Midsize Bank Panic to Test Regulators’ Skepticism of Mergers

WASHINGTON—Bank regulators have been loath to let big lenders buy each other. They might have to reassess and allow more mergers as a way out of the current midsize-bank turmoil.

Those lenders are under pressure after several of their peers failed in recent months. Some analysts and banking experts say the best way to shore up depositors’ and investors’ confidence is for more banks to merge without government assistance—and they say regulators should get out of the way or even encourage the tie-ups.