US Banks Face $482 Billion in Unrealized Losses, FDIC Warns

American banks are facing a sharp rise in unrealized losses, with the latest data from the Federal Deposit Insurance Corporation (FDIC) revealing a significant increase in the fourth quarter of 2024.

The total value of these losses surged by $118.4 billion, bringing the overall figure to $482.4 billion.

The FDIC attributes the surge to rising long-term interest rates, such as those on 30-year mortgages and 10-year Treasury bonds, which have eroded the market value of bank-held securities.

Unrealized losses represent the gap between the purchase price of these assets and their current worth, a factor that played a key role in the downfall of Silicon Valley Bank in 2023. The bank’s collapse was triggered when depositors, alarmed by heavy losses on securities sales, rushed to withdraw their funds.

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Despite these mounting losses, the banking sector posted a 2.3% increase in overall profits. However, concerns remain, with the FDIC’s list of troubled banks now including 66 institutions, down slightly from 68 in the previous quarter.

These banks have received poor ratings under the CAMELS system, indicating financial instability that could jeopardize their survival if left unaddressed.

So far in 2024, one bank has already failed. Pulaski Savings Bank was shut down in January, with regulators citing “suspected fraud” as a contributing factor without providing further details on the exact cause of its closure.

Alexander Stefanov