Rising yields on Treasurys has pushed commercial real estate distress rates up and increased the difficulty of refinancing. That, in turn, is an albatross around the neck of regional banks, which were just getting out from under unrealized losses from holding bonds.

Federal Deposit Insurance Corporation Chairman Martin Gruenberg said in a speech last month about 2024 Q3 that the banking industry had been showing resilience. “The industry’s net interest income and net interest margin increased this quarter,” he said. “Asset quality metrics deteriorated modestly but remained generally favorable despite continued weakness in several loan portfolios, which we are monitoring closely.”

Part of the good news in that quarter was that “unrealized losses on available-for-sale and held-to-maturity securities declined $149 billion to $364 billion in the third quarter,” Gruenberg said.