Following a string of bank failures, US Treasury Secretary Janet Yellen informed bank CEOs on Thursday that further mergers may be required, CNN said on Friday, citing two people familiar with the subject.

A Treasury representative declined to comment on the meeting with CEOs of the top US banks, other than to reiterate the strength and health of the US financial system.

The meeting with more than two dozen executives convened by the Bank Policy Institute came as the banking sector is endeavoring to shake off several weeks of turmoil spurred by the sudden failure of Silicon Valley Bank, which led to regulators seizing two more collapsing institutions and backing uninsured depositors in an effort to tamp down fears of broader contagion.

The Treasury readout did not mention bank mergers, but CNN quoted sources as saying that consolidation was discussed.

Yellen told Reuters in an interview in Japan last week that pressures on U.S. regional bank earnings may lead to more concentration in the sector and regulators will likely be open to such mergers.

But the report that she gave a similar message directly to bank CEOs, alongside news that talks over the U.S. debt ceiling were at an impasse, had a significant impact on markets on Friday.

“That’s why the market took an initial knee-jerk move,” said Michael James, managing director of institutional equity trading at Wedbush Securities.

Two-year Treasury yields initially dropped by some 11 basis points on Friday after the report, while benchmark 10-year yields fell by about five basis points.

Shares of regional banks also fell, with the KBW Regional Banking Index down 2.8% and shares of PacWest Bancorp, Zions Bancorp, Western Alliance Bancorp, KeyCorp and Comerica Inc down between 1.8% and 4%.

Other factors weighing on shares included news that Republicans in the U.S. House of Representatives and President Joe Biden’s administration had paused talks on raising the $31.3 trillion debt ceiling. The U.S. government may default on some debts as early as June 1 unless Congress votes to lift the debt ceiling.

Federal Reserve Chair Jerome Powell also hinted on Friday at a potential pause in rate hikes amid more balanced risks in the economy.