When interest rates rise, the price of long-term assets falls. Consequently, when the Fed began raising interest rates in 2022, the value of bonds and mortgages dropped, causing significant accounting losses for banks heavily invested in these assets. Silicon Valley Bank went bust, for example, because depositors fled upon realizing it was holding lots of Treasury bonds.
Interest rates remain high and many banks have large unrealized losses on their books. According to the latest FDIC data (see below) unrealized losses currently total $516.5 billion, far exceeding levels seen during the 2008-2009 financial crisis. Price risk is not the same as default risk and if the banks can hold onto their assets until maturity then they will be solvent. The real danger, as with SVB, is if unrealized losses are combined with a deposit run. So far that doesn’t seem to be happening but it’s well within the realm of possibility.