Part 2/9:
Unrealized losses are, in essence, paper losses on assets that the bank has not yet sold. They reflect the difference between an asset’s current market value and its original purchase price. Because banks are often not required to mark securities to market regularly—especially for held-to-maturity securities—these losses remain unrecognized in the income statement until the assets are sold. This creates a deceptive picture, hiding potential vulnerabilities until they become unavoidable.