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The risks of banks in the digital world between influencers, tweets and applications

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The risks of banks in the digital world between influencers, tweets and applications

Banks, the new risks between tweets and influencers

Some have caused a sensation in the Credit Suisse crackdown statements by the president of the Swiss bank Axel Lehman who gave part of the responsibility for the disaster to the “social media storm”. Many criticized him thinking he didn’t want to take responsibility. But the statement calls for further study and above all what was the top executive referring to? In particular to two info that appeared in the critical period on social media. A tweet published by economic journalist David Taylor of ABC which revealed that a major international bank was on the verge of collapse. The second was the approach of the site Inside Paradeplatz (Zurich’s bank square) which gave confidential information on the internal affairs of Swiss credit institutions. Of course, not everything is the fault of social media, but surely these uncontrolled and widespread rumors at the speed of light have made the avalanche swell. An avalanche that, for Silicon Valley Bank, has become a tsunami with the record $42 billion withdrawn in just 10 hours, at a rate of over a million dollars per second.

Banks, the uncontrolled leaks of news on social media

And herein lies the problem for the banks when they begin to breathe in the air of crisis. On the one hand the uncontrolled and widespread leaks of news in the virtual ocean and on the other the digital applications that allow you to move money instantly, without giving the authorities time to intervene. Obviously the alerts that are spread on social networks, from WhatsApp to Twitter and on all other digital communication platforms scare the market and multiply online withdrawals.Rumors spread faster on social networks, and it is difficult for banks to stop them. There have been several examples of “terrorist” messages on the recent occasion. Those, for example, dellā€™influencer Kim Dotcom advising his 1.5 million followers to withdraw money from banks in the midst of a financial storm. Result: 2.4 million views on Twitter. Or i tweet from billionaire Bill Ackman, with 700,000 followers, which contributed to increasing uncertainty. All this panic born from social media made the prestigious Wall Street Journal say that, probably, the Silicon Valley Bank had been the first bank blown up in an instant mainly thanks to the Twitter panic.

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Banks, diversifying is the secret to defending oneself

In this new reality, how can a bank defend itself against these threats? For some experts, there are ways to defend yourself ā€œWhat helps to avoid panic is to diversify deposits and assets. When you have deposits from different people, it’s more difficult for them to coordinate to withdraw money at the same time. This happened at Silicon Valley Bank, where customers, especially in the technology sector, made withdrawals at the same time and the escape was very fast. The same goes for assets: you need to diversify your risk, and the SVB was an example of what to do wrong, like buying too many bonds. Nobody could be saved from a massive and rapid withdrawal of deposits but, as many analysts argue, it could be difficult for this to happen to large and consolidated banks with diversified franchises such as the main European banks. While smaller and under-diversified banks may be more vulnerable. This thesis should give breathing space and security to a reality as big as Deutsche Bank, the largest German bank. In conclusion, however, there is a fact: regardless of the size, when the bad air blows and social networks begin to rumble, customers mercilessly move their money from one place to another using the applications that the banks themselves have made available to them to operate comfortably, quickly and cheaply. And this technological boomerang greatly worries the banks that have not yet found a solution.

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