https://sputnikglobe.com/20231110/us-banking-economy-built-on-sand-of-yo-yoing-asset-values-expert-warns-1114863098.html
US Banking Economy Built on Sand of Yo-Yoing Asset Values, Expert Warns
US Banking Economy Built on Sand of Yo-Yoing Asset Values, Expert Warns
Sputnik International
The Silicon Valley Bank collapse exposed how attempts to control inflation had left financial firms over-exposed to losses from Treasury bond holdings. Aquiles Larrea warned depositors that they were still at risk from bank runs.
2023-11-10T13:27+0000
2023-11-10T13:27+0000
2023-11-10T13:50+0000
analysis
us
business
us economy
economy
silicon valley bank collapse
moody's
https://cdn1.img.sputnikglobe.com/img/07e7/06/13/1111305742_0:160:3072:1888_1920x0_80_0_0_90b19b19fa8bcc525dd4bcf250cf0974.jpg
The US banking sector is built on an unstable foundation of bond assets that no longer hold their value, says an expert.A new report by Moody's US ratings agency has revealed that some of the biggest banks have a combined $650 billion in unrealized losses — a term for the declining value of assets which have not yet been sold.Financial expert Aquiles Larrea told Sputnik that fluctuating asset values are not unusual or a problem until the banks are forced to sell these holdings at a loss.He pointed to the collapse of the Silicon Valley Bank (SVB) in March of this year as an example of how asset portfolios could go horribly wrong."There was a situation where the bank was forced to sell assets and the valuation of the company and they eventually went under," Larrea stated. "They're bordering on criminal because these guys were also taking money for their bonuses before the bank went under," he added.The financial analyst said the trade in assets such as the SVB's ill-fated US Treasury bonds, which lost value when the Federal Reserve raised interest rates, was huge."Let's just take the simplest example: A $1,000 bond all of a sudden is a $700 bond. That's a huge loss. That's a 30 percent drop. So banks assets have gone down 30 percent, which is not unheard of. That has happened. But generally, the banks don't survive," he concluded.For a more in-depth analysis of current affairs, tune in to our Sputnik Radio show The Final Countdown.
https://sputnikglobe.com/20230815/fitch-analyst-says-rating-agency-could-downgrade-us-banks-1112615413.html
Sputnik International
feedback@sputniknews.com
+74956456601
MIA „Rosiya Segodnya“
2023
James Tweedie
https://cdn1.img.sputnikglobe.com/img/07e4/08/1c/1080307270_0:3:397:400_100x100_80_0_0_7777393b9b18802f2e3c5eaa9cbcc612.png
James Tweedie
https://cdn1.img.sputnikglobe.com/img/07e4/08/1c/1080307270_0:3:397:400_100x100_80_0_0_7777393b9b18802f2e3c5eaa9cbcc612.png
News
en_EN
Sputnik International
feedback@sputniknews.com
+74956456601
MIA „Rosiya Segodnya“
Sputnik International
feedback@sputniknews.com
+74956456601
MIA „Rosiya Segodnya“
James Tweedie
https://cdn1.img.sputnikglobe.com/img/07e4/08/1c/1080307270_0:3:397:400_100x100_80_0_0_7777393b9b18802f2e3c5eaa9cbcc612.png
us, business, us economy, economy, silicon valley bank collapse, moody's
us, business, us economy, economy, silicon valley bank collapse, moody's
US Banking Economy Built on Sand of Yo-Yoing Asset Values, Expert Warns
13:27 GMT 10.11.2023 (Updated: 13:50 GMT 10.11.2023) The collapse of Silicon Valley Bank exposed how the Federal Reserve's attempts to control inflation had left financial firms over-exposed to losses on their holdings of Treasury bonds. Financial expert Aquiles Larrea warned depositors that they were still at risk of bank runs.
The US banking sector is built on an unstable foundation of bond assets that no longer hold their value, says an expert.
A new report by
Moody's US ratings agency has revealed that some of the biggest banks have a combined $650 billion in unrealized losses — a term for the declining value of assets which have not yet been sold.
Financial expert
Aquiles Larrea told
Sputnik that fluctuating asset values are not unusual or a problem until the banks are forced to sell these holdings at a loss.
"The thing to be scared about is when they start taking those realized losses because there's a run on the bank or there's forces beyond their control," Larrea warned.
He pointed to the collapse of the
Silicon Valley Bank (SVB) in March of this year as an example of how asset portfolios could go horribly wrong.
"There was a situation where the bank was forced to sell assets and the valuation of the company and they eventually went under," Larrea stated. "They're bordering on
criminal because these guys were also taking money for their bonuses before the bank went under," he added.
15 August 2023, 14:18 GMT
The financial analyst said the trade in assets such as the SVB's ill-fated US Treasury bonds, which lost value when the Federal Reserve raised interest rates, was huge.
"People forget bonds will go up and down on a daily basis. It's a much bigger market than the stock market. It dwarfs the stock market as a whole," Larrea stated. "But you have to remember, they do go up and down. And if at any given time, if there was a run on the bank, that's when your money would be affected most," he added.
"Let's just take the simplest example: A $1,000 bond all of a sudden is a $700 bond. That's a huge loss. That's a 30 percent drop. So banks assets have gone down 30 percent, which is not unheard of. That has happened. But generally, the banks don't survive," he concluded.
For a more in-depth analysis of current affairs, tune in to our Sputnik Radio show The Final Countdown. 
