Cybiont’s 5-second summary

• Capital policy relative to unrealized gains and losses on securities is wrong.
• Tangible capital and regulatory capital ratios diverged, & no one cared.
• Mixed-attribute accounting guidance fails to recognize that the unique nature of our interest rate transition (moving rapidly from a protracted period of record-low rates to one of indefinite but significantly higher rates) has resulted in unrealized securities losses that are undeniably “other than temporary.” (as an aside, any banker that in order to move securities from AFS to HTM, attests that they have the ability to hold an asset that now has a WAL of 8+ years doesn’t understand the definition of that word in this context.)
• The FDIC failed to recognize uninsured deposits as a catastrophic liquidity trigger and to disincentivize it with increased insurance premiums.
• Where are we? Emergency policy actions hopefully reduced the liquidity catalyst but not the capital policy and accounting problem. These will unfold, likely disorderly, over the coming months.