The banking crisis of spring 2023 continues to be a cause of concern for the Financial Stability Board. The bank regulators are especially worried about the outflows of funds that are amplified and accelerated through social media – which happened twice with Credit Suisse.
The global regulatory authority intends to elaborate in a report on how social media fuels bank runs and what measures and safeguards can help prevent them.
Withdrawing Money Using a Mobile Phone
The recommendations by the Financial Stability Board (FSB), which is part of the Basel Bank for International Settlements (BIS), will be available by the G20 meeting in October, news agency «Reuters» reports. In particular, changes to the liquidity rules for banks are being considered.
The regulatory authority is looking at how deposit dynamics have changed, the role social media has played, and the role new technology has played now that customers can withdraw money using a mobile phone. FSB Secretary General John Schindler (image below) made this promise at a media briefing.
(Image: FSB)
Focus on Liquidity Buffers
Posts on social media helped to accelerate outflows from Silicon Valley Bank in March 2023. Depositors pulled 42 billion dollars from there in just 10 hours.
«We haven’t yet set out policy options for any of this, but having said that, we are in favor of boosting the resilience of the financial system, and things like liquidity buffers are one of the options to boost that resilience,» says Schindler.
«Too Big to Fail» Works
The global Basel Committee of banking supervisors, a member of the FSB, is looking at potential reforms to its two core liquidity rules for banks covering 30 days and 12 months, and will feed into the FSB report in October.
In the case of Credit Suisse, Switzerland opted for an emergency takeover by UBS instead of applying the «too big to fail» resolution plans for systemically important banks. But Schindler believes the FSB’s bank resolution rules could still work.
Shadow Banks Also on Radar
Another focus of FSB’s work in the current year will be on non-banking financial institutions such as investment funds, and the risks they pose to financial stability. More attention will also be placed on the financial risks posed by natural disasters.
The FSB is formulating recommendations for the G20, whose members have undertaken to implement them at a national level.
