Pedro Machado, a member of the ECB’s Supervisory Board, stated at a conference in Frankfurt focusing on Spanish banking that “social media can fuel panic, while internet and mobile banking can make a bank run easier than ever.”
“In normal times, neither internet banking nor the availability of mobile apps has a systematic effect on deposit volatility,” Machado noted. “However, during periods of stress, increased use of internet banking amplifies extreme deposit withdrawals.”
The ECB reached this conclusion after empirically analyzing data from the 110 largest banks in the eurozone, which it directly supervises, between 2016 and 2024.
An increase of 20 percentage points in online banking use in the European Union (EU) in recent years translates to an amplification of nearly six percentage points in extreme deposit outflows, according to ECB data.
Therefore, supervisors should monitor unsecured digital deposits and consider them in stress test scenarios, Machado recommended.
Social media accelerated the run on Silicon Valley Bank in 2023 and intensified contagion to regional banks, Machado commented during a speech at the conference organized by the Spanish Banking Association (AEB) and the Spanish Confederation of Savings Banks (CECA).
Currently, no causal effect of social media on European banks’ deposit flows has been observed, except in specific cases like Credit Suisse in March 2023.
An explanation for this is that the data used have monthly frequency and do not fully capture very short-term deposit outflows occurring in a matter of hours or days.
As a result, Machado suggested that supervisors should consider requiring more frequent information on retail deposit outflows from major eurozone banks during periods of stress, possibly even real-time liquidity condition monitoring.
Similarly, digitalization also facilitates the movement of deposits from traditional banks to alternatives offering higher returns, particularly unsecured deposits, Machado highlighted.
