset story don’t expect any systemic risk from the recent news. Macrae Sykes, portfolio manager of the Gabelli Financial Services Opportunities ETF (GABF) at Gabelli Funds, noted the current macroeconomic backdrop is favorable to banks: Lower interest rates, stronger animal spirits, a still-robust economy. “We think it’s a pretty good environment for owning banks,” Sykes said. “But obviously you have to do your homework on the individual leadership, their history of underwriting, making sure there’s no mistakes, and feel comfortable with their portfolios, the balance sheets.” He remains bullish on the large money centers, such as JPMorgan and Wells Fargo , as well as some regionals, like First Citizens Bank and M & T Bank . Nevertheless, investors are now on guard against the risks that could come from any unintended consequences from sour loans. “This just shows that there’s a low margin for error if and when incidents happen,” Mayo said. — CNBC’s Gabriel Cortes and Chris Hayes contributed to this report