Opinion: Are communications really to blame for bank runs?
In the wake of the SVB crisis, our head of fintech Kate Mallett asks what role PR should play in mitigating banking crises
There has been a lot of talk in the media this week about how PR could have stopped the bank run at Silicon Valley Bank (SVB). I don’t agree with this, but before I explain why, let me quickly recap.
Silicon Valley Bank, as the name suggests, was the bank of choice for the tech sector in the US, with nearly £200 billion in funds deposited since it launched. In an environment of very low interest rates, SVB thrived. But as interest rates went up all over the globe, VC started to dry up, stock prices tanked and SVB customers’ needed their deposits in order to pay people.
Unfortunately, most of those deposits had since been invested in Treasury bonds – or T-Bills – which don’t deliver a good return when rates go up. Fuelled by rumours that SVB couldn’t cash in its bills quickly enough, customers began to take their money out. The subsequent bank run sent shockwaves through global financial markets.
Many PR people are saying that this could have been managed better, or even stopped with clearer communications. However, by the time customers were showing signs of pulling their money, communications were only going to have a limited impact.
The only way to prevent a bank run is for the government, in the form of a central bank, to guarantee deposits. We saw this happen over the weekend when the Federal Reserve backed American’s regional banks, and yesterday when the Swiss National Bank pumped funding into Credit Suisse.
What PR can do is to help banks to reconnect with their core purpose. As advisors, we need to remind our clients, and the public, that banks exist to serve society, to help their customers, support businesses and underpin economic growth.
This applies to whatever size the institution is. These discussions must happen at board level and go beyond just messaging and communications. PR teams can hold a business to account and apply the ‘fourth eye check’ on everything it is doing, to avoid ‘purpose-washing’ and help focus on issues.
PR needs to be central to crises, and it can help contain panic. But it cannot solve fundamental issues in how a business or economy operates. Facilitating conversations about purpose and ensuring this is an ongoing point to all banking activity, is where we can truly make a difference.
This article appeared in PR Week in March 2023
