What securities do FDIC-insured banks hold?
FDIC-insured banks hold mortgage-backed securities, U.S. Treasury securities, state and municipal securities, and equity securities. Mortgage-backed securities make up more than half of their total assets.
Intelligence analysis by Llama
FDIC-insured banks hold a mix of securities, with mortgage-backed securities being the largest share. The share of mortgage-backed securities has decreased since 2008, while the share of U.S. Treasury and state and municipal securities has increased.
Imagine you have a big box of different types of toys. Some toys are super popular and everyone wants them, while others are not as popular. FDIC-insured banks have a big box of different types of securities, and mortgage-backed securities are the most popular. But over time, the banks have started to hold more U.S. Treasury securities and state and municipal securities, which are not as popular.
Analysis
Mortgage-Backed Securities: The Largest Share of Assets
Mortgage-backed securities make up more than half of the total assets held by FDIC-insured banks. This is evident from the quarterly banking profile of FDIC-insured institutions, which provides an overview of their aggregate financial condition. The profile shows that mortgage-backed securities have consistently represented the lion's share of assets since the first quarter of 1984. However, between 2008 and the time of this writing, the share of mortgage-backed securities has decreased, while the share of U.S. Treasury and state and municipal securities has increased. This change in the mix of securities held by FDIC-insured banks is attributed to changes in the regulatory environment and evolving preferences for risk. The researchers at the Kansas City Fed point out that the decrease in mortgage-backed securities is due to a strategy to better protect the value of mandatory capital levels against financial risk.
U.S. Treasury Securities: A Significant Share
U.S. Treasury securities are the second-largest share of assets held by FDIC-insured banks. The quarterly banking profile shows that U.S. Treasury securities have consistently made up around 30-40% of the total assets since the first quarter of 1984. The increase in the share of U.S. Treasury securities is attributed to the changing regulatory environment and evolving preferences for risk. The researchers at the Kansas City Fed point out that the increase in U.S. Treasury securities is due to a strategy to better protect the value of mandatory capital levels against financial risk.
State and Municipal Securities: A Smaller Share
State and municipal securities make up a smaller share of the total assets held by FDIC-insured banks. The quarterly banking profile shows that state and municipal securities have consistently made up around 5-10% of the total assets since the first quarter of 1984. The increase in the share of state and municipal securities is attributed to the changing regulatory environment and evolving preferences for risk. The researchers at the Kansas City Fed point out that the increase in state and municipal securities is due to a strategy to better protect the value of mandatory capital levels against financial risk.
Key points
- Mortgage-backed securities make up more than half of the total assets held by FDIC-insured banks.
- The share of mortgage-backed securities has decreased since 2008, while the share of U.S. Treasury and state and municipal securities has increased.
- The change in the mix of securities held by FDIC-insured banks is attributed to changes in the regulatory environment and evolving preferences for risk.
- U.S. Treasury securities make up around 30-40% of the total assets held by FDIC-insured banks.
- State and municipal securities make up around 5-10% of the total assets held by FDIC-insured banks.
If FDIC-insured banks continue to hold more U.S. Treasury securities and state and municipal securities, it could lead to a more stable financial condition and reduced risk exposure.
If the share of mortgage-backed securities continues to decrease, it could lead to a decrease in the value of the banks' assets and increased risk exposure.
