The four largest banks in the US now have a total of $205 billion in unrealized losses on their balance sheets, according to a new report.
Bank of America, Wells Fargo, JPMorgan Chase and Citigroup have compiled the losses due to bad bets in the bond market, reports the Financial Times, citing fresh data from the Federal Deposit Insurance Corporation (FDIC).
Bank of America is in the worst shape by a significant margin, with $100 billion in unrealized losses on the books at the end of the first quarter.
Wells Fargo and JPMorgan Chase both have $40 billion in unrealized bond market losses, while Citigroup has $25 billion in paper losses.
Silicon Valley Bank is now the poster child representing the potential pitfalls of unrealized losses in the banking system.
The bank’s rapid failure back in March was sparked by an announcement that the bank had booked a $1.8 billion loss from selling a portion of its bond portfolio.
Bank of America has said its own bonds portfolio is not for sale, a move which could hinder the amount of money the bank can generate from deposits.
“BofA has said it has no plans to sell the underwater bonds, avoiding crystallised losses that for now exist only on paper.
The bank’s portfolio consists of highly rated government-backed securities that are likely to eventually be paid back when the underlying loans mature.”
Despite the paper losses, the Federal Reserve says Bank of America and its peers fared well in a recent stress test on the banking system.
The test, which simulated “severely adverse” conditions in US economy, found America’s top 23 banks would remain above their minimum capital requirements in a hypothetical recession, despite total projected losses of $541 billion.
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