European banks are different this time
“This is a risk confronting all banks,”
Sheila Bair, who ran the Federal Deposit Insurance Corp. from 2006 to 2011:
“I don’t see regional banks as having any particular problem,”
“All examiners need to be on alert for how interest-rate risk is being managed. If there is a run, they will need to sell these securities. Those are the kinds of things all-size banks, and all examiners should be worried about.”
The FDIC estimated that U.S. banks had some $620 billion of unrealized losses from securities on their books as of the end of 2022, including longer-duration Treasurys and mortgage securities that have become worth less than their face value.
MarketWatch 23 March 2023
Higher rates mean falls in the price of assets with a long duration.
Plenty of people, including, we now know, some of the stricken banks, effectively bet that rates would stay low forever by piling up on long-duration assets such as 10-year Treasuries.
Buying long-term fixed-rate government bonds when you have short-term floating-rate liabilities is a very basic mismatch — so basic that everyone in finance assumed it could not happen again
Englund: Duration Risk (englundmacro.blogspot.com)
US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.
Niall Ferguson, FT 10 February 2010
Next Bubble U.S. Government Bonds (internetional.se)
Why should Europe be different?
"Europeiska storbanker har i grunden en helt annan affärsmodell" ???
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