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Social Media and Bank Runs: Communications Preparedness

In crisis communications, social media is a kind of third rail. There’s no denying its tremendous power: direct communications with core audiences in real time. But channeling that power can prove challenging in a crisis, and a misstep can have existential consequences for banks. Never was the downside of social media more palpable than during the 2023 bank crisis, when it drove fatal deposit runs at Silicon Valley Bank, Signature Bank and Credit Suisse. Two years on, the banking sector is still working out how to deal with the aftereffects.

It goes well beyond intensifying social media monitoring. Many banks are sharpening how they talk about their capital and liquidity in an environment where a rumor can become a full-blown run at the speed of a viral social media post. Your bank doesn’t even have to be named. A run at Credit Suisse in October 2022 followed a tweet that referenced “an unnamed major international investment bank.”

So what are communications best practices at a time when instantaneous deposit withdrawals can occur online in the middle of the night?

There are three components: regular disclosure of key messaging and metrics around safety and soundness; direct, often reactive, communications to key stakeholders if your institution attracts speculation; and selective proactive communication to forestall broader rumors. 

Preparation should start in peacetime. Develop the strongest possible narrative about the safety and soundness of your bank, the resilience of your business model and how you compare to peers.  Support the narrative with facts and metrics, building the case for why your bank isn’t susceptible to the crisis du jour.

Include messaging and metrics regarding your safety and soundness in quarterly earnings releases and presentations. Key stakeholders shouldn’t be seeing these messages and metrics for the first time in a crisis. 

In the 2023 crisis, the banks perceived to be most vulnerable had a combination of (1) a high proportion of uninsured deposits and (2) large unrealized losses on securities relative to equity.  In the next crisis, it may be an entirely different combination of factors. In any case, know where you stand - you can be sure that analysts, reporters and others will be stack ranking your bank against peers.    

Like cyber attacks, a financial crisis scenario should be part of your regular crisis communications prep and planning, including developing and maintaining a playbook that is periodically tested in tabletop exercises. 

All well and good, but what happens in war time?

Your bank’s campaign starts when a run surfaces at some other bank and kicks off the guessing game about who’s next. Don’t engage with social media speculation, even if your institution is on the list of suspects. Responding publicly to predictions of the next victim will just provide oxygen to uninformed chatter.

In a crisis, it’s natural to want to communicate broadly and proactively. However, in a potential run scenario, this can attract exactly the kind of attention you’re trying to avoid. In 2023, a number of banks issued press releases touting their financial strength and merely drew the scrutiny of the press, resulting in their inclusion in stories about which bank could fail next.

Many of your most effective responses will be in the analog world. Arm your customer-facing and counterparty-facing staff with talking points about your bank’s financial health, tailoring the messages for a range of audiences from retail customers to CFOs.

There are scenarios where broader proactive communication can be effective. The approach of quarterly earnings often gives rise to speculative chatter. If speculation is swirling around your bank’s financial condition, a brief earnings pre-release that provides a few key reassuring metrics can be a nuanced, effective way of shutting it down.

In a world where social media and online banking are increasing the risk, speed and severity of deposit runs, preparation and transparency can go a long way to managing the impact of industry-wide issues at your institution.