Sovereign Bancorp Inc., the second-largest U.S. savings and loan, said Friday that it is selling its entire portfolio of collateralized debt obligations to eliminate the risk to the lender's capital levels "of future volatility."

The unrealized loss on the CDOs was $254 million at June 30, and Philadelphia-based Sovereign's tangible capital will be reduced another $136 million, the lender said in a regulatory filing. It said it remains well-capitalized.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.