It’s been two weeks since the Silicon Valley Bank run that spurred a banking crisis. It took about 36 hours from SVB posting its troubled financials to it being shuttered by regulators. While the implosion exposed shortcomings in existing financial regulations, it also highlighted the role of social media in snowballing rumors and spreading panic in venture capital, private equity, and banking circles.
“It’s a complete game changer from what we’ve seen before,” Citigroup CEO Jane Fraser said in an interview Wednesday about what social media and mobile banking did to fuel the crisis, Bloomberg reported.
“There were a couple of Tweets and then this thing went down much faster than has happened in history. And frankly I think the regulators did a good job in responding very quickly because normally you have longer to respond to this,” she said.
The fallout didn’t end with SVB. Three established banks have collapsed since, including Credit Suisse, while First Republic Bank is in turmoil.
To be sure, banking crises have happened numerous times in the past. But the speed at which this one escalated was unlike any other. Depositors were able to access their funds online via their phones, which may have made it easier for a $42 billion bank run to happen within hours. Fraser believes the problem isn’t so much about the banking industry as it is about specific banks.
“This isn’t like it was last time. This is not a credit crisis,” said Fraser, referring to the 2008 financial collapse. “This is a situation where a few banks have some problems and it’s better to make sure we nip that in the bud.”
