SINGAPORE/LONDON (Reuters) -Shares in European and Asian financial stocks dropped on Friday following a rout in U.S. regional banking shares driven by worries about mounting risks and credit quality.

The banking sector's exposure in two recent U.S. auto bankruptcies rekindled concerns about lending standards more than two years after Silicon Valley Bank's failure, when high rates drove paper losses on its bonds.

European banks fell 2.6% in early trade, led by Deutsche Bank, off 5.8%, while Barclays was down 5% and Societe Generale slid 4.35%.

Shares in Citigroup fell 5.5% in Frankfurt, albeit in thin trading.

Earlier in the day, Japanese banks and insurers had also sunk, with Tokio Marine ( TKOMF ), Mizuho and Mitsubishi UFJ Financial Group ( MUFG ) all down nearly 3%.

The U.S. regional banking index slumped 6% on Thursday as two small banks disclosed separate issues.

Zions Bancorporation said it would take a $50 million loss on two commercial and industrial loans from its California unit, while Western Alliance disclosed it had initiated a lawsuit alleging fraud by Cantor Group V, LLC.

Analysts said that while the issues were unlikely to pose systemic risks, they would weigh on near-term sentiment.

"While meaty, the size of the bad loans in and of itself is unlikely to pose risks to the overall system," said Kyle Rodda, senior financial analyst at Capital.com.

Rodda said the underlying cause of both issues was lax lending standards and fraud, which has spurred fears that such behaviour is endemic and could lead to further defaults.

Other financial stocks in Asia were also under pressure, with Singapore's DBS Bank down nearly 1%, while Australian insurer QBE fell 9%.

The recent bankruptcies of U.S. auto parts supplier First Brands and car dealership Tricolor have put a spotlight on the risk controls of banks and the opaque credit market, where complex loans have made it harder to gauge participants' exposure.

The twin collapses last month have forced some debt investors to cut exposure to certain sectors over concerns about weakness in consumer and auto lending.