Bank runs used to be slow. The digital era sped them up
BNN Bloomberg
Regulators, policymakers and bankers are looking at the role that digital messaging and social media may have played in Silicon Valley Bank's collapse.
The failure of Silicon Valley Bank last week had the panic but few other similarities, instead taking place on Twitter, message boards, cell phones and bank websites.
What made the failure of Silicon Valley Bank unique compared to past failures of large banks was how quickly it collapsed. Last Wednesday afternoon, the US$200 billion bank announced a plan to raise fresh capital; by Friday morning it was insolvent and under government control.
Regulators, policymakers and bankers are looking at the role that digital messaging and social media may have played in the collapse, and whether banks are entering an age when the psychological behavior behind a bank run — mass fear from depositors of losing their savings — may be amplified and go viral quicker than bank officers and regulators can successfully respond.
