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In the wake of SVB, this big question is what should regulators and investors do? Some might think (or hope) that SVB was an anomaly. After all, what made it so vulnerable was not just its mismanagement of interest rate bets, but the concentrated — uninsured — nature of its depositor base. And as the economists’ study shows, many depositors congregated online in a tribal echo chamber, fueling feedback loops. But while SVB was an extreme case, it also revealed a bigger pattern: neither banks nor governments are prepared to deal with a social media-infused world that operates at warp speed.
More specifically, “at the hourly frequency, we show that negative returns [for banks’ share prices] emerge after periods of intense Twitter conversation,” they added. They also noted that “banks with a large pre-existing exposure to social media performed much worse during the recent SVB bank run,” since the granular pattern of tweets suggests that “investor conversations spilled over into depositor conversations”.
https://www.ft.com/content/a60e543d-c950-4ebb-8da9-d6b0b359ad7b
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