A crisis of confidence in the US banking sector led people to pull their money from banks including Silicon Valley Bank and Credit Suisse, and more recently, First Republic Bank and California-based PacWest Bancorp. The way these events have unfolded have created a new term in the vocabulary of finance: “digital bank run”.
Unlike traditional bank runs, which conjure up images of people queuing outside a branch to withdraw their money in person, digital bank runs snowball even faster due to social media chatter. This can add to the sense of panic around the run.
Posts on Twitter with negative information about Silicon Valley Bank contributed to depositor withdrawals totalling US$40 billion (£32 billion) – 23% percent of total deposits – in a matter of hours, culminating in the bank’s failure. In contrast, it took Washington Mutual nine days to lose $17 billion (9% of its deposits) in 2008.