The rapid spread of information via social media and digital platforms poses new contagion risks to banking as customers react quickly to perceived risks, according to this opinion piece in the Financial Times. While depositors may traditionally have met in smoke-filled rooms to pull funds en masse, modern panic withdrawals can occur via smartphones, laptops or conference calls in real time. This “game-changing” phenomenon has forced banks and regulators to explore how to improve capital reserves, protect depositors and make it harder to withdraw money during times of stress or upgrade central banking systems to operate 24/7. In times of financial crisis banks could become more risk-averse only if they “prepare for future shocks by studying past accidents or near-disasters,” the article said. Among the five lessons laid out, the piece argues that banking is often a symptom of a wider, systemic failure rather than the cause, and banks that grow too quickly can get over-exposed.
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