A new academic paper examines the risk of social media on 'distress in banks' and how Twitter conversations amplified the bank run risk ahead of SVB's collapse.
in March, market participants were quick to point out the role social media played in the velocity of its failure.digs deeper into the cause and effect of social media in the case of SVB, arguing that greater exposure to social media amplifies bank run risk and warning that other banks could face similar risks.
"Communication and coordination pose a risk to banks, especially when many of the deposits in the bank are uninsured," the academic paper says. "The amplification of bank run risk via Twitter conversations is a unique opportunity to observe communication and coordination that shapes a critically important economic outcome − distress in banks."
Furthermore, "given the increasingly pervasive nature of social communication on and off Twitter, we do not expect this risk to go away, but rather, it is likely to influence other outcomes, as well." In March, Silicon Valley Bank, a firm that primarily served startup businesses, became the biggest bank failure in the U.S. since the 2008 financial crisis and the second-largest ever – all
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