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Looks like America’s banks have finally figured out that social media’s network effect applies to bank runs, too.
Reuters reported that US banks, shooketh by the fate that befell Silicon Valley Bank, are getting serious about social media strategy. The SVB saga showed how social media can turbo-charge a bank run, so now big banks are planning how they can stop grumpy complaints on Twitter from cascading into something more sinister.
Your Money’s in Elon’s House
To be clear, chattering Twitter users were not the only thing that brought down SVB. The bank’s internal organs were already in critical condition, and bank runs have drained banks of their funds for centuries before the advent of social media. But social media can grant outsized influence to niche corners of the internet, allowing ripples to fan out at incredible speed — especially when most of your depositors are tech nerds. Some have even hypothesized the true origin of the panic stems from the newsletter The Diff, which is widely read in VC circles and flagged SVB as “technically insolvent” in February.
Former CEO SVB Greg Becker insisted before a senate hearing this week that even the healthiest bank would have succumbed to a bank run of the “velocity and magnitude” that SVB suffered.
The upshot of SVB’s downfall, according to Reuters, is that banks are now pouring resources into monitoring and even parachuting into social media:
- Seven banking executives and analysts told Reuters that banks all over the US are strategizing on how to contain rumors on social media, a notoriously difficult task. Risk departments are reportedly being asked to come up with ways of both measuring and responding to social media stampedes.
- One unnamed banking executive told Reuters banks are planning to respond more actively to customer complaints on social media, saying “we want to nip it in the bud.” So next time your bank’s customer service hotline is sending you in circles, you know what to do.
Of course, there’s no guarantee banks will be able to successfully hold back the tide of online rumor-mongering. “There are so many social media monitoring tools today, but the use of those tools is often delegated to threadbare marketing teams or third-party vendors,” Jim Perry, a senior strategist at Market Insights, told Reuters.
As Your Affluence Expands: Becker and execs from fellow banking casualty Signature Bank were pressed during their Senate hearing on whether they would hand back their paychecks. Becker demurred, and former Signature exec Scott Shay said he was “not planning to do so.” Something tells us no amount of outraged tweets could sway them.