Shares in JPMorgan Chase have dived 9% after the biggest US bank, revealed a trading loss of at least $2bn (£1.2bn)
Chief executive Jamie Dimon blamed "errors, sloppiness and bad judgement" for the losses and warned "it could get worse".
The risky hedging strategy could cost the bank an additional $1bn, he added.
Mary Schapiro, the head of the US market regulator the Securities and Exchange Commission, said that "all the regulators are focused on this".
But she did not give any more details about possible action by her agency.
Shares in other US banks fell, including Bank of America which lost 2.4%. European banking shares also suffered, with Barclays down more than 3.5% and Deutsche Bank falling 1.6%.
BBC
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