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Working Paper
Rushing to Judgment and the Banking Crisis of 2023
This article critically reviews the 2023 banking crisis with the benefit of two years of hindsight. We highlight seven facts that depart from the standard account of the crisis that has developed. We describe the crisis as a reaction to bank business models that focused on providing banking services to certain economic sectors, crypto-asset firms and venture capital, that had come under economic pressure during the preceding year. We argue this view of the crisis provides a more precise explanation of which banks were affected compared to an explanation focused solely on banks’ balance ...
Banking Analytics: Unrealized Losses Decrease Again at U.S. Banks
Unrealized losses as a percentage of total securities at U.S. banks fell again in the second quarter of 2025, though they remain a risk for some institutions.
Journal Article
The Implications of Unrealized Losses for Banks
nterest rates have risen across the yield curve since the Federal Open Market Committee began tightening monetary policy in March 2022. After amassing securities during the pandemic, commercial banks saw rising interest rates erode the value of their securities portfolios by nearly $600 billion, or about 30 percent of their capital holdings. In some cases, declines in valuation of securities holdings in response to interest rate changes—known as “unrealized losses”—can mechanically reduce key regulatory capital and liquidity ratios. Should banks need to sell the securities to generate ...
What Are the Characteristics of Banks with Large Unrealized Losses?
An analysis suggests banks with significant exposure to unrealized bond losses rely more on deposits, hold less-liquid assets and have smaller capital buffers.
Report
Investor Attention to Bank Risk During the Spring 2023 Bank Run
We track investor perceptions of bank risk during the 2023 bank run using “balance sheet betas” — the covariance of a bank’s stock returns with returns on factors based on uninsured deposits and unrealized securities losses in 2022Q3. Betas are mostly zero before the run but rise significantly during it, and even further when a bank is in the news. These increases are only weakly related to bank fundamentals. Once the Fed’s liquidity support is announced, betas become insensitive to losses on eligible collateral. Public news and government interventions, rather than fundamentals ...