SVB Collapse Prompts Effort to Quash Bank Frenzy on Social Media

By Evan Weinberger

Speed of social media puts banks at risk of rumor-based runs
New rules, better communication considered for halting deposit flight
Silicon Valley Bank’s collapse has been called the first “Twitter bank run,” and banks and policymakers are scrambling to find ways to prevent the next one.Tech executives and investors’ social media posts—including group chats, Slack messages and investor Bill Ackman’s tweets—contributed to a massive, unprecedented amount of withdrawals that crippled SVB earlier this month…Some potential solutions don’t require new law, said Karen Shaw Petrou, the co-founder and managing partner of Federal Financial Analytics, a financial advisory firm. Banks could be required to have an early warning system to know when deposit accounts are close to reaching the $250,000 statutory limit for federal deposit insurance, Petrou said in her analysis. Changing bank liquidity requirements also would allow financial institutions to better handle sudden runs, she said.