When a bank makes a loan and it starts going sour, it impairs its balance sheet by noting a counterbalancing liability in the form of a loss reserve. The article alleges banks need to increase those loss reserves. It is not saying e.g. JPMorgan is exceeding its capital reserves.
All this means is bank profits MIGHT be slightly lower this year. All of them set records for profits in 2023, so this seems like a big nothingburger.
It does, however, warrant banks reevaluating their risk assessment practices. Or maybe the problem is elsewhere? Something is definitely out of place for this situation to even arise so soon after the unpleasantness of 2008.
Reserves are entirely an accounting item. There are no cash reserves.
> warrant banks reevaluating their risk assessment practices
It’s predicting they already have. This article is messaging likely earnings outcomes. Not a crisis.
I feel like this should be said a second time.