Banks are sitting on $500 billion in unrealized losses, and stagflation could cause another Silicon Valley Bank-like crisis

A timeline depicting the failure of Silicon Valley Bank displayed during a House Financial Services Committee hearing in Washington, DC, US, on Wednesday, May 17, 2023. (Credit: Anna Rose Layden—Bloomberg via Getty Images)

• Banks got caught “chasing yield” and took big losses when the Federal Reserve dramatically hiked interest rates to fight inflation. Those losses are still hanging around, and several experts told Fortune many core issues from the 2023 banking crisis pose a continued threat to the system if economic conditions deteriorate.

Just over two years after the collapse of Silicon Valley Bank and First Republic, banks are still taking big losses thanks to high interest rates. That’s cause for major concern, several experts told Fortune, especially if President Donald Trump’s tariffs lead to the dreaded combination of “stagflation,” or rising inflation coupled with slowing growth, putting further pressure on lenders.