Johan de Jong, a Postdoc in the department of Applied Economics at Erasmus School of Economics, talks about the recent turmoil in banking. De Jong works in the fields of behavioural economics, experimental economics, and behavioral finance. He soon hopes to obtain his PhD at the University of Amsterdam on research into bankruns.
Just before the collapse of Silicon Valley Bank, Greg Becker, head of the bank, expressed that the bank could be in trouble if people communicated to each other that Silicon Valley Bank had liquid problems. This statement was not a helpful one, says the Postdoc. 'In behavioural economics, this is called the coordination game. People watch what others do and adjust their behaviour accordingly. Everyone knows that a bank will collapse if only enough people take their money out. And nobody wants to be late, even if they see no other, fundamental problems at their bank,' he explained.
To date, the bankrun that led to the fall of Silicon Valley Bank is the fastest ever. Still, bankruns are something of all times, and banks are basically always vulnerable to a bankrun. However, economic research shows that the fear that can lead to a bankrun can also recede, De Jong adds.
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You can download the full article from Het Financieele Dagblad, 17 maart 2023, above. The full interview with OVT, 19 March 2023, can be listened to here.