U.S. Banks are sitting on $1.7 trillion in unrealized losses, research says. That’s not a problem—until it is

Why do banks invest in MBS? Itamar Drechsler, Alexi Savov, and Philipp Schnabl* March 13, 202 New York University Stern School of Business

U.S. banks had unrealized losses of $1.7 trillion at the end of 2022. The losses were nearly equal to banks’ total equity of $2.1 trillion, professors Philip Schnabel and Alexi Savov and the University of Pennsylvania’s Itamar Drechsler explained.

Unrealized losses aren’t reflected on banks’ balance sheets due to an accounting practice where assets are held on banks’ books at the value at which they are bought, instead of their current market value.

“As long as people aren’t all coming in at the same time and demanding that their deposits back, you’re okay,” Weiler told Fortune Thursday.

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U.S. Banks are sitting on $1.7 trillion in unrealized losses, research says. That’s not a problem—until it is (yahoo.com)

Why do banks invest in MBS? (nyu.edu)