SINGAPORE: Singapore’s second-biggest lender Oversea-Chinese Banking Corp (OCBC) reported on Wednesday (May 10) a better-than-expected 39 per cent jump in first-quarter profit from a year earlier on the back of strong net interest income growth. OCBC, which is also Southeast Asia’s second-biggest bank by assets, said January to March netContinue Reading
SINGAPORE: A digital platform for financial institutions in Singapore to share information on suspicious customers or transactions will be set up after parliament passed the Financial Services and Markets (Amendment) Bill on Tuesday (May 9).
The new platform will be jointly developed by the Monetary Authority of Singapore (MAS) and six major commercial banks – DBS, OCBC, UOB, Standard Chartered Bank, Citibank and HSBC.
These banks will be given access to the platform, called the Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases (COSMIC).
It is set to be rolled out in phases, starting from the second half of 2024.
In the initial phase, COSMIC will focus on three key financial crime risks in commercial banking, namely abuse of shell companies, misuse of trade finance for illicit purposes and financing that aids the proliferation of weapons of mass destruction.
Sharing of information will be voluntary during this initial phase that will last for two years.
This is to allow the platform to achieve operational stability while MAS engages financial institutions to calibrate features and address operational issues, said Minister of State for Trade and Industry Alvin Tan as he tabled the Bill for a second reading.
MAS intends to make information sharing mandatory for higher-risk situations in the later stages, as well as widen COSMIC’s coverage to include more risk areas and financial institutions.
Further legislative amendments will have to be proposed in the later stages to effect these mandatory requirements. MAS will consult the industry and the public before introducing these amendments, a spokesperson told CNA.
The initiative is part of efforts to beef up Singapore’s defences against money laundering and financing of criminal activity.
Mr Tan, who is a board member of MAS, said that while financial institutions have made significant strides in this aspect, they are currently unable to warn one another about unusual activity involving their customers given customer confidentiality obligations.
“Criminals exploit this by making illicit transactions through different financial institutions to avoid detection,” he added.
COSMIC, which aims to eliminate these information gaps, will “make it easier for financial institutions to detect and thereby deter criminal activity”, Mr Tan told the House.
Currently, Singapore’s Banking Act mandates that regulated financial institutions and their officers uphold confidentiality when handling customer information.
A private-public partnership, dubbed Anti-Money Laundering and Countering the Financing of Terrorism Industry Partnership (ACIP), was established in 2017 to allow the MAS, the Commercial Affairs Department (CAD) and financial institutions to share specific information on a case-by-case basis.
Such a mechanism has “built trust among stakeholders” and demonstrates the benefits of information sharing, MAS said in response to CNA’s queries.
COSMIC will allow such information sharing “to be conducted at scale and in a structured format, to more efficiently and effectively pick out suspicious actors”, the spokesperson said.
Aims to promote faster, cheaper, more transparent, and more inclusive cross-border payments, particularly benefiting micro, small, and medium enterprises.
Expected to strengthen economic ties between Indonesia and Malaysia, support a stronger post-pandemic economic recovery, and provide greater convenience for travelers.
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SINGAPORE: About 89 per cent of depositors in Singapore are currently fully insured under the Deposit Insurance Scheme, said Minister of State for Trade and Industry Alvin Tan on Monday (May 8).
The scheme, administered by the Singapore Deposit Insurance Corporation (SDIC), insures Singapore-dollar deposits held at a full bank or finance company in Singapore. In the event that a bank or finance company in the scheme goes under, the SDIC will pay out up to S$75,000 per depositor per institution.
The coverage limit of S$75,000 was last raised in 2019 and fully insured 91 per cent of depositors at the time.
Amid deposit growth, the percentage of fully-insured depositors has since fallen slightly to 89 per cent, Mr Tan said in response to parliamentary questions.
Mr Tan also said the Monetary Authority of Singapore (MAS) has just concluded its latest regular review of the scheme, including the coverage limit and ways to ensure operational efficacy. The regulator aims to present these proposals for public consultation by the end of June this year.
This review was not in response to the recent stresses among some banks overseas, Mr Tan stressed, while adding that “we should avoid overreacting to these events”.
“Our principal objective should be to ensure that the pre-emptive safeguards … are in good shape.”
These safeguards include sound regulation, rigorous supervision, proactive cross-border cooperation, as well as effective governance and risk management by the banks themselves.
The Deposit Insurance Scheme complements these pre-emptive safeguards by providing a safety net for small depositors if banks were to fail, he said.
Mr Tan noted that authorities will have to adjust the nominal coverage limit for the deposit insurance from time to time.
But doing so is not without cost to banks, which will “often ultimately mean costs borne by bank customers themselves”, he told the House.
“So each adjustment to the Deposit Insurance Scheme hence has to be carefully considered.”
For example, members under the scheme pay regular premiums which will likely go up with a higher coverage limit.
“This adds naturally to the banks’ overall costs, which they will have to manage themselves and then sometimes also pass on these costs to customers given that they are commercial enterprises,” Mr Tan explained.
“They might do it through perhaps lower deposit rates, higher lending rates or other fees.”
Mr Tan also gave the assurance that the Deposit Insurance fund is “adequately sized” and is designed to meet a solvency standard of 99.9 per cent.
The target fund size is currently calculated at S$690 million, with the fund having approximately S$570 million in total assets, said Mr Tan.
The fund is established from annual premiums collected from members of the Deposit Insurance Scheme and will be tapped for payouts to insured depositors in the event of a bank failure. It may also borrow from MAS for payments to insured depositors.
SINGAPORE: A proposed law will allow the government to order the takedown of websites and online accounts suspected of being used for scams.
The new Bill, introduced in parliament on Monday (May 8), covers a range of criminal offences. But the threshold for taking action on one group of these offences – those relating to scams and malicious cyber activities – will be lower than the rest.
The Online Criminal Harms Bill tackles online content that is criminal in nature or used to abet crime, the Ministry of Home Affairs (MHA) said in a press release.
It covers nine categories of criminal offences relating to:
Scam and cybercrime cases rose by more than a quarter to hit 33,669 last year, with scam victims cheated of a total of S$660.7 million (US$498.6 million).
MHA said that more needed to be done to fight against online criminal harms given the “pervasive threat and grave impact” on victims.
“Scams and malicious cyber activities that are propagated online can harm many people in a short time. Numerous websites, online accounts, and content are created every day to facilitate such crimes.”
MHA said such content appears benign at first glance and that syndicates “operate at industrial scale, and victims can fall prey within minutes of the launch of a scam campaign”.
The proposed Bill will allow the government to take “swift action” against online criminal activity and proactively disrupt scams before they harm more victims, it said.
This is on top of public education efforts and the engagement of private sector stakeholders like banks and telcos.
As US-China rivalry intensifies, pressure on allies and partners grows. Strategic access in return for economic concessions or security assistance plays out in the Indo-Pacific region. Cases abound, from Sri Lanka, Pakistan, Cambodia, Myanmar and the Philippines to the Marshall Islands and the Solomons.
Rational countries weigh in on the risks, push back or drive hard bargains as they – willingly or reluctantly – accommodate great-power interests. The pace at which such development is unfolding makes the Philippine case instructive.
Despite a new government in Manila barely a year in office, the shift from striking a balance between the US and China to openly taking the US line has become manifest. The Philippine-US alliance is in high-octane mode.
Four new sites for US military access have been granted. One of the biggest iterations of annual joint military exercises was just concluded. The two sides are discussing plans to conduct joint naval maneuvers in the South China Sea.
Manila is being looped into the thickening web of hub-and-spoke trilaterals (US-Japan-Philippines, US-Australia-Philippines), as well as US-led minilaterals like the Quad and AUKUS.
On the third day of President Ferdinand Marcos Jr’s second visit to the US, new bilateral defense guidelines were issued. Indeed, the alliance has evolved rapidly.
The revival of the alliance under Marcos is a sea change from rocky times during the previous Rodrigo Duterte government. Possible irritants like human rights, ill-gotten wealth, and lawsuits faced by the Marcos family in US courts are unlikely to unsettle ties.
This leads to speculations of a quid pro quo between Marcos and the US. It highlights how personal and filial interests can influence foreign-policy swings for a crucial country on the front line of geopolitical flux.
Washington seems poised to insulate renewed relations from these issues lest access to Philippine military sites gets compromised. It is a déjà vu of how US dealt with the president’s father, the late strongman Ferdinand Marcos Sr, decades ago.
Under the second Marcos administration, not only is the alliance reborn, it is breaking new ground. For the first time since the Enhanced Defense Cooperation Agreement (EDCA) was signed in 2014, the US was given access to a Philippine naval base. Renewable every 10 years, EDCA allows the US to deploy troops rotationally and pre-position supplies in agreed locations throughout the country.
Four new sites were added to the existing five. The locations of these are telling. Three – a naval base, an army base, and a civilian airport – are in northern Luzon, close to Taiwan, and can be quickly activated to respond to a cross-Strait contingency.
In contrast, the fourth one on Balabac Island does not have infrastructure that can immediately bear on the South China Sea, Manila’s primary security concern. A lush island far from the country’s outposts in Kalayaan, it has more value in monitoring maritime traffic crisscrossing the West Philippine and Sulu Seas.
Developing the naval detachment in Ulugan Bay, closer to the oil-and-gas-rich Recto Bank, might have been more sensible in enhancing Manila’s posture in the flashpoint.
The US withdrew from the Intermediate-Range Nuclear Forces Treaty in 2019. Hence the use of such armaments as Patriot and Avenger missiles and HIMARS rockets in annual war games raises suspicions that they may eventually be installed in EDCA sites.
China deployed missiles in the Spratlys in 2018, and Manila, in response, aims to field a BrahMos battery this year. The stationing of US missiles in EDCA bases may thus worryingly elicit a Chinese reply. More toys in an already crowded pond may only raise the specter of accidents.
Where the additional EDCA sites are situated, and the choice of recent Balikatan exercise areas (which includes Batanes and Cagayan close to Taiwan), reflect an accommodation of US priorities.
The pretext of boosting the capacity to react to disasters is doubtful. If humanitarian assistance and disaster relief (HADR) is the priority, southern Luzon or eastern Visayas should have been more appropriate as these regions are at the forefront of ever stronger typhoons coming from the Pacific due to climate change. At the very least, one should have been put in either area to make the HADR pitch more tenable.
It is also doubtful how greater military access will address China’s gray-zone activities in the South China Sea and whether other claimants will be amenable to joint patrols in contested waters. Manila is not the only target of Beijing’s incursions in the strategic waterway. But other disputants are able to push back and even make headway.
Vietnam, with no foreign troops, no foreign bases, and no alliances, was able to occupy and control the most number of features in the Spratlys – more than the combined rocks, reefs and submerged banks held by the Philippines, China, Malaysia and Taiwan.
While Beijing’s Great Wall of Sand got much attention, Hanoi’s modest reclamation attracted less attention. While China’s unilateral fishing bans invite protests from other littoral states, Vietnamese – not Chinese – fishermen remain the most frequent poachers in the Philippines’ western exclusive economic zone (EEZ).
In 2016 and 2017, out of humanitarian considerations, former leader Rodrigo Duterte personally sent off two batches of Vietnamese fishermen caught in the country’s waters.
This raises the question of whether EDCA expansion is an effective calibrated response to Philippines’ major external security challenge and whether the costs and risks attendant to it outweigh the expected gains.
EDCA expansion stoked fears among concerned local leaders and legislators that the Philippines might be drawn into a superpower clash over Taiwan. Marcos allayed such fears, saying that the country’s bases would not be used for offensive purposes or serve as staging posts for action against another country.
He also reassured Beijing, meeting with Foreign Minister Qin Gang a week before his trip to Washington. Marcos is in a difficult spot, hoping to soothe persistent domestic and regional concerns but not wanting overly to constrain the use of EDCA sites lest it diminish their supposed deterrent value.
And while much focus was given to defense, one must ask how prepared Manila is to weather potential economic reprisals. This is especially so if China imposes sanctions in response to US missile deployment in new EDCA sites.
America’s oldest Asian ally is not only the most militarily disadvantaged in the South China Sea, it is also the most economically vulnerable in the First Island Chain. How can a country be so gung-ho on security issues and be a laggard in cornering trade and capital flows redirected to Southeast Asia?
While endorsing the Quad and AUKUS, the Philippines was the last member of the Association of Southeast Asian Nations (other than war-torn Myanmar) to ratify the Regional Comprehensive Economic Partnership (RCEP) and has yet to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
If Manila wants the US and the international community to be invested in its security, it has to climb up the value chain. It should wisely leverage the alliance to this end.
If Taiwan has the Silicon Shield and Vietnam is the rising manufacturing powerhouse, the Philippines cannot just have call centers and strategic real estate. It should play its cards well to turn a crisis into an opportunity.
shabby PictureDuring a occasionally contentious annual general meeting, HSBC has repelled an attempt by its largest shareholder to dismantle the bank.
For more than a year, Chinese employer Ping An has been attempting to divide the bank.
People voted to accept the proposal on Friday, so it was unable to win the support of any other significant investor.
According to HSBC president Mark Tucker, the outcome” draws a line” in the protracted discussion surrounding the bank’s organizational structure.
HSBC’s dividends are primarily generated in Asia, despite having its headquarters in London.
Ping An, which owns an 8 % stake in HSBC, wants the lender to divide up its Asian operations.
It contends that the company’s successful Asia procedures are subsidizing less successful banks divisions. Additionally, HSBC may be exempt from the needs of UK officials if it were split up.
To compel the split, Ping An and Ken Lui, an individual investor in HSBC based in Kong Kong, needed 75 % of all vote cast at the AGM.
With no other significant institutional investor supporting the system, they were unable to obtain those values.
Mr. Tucker warned the AGM that the bank’s dissolution may jeopardize its regional technique and be both risky and expensive.
He stated at the Birmingham AGM, which was frequently interrupted by climate change activists who assert that HSBC is not doing much to reduce its funding of polluting industries and companies, that it would not be in shareholders’ interest to cut the lender.
At the conference, Mr. Lui vowed to continue the break-up system, pledging to maintain pressure on HSBC’s management and entrance the numerous little shareholders of the bank in the Hong Kong.
Although it is unclear what Ping An’s then move may be, there are more important considerations at play than simply getting a return on its choice.
According to some experts, Ping An, which is partially owned by the Chinese government, may serve Beijing’s political objectives as well as the commercial interests of its shareholders.
The most significant financial gateway in China is by far the Hong Kong, with HSBC serving as its focal point.
Some contend that Beijing might not be willing to take the risk of just handing over the state’s most valuable asset to the West.
An illustration of this is the financial loneliness that resulted from Russia’s invasion of Ukraine.
Having control of one of Asia’s base banks may be crucial may a similar political crisis involving China arise, which is not impossible given the tensions surrounding Taiwan and the South China Sea.
In this sense, HSBC is experiencing an existential issue that began when it was established under British rule in the Hong Kong.
The the Hong Kong and Shanghai Banking Corporation, as it was formerly known, has had a long-distance partnership with the UK for the majority of its 158-year account.
In actuality, HSBC didn’t start to dominate UK High Street until 1993, when it acquired Midland Bank and relocated its corporate offices to London. Especially today, HSBC prints bank notes in the Hong Kong.
According to the Hong Kong-based business risk consultant Steve Vickers, there is a startling disconnect between HSBC’s hub of operations and its submission to regulators in Britain. ” This is a relic of the colonial era and an accident of history.”
In 2020, when the Bank of England ordered HSBC and additional European lenders to avoid paying dividends to shareholders due to the pandemic, we got a little taste of this.
Ordinary the Hong Kong owners, who own in a third of HSBC’s stock and many of whom depend on the expenses for their retirement funds, were outraged by this.
It was a straightforward but striking example of the influence of executives on the Chinese island. Although Asia may make the funds, London really makes the decisions.
China and Ping An do not want to be in this environment. It might help to explain why Ping An is officially and vehemently pushing HSBC in the manner of European investors’ typical investor advocacy.
According to Steve Vickers,” A more assertive China is now frightened to challenge itself in the international market industry.” However, they must proceed with extreme caution when dealing with HSBC because the stakes are high.
Thirty years of being headquartered in London is proving to be very disorienting for HSBC Holdings Plc.
Posterity will question the wisdom of the behemoth’s 1993 decision to move its headquarters from Hong Kong to the UK. Anyone who couldn’t see then that Asia would be the bank’s true profit center decades later — it generated 78% of pre-tax profit in 2022 — wasn’t paying attention.
But today’s tussle between HSBC and Shenzhen-based Ping An Insurance — its biggest shareholder — raises a question everyone knew was coming: whether HSBC is an Asian bank or a global one.
Ping An is pressuring HSBC CEO Noel Quinn to admit it’s the former and create a separately listed Asian business headquartered in Hong Kong.
Michael Huang, CEO of Ping An, says it’s the clearest way to fix what he views as HSBC’s lack of competitiveness. And, as Huang puts it, to “crystallize multiple benefits” from a “strategic restructuring” that better reflects Asia’s contributions to the bank’s bottom line.
Odds are, however, Huang will be disappointed. A shareholders meeting in Birmingham seems likely to side with Quinn, who has time on his side. And a recent dose of healthy financial results is sure to dampen calls for radical change.
Thing is, Huang isn’t exactly wrong. With its 8.3% stake in HSBC, Ping An is well within its rights to agitate for change. There’s certainly an argument that management has “drained HSBC Asia of dividends and growth capital” to smooth out underperformance elsewhere.
Indeed, dramas abroad appear to be preoccupying HSBC’s top management in London. HSBC’s interests in France, for example, have gone awry. Hopes to sell that unit back in 2021 appear to be going nowhere.
Huang probably looks askance at the time and energy spent on the purchase of Silicon Valley Bank’s UK operation in March. Quinn’s team called it a win for HSBC’s global growth strategy. To Huang and his fellow detractors, the SVB deal is yet another distraction from the real game in Asia.
Still, Quinn’s argument to stay the course got a big boost from a barnburner of a first-quarter report.
Earlier this week, shareholders learned HSBC generated a 19.3% annualized return on tangible equity. It was a performance in league with Singapore giant DBS Bank and in a different stratosphere than the single-digit gains normally experienced by HSBC shareholders.
Jefferies analyst Joseph Dickerson notes that the quarter was characterized by “strong capital generation. Revenue showed strength notably in non-interest income.”
Hence Huang’s “timing” problem. Quinn’s team can argue its restructuring strategy is working. Why risk changing course now?
Already, HSBC brass can counter, the bank has pivoted away from low-yielding businesses in Canada and parts of Europe. And that, for all Ping An’s griping, the bank is indeed gravitating more and toward prioritizing Asia.
All this helps explain why advisory group Institutional Shareholder Services wants investors to vote down Ping An’s proposals. ISS told Reuters that Ping An’s strategy “lacks detailed rationale.”
Advisory firm Glass Lewis recommends the same: “We do not believe that realizing improvements in returns and value necessitates a breakup or spinoff of HSBC’s Asian business at this time.”
As Quinn told Bloomberg this week: “We have said all along that we believed the fastest and safest way to get increased valuation, increased profit, increased dividends, is by focusing on the current strategy. These results show that the strategy is working.”
Another reason the time might not be right is the intensifying banking crises that have global markets in near-panic mode. In the US, the collapses of SVB and Signature Bank made headlines anew this week as First Republic Bank hit a wall.
After being seized by regulators, California-based First Republic was sold to JPMorgan Chase. The news triggered investors’ PTSD over UBS having to save Credit Suisse from the financial abyss.
As such, Huang’s odds of convincing other top HSBC shareholders that now is the time for a risky breakup of a US$150 billion lender — one that regulators on a few continents would want to micromanage — are falling by the day.
There’s also the danger of the biggest HSBC shareholder essentially yelling “fire!” in a traumatized financial theater. SVB’s downfall, remember, was precipitated in part by tech billionaires ragging on its management over social media. Many believe, likewise, that intemperate comments from Saudi National Bank pushed Credit Suisse over the edge.
In such a fragile environment, Huang’s Ping An doesn’t seem to be reading the room. There’s no doubt that Chinese leader Xi Jinping would be thrilled to see HSBC heed Huang’s demands. Having a truly pan-Asian giant headquartered in Hong Kong would be a boon for a city watching its banking jobs pivot to Singapore.
Though Huang is speaking for Ping An, this financial cold war of sorts, the extent to which things have broken down entirely between him and HSBC, may fan concerns over China’s increasing hold over Hong Kong and its future status as a global financial center.
It’s intriguing to view this standoff as a microcosm of the East-West divide upending the global economy. More than arguably any other banking giant, HSBC finds itself squeezed between two great powers – China and the US –wielding financial leverage wherever they can find it.
For HSBC, it hardly helps that it relies on the US dollar to clear trades at a moment when Beijing is working to internationalize the yuan. After all, HSBC’s ability to access deals in Hong Kong and China — and rack up massive profits — comes at the pleasure of Xi’s Communist Party.
The outsized role that China’s growth played in the $13.7 billion pre-tax profit HSBC reported in the first quarter makes this a delicate dance.
In February, lawmakers from Britain’s All-Party Parliamentary Group accused HSBC and Standard Chartered Bank of being “complicit” in China’s “gross human rights abuses of Hongkongers.” At issue: barring customers’ access to their pensions after they fled the city amid anti-mainland China protests in recent years.
“These banks cannot continue to act with impunity, and the UK government must act to assist those… who are suffering from the impact of these anti-democratic laws,” says Alistair Carmichael, co-chair of the APPG for Hong Kong.
In a statement, HSBC retorts that the bank has “an enduring commitment to Hong Kong, its people and communities. It is where we were founded nearly 160 years ago. Like all banks, we have to obey the law, and the instructions of the regulators, in every region in which we operate.”
Yet Ping An’s real problem is that it hasn’t pulled enough HSBC shareholders its way. Here, activist shareholder Ken Lui is proving to be an ally.
He recently submitted a resolution calling on HSBC to plot ways to restructure its Asia business. Lui seeks “structural reforms including but not limited to spinning off, strategic reorganization and restructuring” of HSBC’s Asia unit.
Of course, Huang’s company has other options for betting on giant lenders focused specifically on Asia. Selling its HSBC stake is always an option. After all, it hardly seems that Quinn’s inner circle – or that of chairman Mark Tucker – is about to announce a giant U-turn in strategy.
Quinn’s office claims it’s already stress-tested what Ping An is requesting and argues Huang’s ideas would do more to reduce than boost shareholder value. Goldman Sachs has reportedly made similar arguments.
Though Huang is not wrong that HSBC should be more present in Asia, physically, the recalibration he seeks at a moment of fragility in the global banking system seems a non-starter.
Huang might have better luck getting shareholders to prod HSBC to restore dividends. For Quinn’s team, that might be the easier way to defuse this shareholder cold war.
Follow William Pesek on Twitter at @WilliamPesek
Due to Silicon Valley Bank’s March 10, 2023, crash, investor discussions about the institution spiked on Twitter, which fueled the SVB banks run. These tweets also caused some financial institutions with poor balance sheets to collapse, as we explain in our latest working paper,” Public media as a lender run catalyst.”
The bank’s stock ticker,” SIVB ,” was mentioned in a significant number of tweets on March 9 around 9 am EST. Before posts mentioning” SVB” or” Silicon Valley Bank,” which were aspect of a more general-interest word, started, it had been about 2.5 years.
The rapid decline in the company’s share price on March 9 coincided with that spike in trader tweets, which persisted in after-hours trading and before the market opened the following morning. On March 10, the day the bank failed, trading in SVB’s property was halted.
We categorized US businesses, along with a number of other acquaintances, based on the volume of tweets that were sent about them and their susceptibility to potential bank runs.
We multiplied loses the bankers incurred as a result of the series of interest rate increases that started in March 2022 by the percentage of their payments that were below the Federal Deposit Insurance Corp. ‘ s security cap of US$ 250, 000 per account to determine risk.
We discovered that in March, stock of banks with significant Twitter engagement in January and February experienced significantly greater declines. The collection of institutions that were most vulnerable experienced a stronger impact. First Republic Bank was one of them, but it failed on May 1.
The one-third of businesses with the most posts saw drops in their share prices that were, on average, around twice as large as those of the other businesses when we examined what happened to the assets of all those with susceptible balance sheets between March 6 and March 13.
Social marketing may have contributed to Silicon Valley Bank’s death, according to US politicians.
The Great Depression-era bank crisis is primarily responsible for the current understanding of bank functions. Back again, panic among banks customers was spread by word-of-mouth, media coverage, and social signals like lengthy lines outside of banks.
Since traditional media outlets primarily rely on one-way transmission from legal resources to the general public, the size of the reader and the quick spread of ideas set social media apart from newspapers and broadcast message.
Banks will undoubtedly continue to be concerned about this, especially in light of the problems that some financial institutions are currently experiencing.
Many of the ideas we raised in our documents were emphasized in a statement on SVB’s loss that the Federal Reserve released on April 28. It highlights SVB’s poor risk management and a sizable portion of Silicon Valley startup neighborhood savers, who are frequently very energetic and well-connected on social media.
Another group of academics, under the direction of Itamar Drechsler, a finance professor at the University of Pennsylvania, found that the subsequent rise in insured deposit accounts may weaken banks.
The development of perfectly modern businesses and mobile banking apps may increase this risk even more, according to ongoing research from a team of researchers at Columbia University and the University of Chicago.
According to reports, lenders who quickly withdrew money from SVB already used telephone calls, group email messages, Slack, and WhatsApp to express their worries.
However, since there is no content that is readily available to the public, it is difficult to determine what part those some, less formal dialogues played in causing the SVB bank run.
Tony Cookson is Associate Professor of Finance, University of Colorado Boulder and Christoph Schiller is Assistant Professor of Finance, Arizona State University
Under a Creative Commons license, this story has been republished from The Conversation. read the article in its entirety.
