Regulating the Unpredictable: A Look-back on the Bank Failures in the Digital Era

Reading Time: 1 minute, 22 seconds

Prepared & Written by:
John Lowell, PMP, Noureddine Naamani, Jose Roman, CPA, CFE | Hancock Askew & Co.

In the dynamic world of finance, banks play a pivotal role as pillars of stability, overseeing transactions that fuel our daily lives. Yet, beneath this strength lies a delicate vulnerability. When exposed, it sends ripples through economies.

In an era defined by the rapid dissemination of information and the viral spread of trends through social media, recent events have underscored the powerful influence of technology. Bank failures, triggered by a mere tweet, emphasize the transformative power of digital platforms. This intricate interplay shapes a landscape where innovation harmonizes with vulnerability.

We navigate disruptions caused by collapses, outlining strategies for resilience. As we uncover the intricate mechanisms at play, we fortify the foundation of financial structures. This journey is not just about comprehending the past; it’s about forging a more resilient and stable future.

In the spring of 2023, a remarkable and concerning pattern emerged as three out of the four largest bank failures in history unfolded. The demise of Silicon Valley Bank (SVB) serves as a poignant example of mismanagement, leading to a cascading series of failures across its leadership, oversight, and regulatory frameworks. SVB’s situation is remarkable due to its unique and highly concentrated business model, which revolves around servicing tech startup companies in Silicon Valley. Some of these companies are tech giants such as Roku, Circle, Pinterest, Shopify, etc. An important aspect of SVB’s failure is that they relied heavily on tech investors; ones that would be most active on social media platforms such as X (formerly known as Twitter) and Instagram.

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