> regulatory deposit requirements I wonder if this is the problem. > to a bank with regulatory deposit requirements and a longer term outlook? Maybe with som

> regulatory deposit requirements I wonder if this is the problem. > to a bank with regulatory deposit requirements and a longer term outlook? Maybe with some generally accepted accounting principle, but not by any sensible business standard. If that bond trades for $80, no one would buy it for $90. It’s worth $80. Similarly, if you already own it, it’s not magically worth more. And if you are a bank with a long term outlook, you expect interest rates to hold near current levels, and you pay 4.5% APY to depositors, your long term outlook of paying 4.5% to deposits where that deposit money is locked up in a very safe bond earning 1.8% APY, you are losing a lot of money, very safely, in the long term. Almost exactly as much as you would lose by booking the loss right away and investing in something else. Other than tax or regulatory arbitrage, complex accounting is no substitute for actual profits and losses :)