What the numbers say: Six major banks reclassified $504.2B in available-for-sale (AFS) securities to hold-to-maturity (HTM) status in 2022, The Wall Street Journal reported. Charles Schwab, PNC, JPMorgan Chase, Wells Fargo, Truist Financial, and U.S. Bancorp each made similar decisions as other banks when bond prices fell. Together, the banks' combined HTM bonds were worth $1.14T on their balance sheets at the end of the year, an increase of $681B from January 2022. The reclassification allowed the banks to avoid repricing these assets at daily market values and improve their balance sheets. Relevance: Notably, SVB Financial Group, the parent company of Silicon Valley Bank, left its HTM bonds classified as such through the end of 2022, at which point the unrealized losses left off their books fueled concerns during the bank run that preceded SVB being shut down. Brands that should care: Large and small U.S. banks alike will contend with concerns about unseen risk on balance sheets following SVB's collapse. While the reclassifications of assets by these six banks do not represent a new practice, given its scope, financial institutions will need to demonstrate and communicate to reassure deposit holders that proper risk-management safeguards are in place to avoid SVB's fate. |
