Experts sound alarm: US banks sitting on $500 billion in unrealized losses; fear a repeat of Silicon Valley Bank-like collapse

Just two years after the dramatic collapses of Silicon Valley Bank and First Republic Bank sent shockwaves through the financial world, a new wave of concern is building within the United States banking sector. A recent report citing data from the Federal Deposit Insurance Corporation (FDIC) reveals a significant surge in unrealized losses held by US banks related to their securities investments.According to Fortune, these losses reached a staggering $482.4 billion in 2024. This figure represents a substantial 32.5% increase, or $118 billion, compared to the previous quarter, a jump that experts are viewing with increasing alarm. The report highlights that this number is approaching the $515 billion seen when SVB succumbed to a bank run in March 2023 and remains considerably high compared to the peak of $684 billion reached later that year.Rebel Cole, a finance professor at Florida Atlantic University with prior experience as a special advisor to the International Monetary Fund and World Bank, expressed serious concerns. "All it takes is one bad news story about any of these banks, and we could have another banking crisis like we had in March of [2023]," he was quoted by Fortune, adding, "I’m amazed we haven’t had one since then."Cole pointed to the volatility of US bank losses, which he noted have been closely tracking the benchmark 10-year Treasury yield. The report indicates that this yield has experienced significant fluctuations in 2025, particularly following the US President Donald Trump administration's announcement of tariffs on imports from all countries, coupled with persistently high interest rates amid ongoing inflation. The 10-year Treasury yield is currently above 4.5%, nearing its peak from the fourth quarter.Amit Seru, a finance professor at the Stanford Graduate School of Business, echoed these concerns as per the report. He pointed out that at the current level, the banking system is starting to "see serious problems," according to Fortune. He further warned that "It becomes quite bad at 5%," as per the report. Cole estimated that such a scenario could translate to approximately $600 billion to $700 billion in unrealized investment losses.Adding another layer of concern, Torsten Sløk, the chief economist at Apollo Global Management, highlighted potential risks associated with the broader economic environment. "In a stagflation scenario, the risk is that rates will be higher for longer and credit losses will begin to accumulate, in particular for lenders to tech, growth, and [venture capital], where borrowers are characterized by having no earnings and low coverage ratios," he was quoted as saying in the Fortune report.