Analysts said that US banks including Wells Fargo & Co, JPMorgan Chase & Co were sustained a multi-billion dollar dent following the selloff in the bond market in the past eight weeks.
The analysts added that the portfolios of securities that banks invest in known as available for sale books were affected the worst. These assets can be sold before they reach maturity compared to many loans that are only used for short term trading purposes.
Individual banks will disclose the total number of hit they took in the second quarter. This will be shown through reports that will be submitted later this month.
When the asset prices in these portfolios dropped, the earnings of the bank are not affected. However, capital levels are affected under the new global regulatory framework known as Basel III said analysts.
Marty Mosby, an analyst at investment bank Guggenheim Securities said that the capital drag is not likely to be severe. He added that the condition is not that worse for banks to be forced to issue more equity.
Wells Fargo and Bank of America currently exceeded the proposed new capital levels. However, Citigroup and JPMorgan fell short on the new requirements for the biggest banks according to Morgan Stanley's June 25 research report.
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