What happened

The financial sector has taken investors on quite a roller-coaster ride since the failure of SVB Financial's (NASDAQ: SIVB) Silicon Valley Bank last week. Shares of regional banks have been especially volatile, with many such institutions plunging late last week and on Monday, but rebounding sharply on Tuesday.

However, their declines have resumed on Wednesday. As of 11 a.m. ET, First Republic Bank (FRCB) was down by 17%, KeyCorp (KEY 0.38%) had declined by more than 5%, and PacWest Bancorp (PACW) was down by 16%. It's also worth mentioning that all three stocks were very volatile, and it's possible these percentage declines could be much different by the time you're reading this.

So what

The news headline shaking up the financial industry Wednesday isn't about the regional banks, or any U.S.-based institutions, for that matter.

Rather, the reason for the renewed investor fears about the state of the financial sector is news that Switzerland-based Credit Suisse (CS), one of the largest banks in the world, won't be able to raise more capital from a source it has relied on recently. Saudi National Bank helped finance Credit Suisse's turnaround efforts last year, and now owns a 9.9% stake in it. However, Saudi National said that it wouldn't be able to help Credit Suisse with any additional financing, as it doesn't want its ownership stake to exceed 10% for regulatory reasons. This comes on the heels of Credit Suisse's announcement of accounting weaknesses on Tuesday, which was just the latest in a string of problems that have plagued the bank. As of 11 a.m. ET, Credit Suisse was down by about 17%.

There are some new company-specific issues at play here with the U.S. regional banks. First Republic's debt rating was put on warning for a downgrade by S&P Global (NYSE: SPGI), for example. And generally speaking, the institutions getting hit the hardest are those that have the most exposure to business banking clients and uninsured deposits, and these three definitely fit onto that category. About 79% of First Republic's deposits are uninsured. PacWest's uninsured deposits are just over 57% of its base -- a smaller fraction, but still well over the banking industry median. But on Wednesday, at least, the Credit Suisse news seems to be the biggest force moving bank stocks.

Now what

To be sure, the Credit Suisse situation has little to do with most U.S. banks, just as SVB Financial's problems were largely company specific. But it is certainly causing investors -- who were already nervous about bank stocks -- to become even more cautious. It's fair to expect the volatility in the financial sector to persist for the foreseeable future, so investors who aren't up for dramatic swings in their portfolio may want to avoid these stocks for the time being, even though the institutions will likely survive these headwinds relatively unscathed.