Unrealized Securities Losses at U.S. Banks Rise to $326.7 Billion
According to data from the Federal Deposit Insurance Corporation (FDIC), as of the end of the second quarter of 2026, the total unrealized losses on investment securities in the U.S. banking industry reached $326.7 billion, an increase of $1.6 billion from $325.1 billion in the first quarter, a quarter-on-quarter rise of 0.5%.
Barchart noted that this aligns with FDIC data, indicating a continuous increase over the previous two quarters: unrealized losses rose from approximately $321 billion in the fourth quarter of 2025 to $325.1 billion in the first quarter of 2026, and further to $326.7 billion in the second quarter.
However, $326.7 billion is not a historical peak for the banking industry, nor does it equate to realized losses or immediate insolvency. This amount is $68.6 billion lower than a year ago, representing a year-on-year decline of 17.4%, and is significantly below the peak of approximately $684 billion in the third quarter of 2023.
The unrealized losses primarily stem from fixed-income securities held by banks, such as government bonds and agency MBS: rising interest rates depress the market prices of older bonds, and paper losses only convert to cash losses if banks are forced to sell. If held to maturity and the issuer does not default, bonds can typically be redeemed at face value; however, during liquidity crunches or deposit outflows, banks may have to sell early and realize losses.
The unrealized losses on available-for-sale securities amount to $109.8 billion, a quarter-on-quarter decrease of $780 million; the unrealized losses on held-to-maturity securities are $216.9 billion, a quarter-on-quarter increase of $2.4 billion. Held-to-maturity portfolios are usually not marked to market in current profits, but their declining market value still affects banks' flexibility in emergency financing, asset sales, or capital market financing.
Unrealized losses account for 5.5% of the amortized cost of securities. During the same period, the net profit of the U.S. banking industry in the second quarter increased by 12% year-on-year, with loan balances rising by $154 billion, and the number of troubled banks increasing from 63 to 66; the capital ratio slightly decreased due to asset growth outpacing capital accumulation.
From a market mechanism perspective, maintaining high interest rates will continue to depress the prices of older securities, weakening some banks' flexibility to sell assets, absorb deposit outflows, or increase lending. Large banks, due to their deposit base, hedging, and broader financing channels, typically find it easier to manage interest rate risk; regional banks and institutions with longer-duration securities and relatively high unrealized losses face greater pressure. Beneficiaries include money market funds, short-term government bond funds, and platforms that can offer high-yield deposit alternatives.
Source: Public Information
ABAB AI Insight
The core of the $326.7 billion figure is not "banks losing $326.7 billion tomorrow," but rather the balance sheet constraints left by interest rate risk. Banks purchased long-term government bonds and MBS during low interest rate periods with lower coupons, and as market interest rates rise, the prices of these existing securities fall; as long as banks do not sell and the assets do not default, the coupons and maturity redemptions can still slowly offset paper losses, but capital and liquidity buffers will be weakened by lower market values.
The capital path depends on "whether deposits are stable." Stable low-cost deposits allow banks to hold low-coupon securities to maturity; when deposits flow to money market funds or high-yield products, banks must either raise deposit rates to retain customers, compressing net interest margins, or sell securities to raise funds, turning unrealized losses into realized losses. The 2023 Silicon Valley Bank incident illustrates that interest rate losses themselves may not be fatal, but "duration mismatch + rapid deposit outflow + declining market confidence" can turn paper issues into liquidity crises.
A historical comparison is the large-scale purchase of long-term securities by banks in the low interest rate environment of 2020-2021, followed by rapid interest rate hikes by the Federal Reserve leading to declines in the market value of securities. The current loss scale has significantly retreated from the peak in 2023, indicating that interest rate changes, securities maturities, and portfolio adjustments are digesting some pressure; however, the consecutive two-quarter rise indicates that as long as interest rates do not significantly decline or long-term yields rise again, duration risk will continue to appear on banks' balance sheets.
This represents a transfer of pricing power. Banks traditionally rely on low-cost deposits to earn interest spread; when money market funds and short-term government bonds can provide high yields and low-risk alternatives, depositors have stronger mobility of funds, and banks must reprice deposits. The mechanism is that the higher the interest rates and the easier digital transfers become, the more deposits resemble funds that can be compared at any time, reducing banks' control over low-cost liabilities, and the interest rate risks locked in long-term securities will be exposed more quickly.
ABAB News · Cognitive Law
Unrealized losses do not mean bankruptcy, but they will compress the space to respond to liquidity shocks.
The real explosion of interest rate risk does not lie in bond declines, but in deposit departures.
The easier it is for depositors to migrate, the more unstable banks' low-cost funding becomes.