Banks Underwater

Econophysics2020

Is JPM Solvent? If not, what about Citi? Is anyone solvent?

An available-for-sale security (AFS) is a debt or equity security purchased with the intent of selling before it reaches maturityor holding it for a long period should it not have a maturity date.

Accounting standards require companies classify any investments in debt or equity securities when they are purchased in one of the following categories:

Available-for-sale securities are reported at fair value; changes in value between accounting periods are included inaccumulated other comprehensive incomein the equity section of thebalance sheet.

As interest rates have risen in response to Federal Reserve policies, the AFS securities have seen significant unrealized losses on their bond portfolios.

The change in bond portfolios has disrupted the bank M&A market and inflicted pressures on large commercial banks.

Generally accepted accounting principles (GAAP) require unrealized losses…

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