Is there a “unrealized loss” disclosure on the bank's balance sheet next?
Wolf Richter on Wolf Street.
Travis Hill, chairman of the FDIC board of directors who was sworn in as Vice Chairman of FDIC on January 5th, issued a statement along with documents from FDIC quarterly report on FDIC Insurance Banks as well as materials from FDIC quarterly report. . As of today, we will no longer disclose the total assets on the “Bank List in question.”
This list previously showed total assets and the total number of banks in the problem bank list. As of today, the bank list in question only shows the total number of banks and forgets the assets.
This sudden end of disclosure is a problem. Because jumping assets on the list was used to indicate that a larger bank was on the list, so we need to be careful. Bigger Bank is on the list. According to today's FDIC, the total number of 66 banks will be displayed in the fourth quarter of 2024. This is what FDIC charts were in use by 2024 quarter.
In the chart above, we found that larger banks were on the problem bank list as the assets of the problem banks skyrocketed by jumping to the gold column in the fourth quarter of 2021. Then in 2022 SVB went to hell to see everyone, and eventually collapsed in the first quarter of 2023, followed by two other banks. I didn't know which banks were on the list, but I knew something was going on with one or more big banks. And people guessed correctly or wrongly. Now we don't see it anymore.
This is what the FDIC problem banklist chart looks like today. The fourth quarter, 2024, marks the first time since 1990 that the total assets of the issue bank have not been revealed. The gold column now represents the number of banks (shown by the black lines used), and total assets data (previously used for gold pillars) has disappeared.
In a statement, Hill tackles the irony of the law. “When acting chairman, the FDIC issued a statement saying it would “expand transparency in the region that does not affect safety, soundness or financial stability.” ”
Disclosure of the issue bank's total assets “will not affect safety and soundness or financial stability” from 1990 until the third quarter of 2024.
Is there a “unrealized loss” in the bank's financial statements next?
Certainly, he gave four reasons why this was suddenly needed:
When large banks are on the list, the public begins to identify which banks are incorrectly identifying unlisted banks and oust money that “induces a disorderly run.”
So, while that may have happened, what prompted the implementation in SVB was a massive, large-scale, unrealized statement disclosure of financial statements in Treasury securities and MBS holdings, with the disclosure of large-scale, unrealized losses by depositors, which were appropriately linked. It was total reliance on insurance deposits. So, will the disclosure of unrealized losses on the bank's balance sheet be next?
He added another reason: “The supervisor has not downgraded large banks in poor condition, fearing that disclosure could cause bank operations and financial instability. “But the bank's financial statements could use Spark Bank Runs and managed to run the bank. Is that the next one? To avoid “disorderly conduct”
And he added another reason. “Major banks have been downgraded for reasons other than worsening financial position (which occurs regularly as a common problem).
The forced disclosure of sin, and the fear of the consequences of these disclosures, is part of what is supposed to ensure that banks do not do stupid things. The purpose of these disclosures is to impose some discipline on the banks and the CEOs of the bank. And if they do stupid things, they allow the market and depositors to punish them. And the fear of that punishment is supposed to ensure that banks do not do stupid things. That's all about disclosure. And repealing these types of disclosures is not to make the banking system stronger.
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