When US lender Silicon Valley Bank collapsed last month,one of the most striking aspects of the turmoil was the speed with which money was pulled from the bank:a staggering US$42 billion ($62 billion) was whipped out in a day. The shock collapse then set off worries about the potential for “runs” on other US banks,with the panic even spreading to Switzerland’s Credit Suisse,prompting an emergency takeover from its rival UBS.
To be sure,there were specific problems at these banks that caused the panic in the first place,and Australian banks are in a much,much stronger position.
But when some of the most senior people in the industry reflected on the chaos,they highlighted the role that technology played in spreading the panic,and in allowing people to withdraw money rapidly.
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Westpac chief executive Peter King last week said the “interesting learning” from recent turmoil was how banks deal with the digital age – particularly the speed at which information can spread and money can move.
The powerful banking watchdog,Australian Prudential Regulation Authority (APRA) chair John Lonsdale,also observed how technology meant banking crises could occur more quickly. While bank “runs” in the past involved people queuing up outside branches,these days there is no need to line up or be limited by opening hours.
“Entire balances can be instantly transferred elsewhere at the click of a button 24 hours a day. Information – and misinformation – also spread further and faster than ever before,particularly through social media,” Lonsdale said.