Shares of regional banks such as Zion's Bancorp (ZION) and KeyCorp (KEY) traded lower after Minneapolis Fed President Neel Kashkari advocated for increasing the capital requirements for banks with more than $100 billion in assets. Kashkari said the current proposal to raise the requirements for large banks "is a step in the right direction," but that it "doesn't go far enough." Yahoo Finance Live looks at how regional bank stocks are reacting to Kashkari's comments.

Video Transcript

- Akiko, let's take a look at regional banks because we're also seeing some movement there those stocks under pressure today falling into the red after Minneapolis Fed President Neel Kashkari warned that the banking crisis may not be over. He also went on to say that proposals for stricter capital requirements for banks with more than $100 billion in assets doesn't go far enough. So we're seeing some of those jitters across the board when it comes to some of those regional plays.

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Kashkari, the fact that he was saying that we do see higher rates. He didn't commit. He didn't say we necessarily need another rate hike here from the Fed. But he did say if we do see another rate hike, that is what could cause a little bit more distress and a little bit more concern within some of these smaller lenders.

- Yeah. When you talk about the path of rate hikes, so what he essentially said is we're a long ways away from a rate cut. That's as far as the commitment went. But going back to what we've been hearing on regional banks, he's referring to, of course, the proposal that came out from regulators for additional capital requirements.

We're talking about midsized regional banks. It would be about 5% additional requirements there. And Kashkari's direct words here. He says the risk is that if inflation is not completely under control, that we have to raise rates further from there to bring it down. That they, as in the regional banks, might face more losses than they currently face today. And those pressures could flare up again in the future.

Now this, of course, came on the back of a headline we got this morning about Fitch warning they may have to downgrade the credit rating of some of the larger banks as well. But certainly, any time you hear about concerns about those capital requirements, certainly things flaring up even months after the collapse of Silicon Valley Bank.

- Yeah, certainly. We're seeing those jitters are reflected in the stock prices today.