Macroscope

In an era of social media fuelling bank runs, good communication is more vital than ever

A poorly written press release led to panicked messages spreading on WhatsApp and Twitter, fuelling the run on Silicon Valley Bank

Yet the wider fallout, which has become a global banking crisis, might have been avoided simply by good communication

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People check their phones at the Silicon Valley Bank’s Hong Kong office at Jardine House in Central on March 12. Photo: Dickson Lee

Darrell Wright, a former financial journalist, is a 35-year veteran of Asia who has run Cognito’s operations in the region since 2017.

Published: 8:30pm, 2 Apr 2023

The current banking crisis is a painful reminder of the fragility of confidence and trust in our financial system. It is also a reminder to the finance community and communications professionals of the importance of high-quality communication and the very real risks that instant messaging and social media present to institutions.

Over the past few weeks, we have seen how potent the combination of poor management and internal controls at Silicon Valley Bank (SVB), wafer-thin faith in bank stability and the impact of social media can be in rapidly amplifying these problems.

Dubbed “the first Twitter-fuelled bank run” by House Financial Services chairman Patrick McHenry, the toxic mix of issues created a fast-breaking wave of worry that has led to major liquidity and insolvency issues at institutions – seemingly safe and sound just moments before.

As the contagion spread from small, regional banks to national US lenders, eventually contributing to the downfall of Credit Suisse, banks have shown how fragile they are after the shock brought on by the end of an era of record-low interest rates. Just over a week after SVB’s issues emerged, the global banking industry had lost around US$1 trillion in value, according to global index provider MSCI.