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By Noele Illien, Francesco Canepa and Rae Wee

European bank stocks fell sharply on Wednesday, with embattled Credit Suisse tumbling to a new low, on renewed investor concerns about stresses within the sector triggered by Silicon Valley Bank's sudden collapse.

Regulators and financial executives around the world have sought to assuage contagion fears after tech-focused lender SVB and another U.S. bank failed last week, but worries persist.

A more than 20% drop in Credit Suisse shares led a 6% plus fall in the European banking index, while five-year credit default swaps (CDS) for the flagship Swiss bank hit a new record high, highlighting increasing investor concerns.

The Swiss National Bank declined to comment on Switzerland's second-largest bank.

"Markets are wild. We move from the problems of American banks to those of European banks, first of all Credit Suisse," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.

In the United States, regional and large banks fell in the premarket. First Republic Bank was flat, with peers Western Alliance Bancorp and PacWest Bancorp down 2% and 12%, respectively.

Big banks including JP Morgan Chase, Citigroup and Bank of America were all hit, by between 2% and 4%.

BlackRock Chief Executive Laurence Fink warned on Wednesday that the U.S. regional banking sector remains at risk, and predicted further high inflation and rate increases.

Fink described the financial situation as the "price of easy money" and said in an annual letter that he expected more U.S. Federal Reserve interest rate increases.

He said that after the regional banking crisis, "liquidity mismatches" could follow because low rates have driven some asset owners to raise their exposure to higher-yielding investments that are not easy to sell.

Rapid rises in interest rates have made it harder for some businesses to pay back or service loans, increasing the chances of losses for lenders who are also worried about a recession.

However, European Central Bank policymakers are still leaning towards a half-percentage-point rate hike on Thursday, a source told Reuters, as they expect inflation will remain high.

Investors had begun to doubt the ECB's commitment to another big rate hike as SVB's collapse rattled markets.

But the source said the central bank was unlikely to diverge from its plan to raise rates by 50 basis points on Thursday because doing so would damage its credibility.

In the United States, the focus is shifting to the possibility of tighter regulation of banks, particularly mid-tier ones like SVB and New York-based Signature Bank, whose collapses triggered the market tumult.

Moody's Investors Service on Tuesday revised its outlook on the U.S. banking system to "negative" from "stable", citing heightened risks for the sector.

SVB's shutdown forced President Joe Biden to rush out assurances that the U.S. financial system is safe and prompted emergency measures giving banks access to more funding.

And in an attempt to avert a similar crisis down the line, the U.S. Federal Reserve is considering tougher rules and oversight for midsize banks similar in size to SVB.

Earlier, the Tokyo Stock Exchange banks index jumped more than 4%, after three straight days of heavy selling.

Investors had been particularly concerned about the huge bond holdings of Japan's lenders, but Japanese finance minister Shunichi Suzuki said differences in the structure of deposits, meant local banks would not face incidents similar to SVB.

SVB AFTERMATH

Wednesday's sell-off comes after some respite on Tuesday when bruised U.S. bank stocks regained some ground, aided by news that private equity and buyout firms were looking to scoop up some SVB's assets.

And in Britain, HSBC's top bosses have called on employees at SVB's rescued UK arm to assure clients "their deposits are safe and loans are supported" as the process of integration following its takeover begins, a memo from the bank showed.

Meanwhile, Charles Schwab Chief Executive Walt Bettinger said on Tuesday that the bank has ample liquidity and is not currently seeking capital or deals.

The firm had seen an influx of $4 billion in assets to its parent company on Friday as clients moved assets to Schwab from other firms, Bettinger told Reuters.

(Reporting by Rae Wee in Singapore, Francesco Canepa and Balazs Koranyi in Frankfurt, Amanda Cooper, Lucy Raitano and Sinead Cruise in London, Noele Illien in Zurich; Writing by Alexander Smith; Editing by Sam Holmes, Elisa Martinuzzi, Catherine Evans and Tomasz Janowski)