NEW YORK: After a social media-fueled uprising that brought down Silicon Valley Bank two months ago and caused havoc in the sector, bankers are strengthening risk management, monitoring, and emergency protocols related to the usage of social media.
According to seven banking industry executives and experts, executives throughout the United States are developing programmes and strategies to tackle cyber dangers, such as misinformation about the health of the banks that might cause deposit withdrawals or hurt the stock.
The initiatives, which have not previously been disclosed, highlight banks’ desperate efforts to adjust to the times, dissuade depositors from starting a bank run, and discourage short sellers from attacking their shares online.
After tweets questioning SVB’s financial stability drove anxious clients to withdraw $1 million per second from their accounts before the bank’s failure on March 10, lenders are reconsidering social media’s position as a possible danger rather than a marketing advantage.
Sumeet Chabria, the founder of ThoughtLinks, a consultancy and advising company that works with banks, stated that social media risk used to be purely reputational but has since resulted in deposit flight concerns, which are existential.
Former Silicon Valley Bank CEO Greg Becker cited social media as a “unprecedented” cause of the lender’s failure. In his testimony to the Senate Banking Committee on Monday, he stated that depositors withdrew $42 billion from SVB in just 10 hours.
The downfall of SVB shocked the markets. The lender declared on March 8 that it would be raising money by selling securities. Clients in the Bay Area tech sector tweeted about their anxieties as doubts about the company’s financial stability increased, and many withdrew money via mobile applications or online banking.
Michael Roffler, the former CEO of First Republic Bank, also attributed the bank’s downfall on social media.
“It has been a wake-up call for some smaller lenders who are now working on updating their emergency response and risk capabilities, along with business continuity plans to tackle this threat,” continued Chabria.
Regional bank officials who requested anonymity since the conversations are private claim that bank executives and directors have mandated that social media be incorporated into risk-management programmes.
In order to “detail out a plan which allows banks to measure internet-related risk, prepare for it, and respond to it,” one of the executives added, risk departments “have been pulled in.”
