There Are 63 'Problem Banks' and $517B in Unrealized Losses: FDIC
Higher interest rates have caused 63 "problem banks" in the US, with $517 billion in unrealized losses. FDIC reassures this represents 1.4% of all banks, using the CAMELS rating system.
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Higher interest rates have led to 63 "problem banks" in the US banking system, accumulating $517 billion in unrealized losses, according to the FDIC. The surge in interest rates over the past two years has caused a decline in the value of fixed-income securities held by banks. In the first quarter of 2024, unrealized losses increased by $39 billion compared to the previous quarter, mainly driven by higher losses on residential mortgage-backed securities due to rising mortgage rates. The number of problem banks increased by 11 from the previous quarter, totaling 63, with total assets of $82 billion. Despite the rise in problem banks, the FDIC reassures that this represents 1.4% of all banks, within the normal range for non-crisis periods. The FDIC uses the CAMELS rating system to assess the financial strength of banks, with the current problem banks mostly being smaller in size.
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