Global Watchdog to Report in October on How Social Media Fuels Bank Runs
The Financial Stability Board (FSB), a global watchdog, announced that it will release a report in October investigating the impact of social media on bank runs. FSB Secretary General John Schindler highlighted the need to examine changes in deposit dynamics, the role of social media, and the influence of new technology, such as mobile phone withdrawals. While no policy options have been determined yet, Schindler emphasized the importance of enhancing the resilience of the financial system through measures like liquidity buffers.
A recent call from a U.S. regulator for new liquidity rules over a five-day period has further intensified the discussion. The Basel Committee, a member of the FSB consisting of banking supervisors, is also reviewing potential reforms to its two core liquidity rules covering 30 days and 12 months. Their findings will contribute to the FSB’s comprehensive report in October.
The report comes in the wake of the forced takeover of Credit Suisse, marking the first major bank failure since the global financial crisis of 2007-2009. Instead of utilizing global rules from the FSB to wind down Credit Suisse, Swiss authorities opted for a takeover by UBS. Despite this, Schindler maintains that the FSB’s bank resolution rules remain effective for closing down a significant financial institution.
In addition to bank-related matters, the FSB will also consider policy options aimed at addressing leverage in non-bank entities, including investment funds. Furthermore, they plan to conduct an analysis of nature-related financial risks.
As the FSB formulates recommendations for the G20, member countries commit to implementing these recommendations on a national level. The upcoming report is expected to provide valuable insights into the intersection between social media, technology, and the resilience of the global financial system.
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