Can social media bring down our entire banking system?


Let me start by saying, simply, WOW. This article, late last month in MONEY, is downright scary. “Study Finds Twitter Chatter Fueled SVB Collapse — and Other Banks Are at Risk.”  Like many of you, I’ve been in this industry for quite a long time, so, I don’t scare easily. But the SVB collapse, which has now earned the title of “the first Twitter-driven bank run” gave me chills. In the “good old days,” like when George Bailey ran the Bedford Falls-based Bailey Bros. Building & Loan, you knew a bank was in trouble when customers lined up at the door to withdraw their cash; the longer the line, the deeper the trouble. Nowadays, withdrawing money — along with a host of other transactions, of course — doesn’t require standing in line. In fact, it doesn’t even require visiting a brick-and-mortar branch.  As we all know, for better or worse, today’s banking transactions are routinely made from a mobile phone… and in less than a minute.

It seems that SVB went bankrupt the same way that Ernest Hemingway’s character “Mike” did in The Sun Also Rises. When asked how it happened, Mike responds: “Two ways. Gradually, then suddenly.”

What caused the “gradually” in SVB’s collapse? With Federal Reserve interest rate hikes — 10 of them since the start of 2022 — a chilly environment for IPOs, and a tough economic climate, many of SVB's startup and tech industry customers were already motivated to withdraw needed funds. Then came the “suddenly.”

On Wednesday, March 8th, Silicon Valley Bank was a well-capitalized institution seeking to raise some funds. Within 48 hours of announcing to investors that it needed to raise $2.25 billion to shore up its balance sheet, a panic ensued — induced, some claim, by the very venture capital community that SVB had served — which led to the 40-year-old institution’s demise. Just a short time ago, when only two US banks had collapsed (now there are three), CNBC reported that “even now, as the dust begins to settle on the second bank wind-down announced this week, members of the VC community are lamenting the role that other investors played in SVB’s demise.”1

What role was that? Numerous VC funds, including major players like Founders Fund, Union Square Ventures, Pear VC, and Coatue Management, had advised companies in their portfolios to move their funds out of SVB “to avoid the risk of being caught up in the potential failure of the bank. In light of the situation with SVB that we are sure all of you are watching unfold, we wanted to reach out and recommend that you move any cash deposits you may have with SVB to another banking platform,” said Anna Nitschke, Pear’s chief financial officer, in an email to founders obtained by CNBC.”2

Bad news coming from VC firms in the tech capital of the U.S. travels fast and that news quickly snowballed into a stock rout, sending customers scrambling for their mobile apps and the “withdraw” button. Of course, the bank was then forced to sell investments to cover the demand... and, at a tremendous loss. Now, here is the kicker. “Word of those losses traveled quickly,” according to Reuters, “and spooked depositors withdrew $42 billion from the bank in just 24 hours. Many blamed the speed and intensity of online chatter about SVB’s weakness for the bank’s swift demise.”  Talk about “speed and intensity” … just multiply that by 450 million Twitter users.

The speed and intensity of the news around SVB’s collapse is, understandably, a concern. In mid-April,  a group of university professors co-authored “Social Media as a Bank Run Catalyst,” a treatise on the cause and effect of social media in the case of SVB that argues that greater exposure to social media amplifies bank run risk and warning that other banks could face similar risks. Here’s the first sentence in the Abstract: “Social media fueled a bank run on Silicon Valley Bank (SVB), and the effects were felt broadly in the U.S. banking industry.”3 As I said in the beginning… scary stuff. 

Of course, during all the media hype and excitement about how this failure portends a global financial crisis, few were paying attention to the more reasonable voices in the banking industry. Their voices were all drowned out by those millions of Tweets spreading fear. 

As Alexander Yokum, an equity research analyst at CFRA Research, warned in the MONEY article, “the fact that people can communicate so much more quickly has changed the dynamic of bank runs and perhaps changed the way we have to think about liquidity risk management. The number one driver right now is fear, not fundamentals.”

And that fear seems to continue to hang over the banking sector like a dark cloud… at least, for now. Over a month after the collapse of Silicon Valley Bank, some mid-size bank shares lost half their value, others were down well into double digits. A few share prices soared recently, then collapsed again. Great if you love roller coasters.  And this is at a time when, with rising interest rates, banking sector investors were anticipating a pretty good return.  Why the rough waters? “We believe regional banks are suffering from a GameStop-like moment where misinformation circulating on social media is fueling stock price declines that threaten funding and solvency,” Jaret Seiberg, financial services analyst at TD Cowen Washington Research Group.There it is again. Social media.  If only positive and accurate information traveled as fast as the negative, inaccurate stuff.  Until that happens, we ride that roller coaster. Buckle your seatbelt and hold on tight.

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To view our marketing creative, both print and digital – ranging from product and brand ads to social media and in branch signage – visit  You can also contact me directly by phone at 678-528-6688 or via email at  As always, I welcome your thoughts on the subject.


1CNBC. Here’s how the second-biggest bank collapse in U.S. history happened in just 48 hours. March 10, 2023

2CNBC. VCs urge startups to withdraw funds.  March 10, 2023

3Cookson, J. Anthony and Fox, Corbin and Gil-Bazo, Javier and Imbet, Juan Felipe and Schiller, Christoph, Social Media as a Bank Run Catalyst April 18, 2023

4CNN Business. Why bank stocks are so unstable. May 9, 2023