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SVB saw $142 billion fly out the door in just 2 days in a tech-driven bank run – and that spells trouble, says Mohamed El-Erian

el-erianMohamed El-Erian.

Fred Prouser/Reuters

  • SVB saw $142 billion pulled from deposits in just two days before it collapsed.
  • The bank run was sped up by social media spreading news faster and tech tools making it easier to withdraw funds.
  • Mohamed El-Erian said potential high-speed bank runs raise challenges for banks.

Silicon Valley Bank saw $142 billion in deposits fly out the door in just two days in what led to the fastest fall of a bank in history — and top economist Mohamed El-Erian has said that spells trouble. 

Depositors tried to pull out $100 billion from SVB on the day it was closed down by regulators, the Federal Reserve’s vice chair for supervision Michael Barr told the Senate Banking Committee on Tuesday. That was a day after savers successfully withdrew $42 billion from the bank. 

These new details of SVB’s downfall has top economist El-Erian flagging warning signs of the impact of tech tools on banks. He said that potential high-speed bank runs raise challenges for banks and their supervisors.

“This reality of increasingly-tech enabled/influenced banking raises complicated challenges for bank managements, regulators and supervisors – direct and indirect ones,” said El-Erian, who is chief economic adviser at Allianz. 

“Also, it doesn’t fit easily in the traditional narrow versus universal banking models,” he said on Twitter. 

The tech-driven historic bank run was sped up by social media spreading news faster amid Twitter-induced panic from VC firms and founders and the tech tools making it quicker and easier to withdraw funds. 

In his testimony before Congress, Barr said he expects more stringent lender rules from regulators to help stave off future bank collapses. 

“I anticipate the need to strengthen capital and liquidity standards for firms over $100 billion,” Barr said. 

Read the original article on Business Insider
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