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Welcome to the Era of the Bank ‘Sprint’

230317 Bank Sprint Blog

Lessons learned from ‘the first Twitter-fueled bank run’

Many agree that the collapse of Silicon Valley Bank was not caused by the speed of the bank run that preceded it. But it has become clear that the mix of technology and social media that enabled the lightning-fast run—or bank “sprint,” if you will—is something the industry needs to ponder.

Not-so-fun fact: Per NPR, in the run that helped topple Washington Mutual in 2008, depositors withdrew $16.7 billion over 10 days. The SVB run? One day, $42 billion.

“You have transactions that can be done much faster ... and get cleared much faster,” Reena Aggarwal, the director of the Psaros Center for Financial Markets and Policy at Georgetown University, told NPR.

And there was this from CNN: “In the day leading up to the bank’s collapse, multiple prominent venture capitalists took to Twitter in particular, and used their large platforms to raise alarms about the situation, sometimes typing in all caps.”

Now that we have experienced what House Financial Services Chair Patrick McHenry called “the first Twitter-fueled bank run,” how can banks prevent or respond to a possible next one?

It’s still early days. But former bank risk management executive Tyler Stambaugh tweeted that possible approaches include a stronger social media presence for banks and meeting customers “where they are”—on their preferred medium—to make sure they have accurate and complete information about a bank’s position.

Find RMA’s initial take on the SVB and Signature Bank of New York failures here