Bloomberg Law
March 24, 2023, 4:41 PM

SVB Collapse Prompts Effort to Quash Bank Frenzy on Social Media

Evan Weinberger
Evan Weinberger

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 tweets from influential accounts—contributed to market anxiety that was followed by a massive amount of withdrawals that crippled SVB earlier this month.

Social media and digital banking technology developments enable information and money to flow faster than ever. And the issue has emerged as a prominent discussion point in recent days as banks and policymakers search for ways to catch up.

“That’s something we’re going to have to deal with. I don’t think we know yet makes the most sense in dealing with social media,” Senate Banking Committee Chairman Sherrod Brown (D-Ohio), said at an American Bankers Association conference March 22.

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About $42 billion left SVB’s balance sheet within hours after corporate customers pulled out funds amid social-media driven panic. By contrast, the 2008 failures of IndyMac and Washington Mutual came after days and sometimes weeks of negative reports pushed depositors to flee.

‘Very Different’

Dealing with a social media-inspired run will likely involve a combination of regulatory preparedness, including how accounts are accessed and raising liquidity requirements. But banks and regulators also could be tasked to boost their knowledge of social media and embed social media strategies in risk management evaluation of banks.

Regulatory fixes to social media-induced runs are likely on the table as the Fed analyzes what happened at SVB, Federal Reserve Chairman Jerome Powell said March 22.

“It’s very different from what we’ve seen in the past, and it does seem to suggest that there needs to be supervisory and regulatory changes,” Powell said.

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.

“For the next run, there’s going to be even greater pressure for people to take their money out quickly,” said Bradley Mirkin, a managing director at Berkeley Research Group.

Another option is to put in a sort of circuit breaker to slow a run, similar to the stops exchanges’ tool to halt trading, said American University Law School professor Hilary Allen.

“There is precedence for this in the bank holidays that Roosevelt implemented in the 1930s,” she said.

The Fed’s review of SVB’s collapse, which it is expected to release May 1, may provide a glimpse of regulators’ thinking on this issue.


In some ways, setting up new rules to deal with fast runs is simpler than facing social media’s information-dissemination powers.

Regulators and banks are deeply familiar with liquidity and managing accounts. Dealing with information spreading at light speed on Twitter, Discord, Slack, and other social media outlets is almost entirely new, Allen said.

“Social media has changed the way that rumors can be amplified for better or worse, and I think that banking regulators need to think about their communications strategies,” she said.

Regulators should strive for clear, concise communication about their actions and rationale when supporting a bank facing a run, said Dan Awrey, a professor at Cornell University Law School. The Biden administration and its regulators have faced criticism for its communication strategy during the recent banking instability.

Banking regulators may need to get staff that’s more comfortable with social media so that they can spot a problem early, Mirkin said.

“You have to build up within the regulators a level of sophistication. Generally speaking, younger people of a certain generation know what’s going on better in social media than people who are senior,” he said.

Banks also need to reconsider their risk management priorities, and make social media a bigger part in their discussions.

Citigroup CEO Jane Fraser called social media’s role in SVB’s collapse a “game-changer.”

“There were a couple of tweets and then this thing went down much faster than has happened in history,” Fraser said at a March 22 appearance at the Economic Club of Washington DC.

When influencers are speaking negatively or spouting off half-truths, banks will have to mobilize their own customers to speak on their behalf, Mirkin said.

Bank supervisors may even need to make social media strategies part of stress testing and risk management reviews, he added.

Regulators and banks are going to have to move quickly because social media risks are accelerating, particularly as artificial intelligence technology blooms.

Deep fake technology also can be used to issue a faked video that seems real, Mirkin said.

A TikTok account featuring what appears to be Tom Cruise but is really a deep fake has been fooling viewers for the last few years. A similar deep fake video of a bank CEO giving false information could trigger a crisis, Mirkin said.

“If you could put Jamie Dimon through a deep fake, there’s a very real chance that you would just have a cataclysmic response,” Mirkin said, referring to the CEO of JPMorgan Chase & Co.

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editors responsible for this story: Roger Yu at; Keith Perine at

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