Delays At Major Banks Reported Amongst Massive Unrealized Losses

According to Downdetector, a network monitoring app, widespread problems at several major banks in the United States have been reported in the last 24 hours, with many financial institutions currently dealing with an influx of complaints about account balances and direct deposits.

Understanding what went wrong

Customers at many TradFi (Traditional Finance) institutions like JPMorgan Chase, Bank of America, US Bank, and Wells Fargo have all reported that funds which should have arrived in their accounts have not come through.

While individual bank statements have been issued, the Federal Reserve has stated that a processing issue at a national network designed for processing ACH (Automated Clearing House) transactions caused the problem.

The Federal Reserve Banks and the Electronic Payment Network manage the ACH system, which is a critical component of the US banking system. It facilitates the transfer of capital between banks and financial institutions, as well as the electronic deposit of wages into the bank accounts of employees. Although the Fed believes the problem has been resolved, there appear to be ongoing delays.

A TradFi disaster

JPMorgan Chase in particular has recently disclosed substantial losses on its securities, which have come to light in a fresh report concerning the overall financial situation of the company. The banking giant finds itself burdened with approximately $40 billion in bond losses that have not yet been realized as of Q3 of this year, marking a 20% increase compared to the previous quarter. These updated figures were discovered in a footnote within the third-quarter financial supplement and exceeded the anticipated loss of $34 billion.

Elsewhere, Bank of America has also revealed via a new quarterly report that it currently holds a total of $131.6 billion in unrealized losses. Although Wells Fargo and Citigroup have released their third-quarter earnings, they have not disclosed the most recent statistics regarding their unrealized losses. In the second quarter of this year, Wells Fargo also reported $40 billion in unrealized losses in the bond market, while Citigroup showed unrealized losses of $25 billion.

Bad to worse

The risks associated with unrealized losses came into prominence earlier this year following the sudden collapse of Silicon Valley Bank in March, which was triggered by an announcement that it had incurred a $1.8 billion loss by selling a portion of its bond portfolio that had fallen underwater.

On a broader scale, estimates show that the US banking industry is confronting roughly $650 billion in unrealized losses. These losses have arisen via a historic decline in bonds due to the efforts made by the Federal Reserve to maintain higher interest rates for a prolonged period.

In a moment of irony, many of these banks had previously disparaged crypto for being too volatile and unpredictable, yet they have proven to be no exception. Not your keys, Not your crypto, is a popular phrase that many in the crypto community often use, as it conveys the notion that investors cannot be sure of their crypto holdings unless they are kept within a wallet to which they have the keys. One could say the same for TradFi institutions however, a fact which the aforementioned unrealized losses prove.