Nouriel Roubini: rising interest rates wiped out over 80% of bank capital

Bank managers, regulators and investors forgot duration risk and market risk.  When yields are higher, the price of the bonds is lower.  Investors lost 20% last year on 10-year Treasuries...  For the overall banks, you have about $620 billion of unrealized losses on the securities out of a capital of $2.2 trillion.  And for some of the regional banks the numbers are much higher.  

But it's not just the securities that have lower value.  Many of the banks had issued loans, like mortgages at fixed rates at 30 years when interest rates were 1% while right now they're at 3 1/2% for 10-year Treasuries.  So the market value of those assets is also down.  People have estimated, therefore, the overall losses for the U.S. banking system from the rise in interest rates, both on securities and loans, are equivalent to $1.8 trillion out of a capital of $2.2 trillion.  Hundreds of the smaller banks are literally insolvent.

So that's a fundamental problem: When interest rates go higher, the value of securities and loans is lower and then we have mass liquidity and solvency problems.

~ Nouriel Roubini, Bloomberg TV interview, 0:30 mark, March 31, 2023