How to deal with a bank run in a hyper-connected era: keep quiet, carry on
Talking about bank runs can make them worse. New research following the SVB collapse finds that the best thing politicians can do in such situations is shut up.
The go-to image illustrating the run on Silicon Valley Bank and others earlier this year was a sepia-toned shot of long lines of anxious depositors queuing outside a deceptively grand bank building to withdraw hard currency (a bit like the one above).
The reality was thousands of depositors on their phones and laptops instantaneously draining SVB of liquidity via an app or webpage.
As Australian Prudential Regulation Authority (APRA) chair John Lonsdale said in the authority’s 2023-24 corporate plan “the digital connectedness of financial systems – an evolution which has brought tremendous benefits to entities and their customers – also allowed for a bank run at a speed never previously witnessed.”
He warned: “Such a possibility on local shores warrants a re-appraisal of liquidity risk settings, among other considerations.”
