Shares of regional banks resumed their slide this week after the collapse of First Republic Bank, the third U.S. mid-sized lender to fail in two months. Short sellers raked in $378.9 million in paper profits on Thursday alone from betting against certain regional banks, according to analytics firm Ortex.

Increased short-selling activity and volatility in shares have drawn increasing scrutiny by federal and state officials and regulators in recent days, given strong fundamentals in the sector and sufficient capital levels, said the source, who was not authorized to speak publicly.

"State and federal regulators and officials are increasingly attentive to the possibility of market manipulation regarding banking equities," the source said.

PacWest Bancorp shares slid 57% on Thursday, dragging down other regional lenders, after the Los Angeles-based bank said it was in talks about strategic options.

(Edited by Kieran Murray and Chizu Nomiyama)