New technologies and social media have the power to “turbocharge” bank runs, former Barclays boss Antony Jenkins has said, commenting on the collapse of Silicon Valley Bank (SVB).
Speaking to City A.M., Jenkins said “technology is a wonderful thing” that has drastically improved the experience for financial services customers in many different ways.
But while these advances have been positive, Jenkins, who left the lender in 2015, noted they have also increased “the ability to move money at speed.” Combined with the growing influence of social media, new technologies have the power to accelerate existing issues in the market.
These factors all came together in the collapse of SVB, when $42bn was pulled from the bank in a single day – the largest bank run in history.
“When you put those things together, what we’ve seen is that the traditional bank run… just gets turbocharged,” he said, although accepting that in most cases a run reflects underlying concerns.
Regulators are now considering how to adapt regulations to face the new reality. Proposals under consideration include raising the limit on insured deposits and boosting the amount of liquid cash banks must have available to meet withdrawal requests.
Jenkins, who is also an external member to the Prudential Regulation Committee, suggested that regulators have a difficult task.
Speaking in a personal capacity, he said: “Its a very difficult thing to deal with because you don’t want to lose the benefits of the speed and efficiency and the cover of technology in the financial system,” he said.
The collapse of SVB sparked panic amongst regional banks in the US, with First Republic becoming the third bank to fall since March.
Asked if this chapter was coming to a close, Jenkins said “we honestly just don’t know.”
“I think it would be a brave person who said that was it,” he added.
Despite warning on the powers of new tech and social media, Jenkins said that technologies could, and should, still be used to help improve customer experiences.
On leaving the legacy lender, Jenkins went on to set up London-based fintech 10x Future Technologies.
While the UK has led on financial innovation in many cases such as open banking, Jenkins does not think there’s been truly fundamental change.
“I like to say we’ve seen a lot of innovation in financial services. We haven’t seen very much transformation,” he said.
What does genuine transformation in the banking sector look like? As an example, Jenkins said you could combine data about a customer with external data sources to make lending decisions. “We haven’t seen that happen yet.”
Jenkins hopes 10x will drive change in the sector, unlike legacy banks, which he said can be “museums of technology”.