The news: Securities and Exchange Commission (SEC) Chair Gary Gensler has ruled out a ban on short selling to tackle wildly fluctuating regional banking stocks, according to Bloomberg.
Similar constraints were ineffective when used previously, Gensler stressed at an event hosted by the Atlanta Federal Reserve.
Why are bank runs in the spotlight?
Regulatory reforms could cut bank run hazards: The current regulatory system may need tweaking to address the new risks that digital banking and social media have added to bank runs. Online banking means customers and businesses can withdraw funds in seconds, with little to no warning, while platforms like Twitter can spread panic about banks' financial health.
To tackle the problem of bank runs, regulators may introduce new rules.
What can banks do? The recent industry turmoil has highlighted the need for lenders to be prepared to quickly address runs and the panic that can spread online. Maintaining customer trust through clear communication will be key to drowning out sensationalism and fear. But the best option for banks will be to avoid the mismanagement that left SVB and other fallen lenders in such a vulnerable position for customers to start pulling deposits.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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