The stocks of US banks stumbled today (Tuesday) amidst fears of stricter regulations and the possible additional downgrading of several lenders in the country. Specifically, the S&P 500 Banking Index, which tracks the performance of major banking companies, slumped approximately 3%, according to market data from Reuters and CNBC.

US Bank Stocks Hit by Double Whammy

According to Reuters, the decline is the lowest in a month. The outlet noted that the shares of JPMorgan Chase saw one of the biggest falls, dropping by almost 4%.

The decline in the banking index occurred as Martin Gruenberg, the Chairman of the US Federal Deposit Insurance Corporation (FDIC), on Monday disclosed that the agency was looking to revamp how top regional lenders in the country draft their 'living wills' for potential failures. A living will is a document that outlines how a bank would be liquidated if it were to fail.

The Dodd-Frank Act, a federal law in the United States enacted in the aftermath of the 2008 financial crisis, requires lenders with consolidated assets of $50 billion or more to prepare a living will. Gruenberg believes that upcoming changes to requirements in preparing the 'will' would make it “significantly more effective", Reuters reported.

The proposal is part of banking industry regulators' recent efforts to increase their oversight over the US banking industry, especially in the aftermath of the recent crises in the sector that saw the collapse of Silicon Valley Bank, Silvergate Bank and Signature Bank. In fact, to step up its regulatory oversight, US bank supervisors, including FDIC, recently put a proposal forward that could make capital requirements for leading US banks jump as high as 16%, Finance Magnates reported.

Possible Additional Downgrade

Meanwhile, an analyst with Fitch Ratings told CNBC on Tuesday that the credit rating agency may be compelled to slap rating downgrades on several US banks, including the lending giant, JPMorgan Chase. Analyst’s warnings came several days after rival Moody's lowered the credit scores of several small to mid-sized US lenders.

In a note seen by Reuters, Moody’s warned that it could extend the rating downgrades to other top lending institutions, including State Street and Bank of New York Mellon. This is even as the second quarter results of many banks showed that they were struggling to increase their profit, Moody’s said.

The credit rating agency noted that the situation could handicap the ability of US banks to generate internal capital.

Devexperts updates DXcharts; FCA warns against seven companies; read today's news nuggets.