The speed at which Silicon Valley Bank collapsed has left experts questioning whether social media has opened up entirely new risks in the world of finance
While there’s nothing new about a financial emergency, these crises – and their resulting responses – are unique in having been accelerated by a frenzy of social media chatter that has fuelled the panic.A bank run occurs when customers lose faith in an institution’s ability to look after their money, and large numbers withdraw their deposits all at once.
The collapse of SVB was the second-largest bank failure in the history of the United States. The largest, Washington Mutual in 2008, took place over the course of eight months. SVB’s collapse played out in barely two days.posts and WhatsApp exchanges, coupled with the ease of access that online banking provides, are seen by analysts as a serious catalyst for the current crisis.
A decision to raise funds through a sale of shares proved to be the bank’s death knell. Venture Capital firm, Founders Fund, is reported to have told companies in its portfolio to move their money out of SVB. In the gossip-fuelled world of Silicon Valley, this news spread like wildfire. Customers withdrew $40bn – one-fifth of SVB’s deposits – in just a few hours.
Other high-profile entrepreneurs sounded the alarm which spread on social media, resonating loudly with the bank’s customers who tended to be tech-savvy entrepreneurs keenly tuned in to online chatter. “The last several days represent a unique incident fuelled by misinformation on social media and are not indicative of the health of our industry,” said Lindsey Johnson, president of the Consumer Bankers Association, in a statement.SVB might be the first bank run of the social media era, but it wasn’t the first bank to see its fundamental business rocked by feverish Twitter speculation.from the Swiss central bank to shore up its finances after its share price fell by as much as 30%.
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