Online Fakery and Digital Bank Runs Are a Scary Mix
Hackers crack the Twitter account of the Associated Press. They post a tweet: Two explosions at the White House, the president is injured. The S&P 500 instantly drops 1%. Sound like fiction? This happened almost exactly a decade ago. Thankfully, the market recovered quickly after Barack Obama's press secretary confirmed no explosions and no injury.
The world of online fakery has moved on a lot since then -- and not for the better. Advances in artificial intelligence have made more sophisticated chatbots and bogus photos and videos easier to produce and propagate. Meanwhile, bankers are quickly realizing that people can move their money faster than ever before through a few quick taps on their smartphones. Everyone, everywhere needs to be as vigilant as possible to the potential for catastrophic cons in finance right now. Markets are already skittish and depositor psychology is unsettled.
Silicon Valley Bank lost $42 billion, or more than half its demand deposits, within hours when its run began. Regulators and executives have noted social media's role. Citigroup Inc. Chief Executive Officer Jane Fraser recently called the combination of mobile-banking apps and social media a game-changer for bank stability when discussing SVB.
“There were a couple of tweets and then this thing went down much faster than has happened in history,” she said at an Economic Club of Washington event last week.
SVB was arguably a special case: It had a highly concentrated deposit base over which powerful individuals such as tech mogul Peter Thiel had real influence. The run might have happened almost as quickly without social media.
Credit Suisse Group AG, the now defunct Swiss bank, was perhaps also a special case: Years of scandals and management
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