REGULATORS and banks in the Philippines need to develop a system on how to immediately respond to issues on social media that may affect public confidence, in order to prevent social media-driven bank runs as seen in the United States, experts said.
Fitch Asia-Pacific Financial Institutions Director Tamma Febrian said that social media has allowed information “to flow at a speed that was unthinkable a decade or two ago,” and has helped lenders market financial products to customers quickly.
“On the other hand, both social media and digitalization could also increase contagion risks by compounding the effect at which a negative news could have on a bank with seemingly weak fundamentals, as demonstrated by the rapid demise of SVB (Silicon Valley Bank),” Mr. Febrian said in an e-mail interview with BusinessWorld.
The sudden collapse of SVB highlighted the risks arising from social media and digitalization. Last month, social media reports fueled panic among SVB customers, prompting massive withdrawals that ultimately led to the bank’s collapse.
While social media may have played a part in causing the bank runs, Mr. Febrian said the banks’ vulnerabilities and weaknesses ultimately caused their collapse.
“We do not think that the leading Philippine banks that Fitch rates suffer from the same issues that affected these failed institutions, helped by prudential liquidity requirements that BSP has instituted over the years,” he said.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla earlier said Philippine banks have no reported exposure in SVB. He also said Philippine banks are strong and are well-capitalized to weather any risks stemming from the collapse of the two US banks.
“The unexpected failures of two specialized regional banks (SVB and Signature Bank) in the United States in mid-March 2023 and the collapse of confidence in Credit Suisse — a globally significant bank — have roiled financial markets, with bank depositors…
All news and articles are copyrighted to the respective authors and/or News Broadcasters. VIXC.Com is an independent Online News Aggregator
Read more from original source here…