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Social Media as a Bank Run Catalyst

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Social Media as a Bank Run Catalyst

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Was ist drin?

New research proves that social media contributed to the fall of Silicon Valley Bank in March 2023. 

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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Hot Topic

Recommendation

In March 2023, Silicon Valley Bank succumbed as its depositors fled, with these and other stakeholders signaling the bank’s perceived financial troubles through social media. The momentum was so swift and powerful that bank executives could not forestall the financial implosion. In a thoroughly researched and well-structured analysis, a group of academics explains how Twitter users created a cascading effect that turned into an unprecedented bank run. The professors also show how social media could put other financial institutions at risk. Investors, bankers and policy officials will find this a robust examination of the entanglement of bank failure and social media.

Summary

Silicon Valley Bank (SVB) shuttered after depositors withdrew large sums from the institution and the bank was unable to meet its obligations.

Silicon Valley Bank, one of the United States’ largest financial institutions, came under considerable financial pressure in March 2023. Depositors, many of whom held balances in excess of Federal Deposit Insurance Corporation limits, led a ferocious exodus of money from the bank.

The bank run emanated from these depositors posting about potential SVB weaknesses on Twitter. These stakeholders were well-connected within Silicon Valley’s venture capital and founder networks on...

About the Authors

J. Anthony Cookson et al. are finance professors at the University of Colorado, Boulder; James Madison University; Universitat Pompeu Fabra and Barcelona School of Economics; Université Paris Dauphine; and Arizona State University.

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