By this point, most anyone with internet access has some inkling of the Silicon Valley Bank (SVB) collapse, which sent shockwaves across the global financial system. We have witnessed ripple effects in recent days culminating in the collapse of additional banking giants including Credit Suisse and Signature Bank. This is an all-too familiar scenario for Wall Street figureheads and the American people alike, especially with these sudden and massive impacts reminiscent of the 2008 financial crisis.
It’s hardly a debate that SVB made significant financial missteps dating back several years. However, it was the firm’s failure in effectively communicating information and offering positive sentiment to its stakeholders in recent weeks that put the “nail in the coffin.” Here’s a breakdown of what happened and why consistent communication can alleviate even the most unprecedented crisis.
Before we dive into the bank’s communications blunders, let’s outline exactly what happened in both the initial stages and the aftermath of this crisis.
March 8: Silicon Valley Bank issues its Q1 2023 Investor Letter and Press Release announcing a $2.25 billion equity raise, seemingly counteracting a $1.8 billion Q1 loss on the sale of $21 billion in securities.
March 9: Silicon Valley Bank shares fall by 60%. CEO Greg Becker delivers a message on an investor call, urging listeners to “stay calm.” Venture capitalists and investors take to Twitter to encourage startups to withdraw funds from the bank.
March 10: SVB shares continue to fall. The U.S. federal government takes control of the bank. Becker delivers a message to employees, acknowledging their concerns and the difficulty of the situation.
March 11: Venture capitalists and tech startup leaders lean on social media to encourage the federal government to refund deposits.
March 12-13: The FDIC and U.S. Federal Reserve issue a joint statement announcing that depositors will have all their money refunded. President Joe Biden addresses the nation with the intention of putting depositors and the American public at ease.
It is also important to note that just weeks ago, SVB was one of the top 20 banks in the nation. From an external communications perspective, the organization was not showing signs of failure prior to its announcement.
Silicon Valley Bank’s owned media channels were maintained effectively, with content targeted toward a wide variety of investors. Its financial professionals demonstrated a confident pulse on the state of the market. Earned media sentiment within the past several years reflected strong company growth, and the firm’s senior leaders, particularly Becker, were frequently quoted touting growth, collaborative partnerships, and acted as reliable sources for financial market outlook.
So, what exactly went wrong?
In addition to financial missteps behind the scenes, when the announcement of SVB’s securities sale and cumulative loss surfaced there was a failure in communication at all levels. SVB acknowledged its multi-billion-dollar loss in its investor letter, but did not acknowledge the big picture, nor did it put matters into perspective, namely the fact that the bank was worth hundreds of billions of dollars. Investors would feel more comfortable if reassured that a $1.8 billion quarterly loss would not repeat itself in future quarters or drastically impact the longevity of investments. Additionally, the bank did not clarify why they made the decision to raise capital and sell its securities, at least not effectively enough to curb the concerns of investors.
Silicon Valley Bank also showed a massive oversight in communication from senior leadership. CEO Greg Becker’s initial message to investors placed the onus of distrust on the bank’s customers, with the words “We have been long-term supporters of you — the last thing we need you to do is panic.”
While he may have been well-intentioned, this message was understandably off-putting to investors. Becker also made a crucial mistake by refusing to take questions on the investor call, at a time when he could have reassured his audience. Lastly, Becker was often a guest on top-tier broadcast segments on networks like CNBC and should have sought out similar opportunities when the announcement emerged, to justify the company’s decision-making. Investors were given no reason to “stay calm.”
While we can draw parallels between this organizational collapse and the 2008 financial crisis, this situation was vastly different in the context of the digital age. This was the first social-media-driven bank run, fueled by venture capitalists and tech startups who flooded social media channels and online threads. SVB failed to act in response.
Clearly, advisors and customer service representatives did not effectively address clients through individual outreach, which is once again a reflection on senior leadership. Crisis communications extends to all marketing channels, especially social media, and SVB did not implement a functional crisis communications plan to ease investors’ complaints.
By all indications, SVB was “radio silent” in its social media engagement. In response to this blunder, we have witnessed other top national and regional banks take extensive measures to prevent this from happening again. For example, First Republic Bank posted a multitude of tweets exhibiting a commitment to valued customers. While a better social media strategy might not have gotten SVB out of the woods, consistent communication via social media can and should play a significant role in PR crisis management, no matter the industry.
The bottom line is that SVB failed to proactively mitigate a massive communications crisis. While the level of hysteria that rippled across social media was unforeseen, SVB should have anticipated the valid concerns that a $1.8 billion loss would produce, especially given the existing wariness in the banking sector amongst investors.
The company did not proactively address the public to the necessary degree beyond its paid media strategy. Its top brass did not establish a PR crisis management plan to align with its relatively younger Silicon Valley-inspired client base, addressing concerns on an individual and public level from the moment the announcement went live. Instilling confidence through well-prepared messaging and a cohesive crisis plan that incorporates all marketing channels, would surely have garnered a kinder and better public understanding for SVB.