Available for sale (AFS): Available for sale is the securities bucket a bank uses when it may sell the bond before maturity, which means the bond is carried at market value.
Where it comes from
Reported on Schedule RC-B at fair value. The unrealized gain or loss runs through accumulated other comprehensive income, so it changes book equity every quarter without anything being bought or sold.
How to read it
AFS is the liquid bucket. It is what a bank sells when it needs cash, and because it is already marked, selling it realizes a loss the balance sheet has already absorbed rather than creating a new one.
The common mistake. Assuming the mark hits regulatory capital. Most banks have elected to exclude AOCI from regulatory capital, so a large AFS loss can cut book equity substantially and leave the tier 1 leverage ratio almost unchanged.
Go deeper
- Unrealized losses and AOCI
- BankingLens pricing and what a subscription adds: percentile rank against the bank’s own FFIEC peer group, fourteen quarters of trend, and the flags an examiner reaches for first.
See also. Held to maturity, AOCI, Equity to assets, Tier 1 leverage ratio.
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