The spread of social networking services has further increased the risk…A history of “bank run-ins,” which have unexpectedly occurred in Japan

Credit uneasiness via “SNS” ⇒ “Deposit-taking racket” via the Internet…

On March 8 of this year, when Silicon Valley Bank (SVB) on the West Coast of the U.S. announced losses from the sale of bonds, credit concerns rose through social networking services, and on the following day alone, March 9, approximately 5 trillion yen ($42 billion) in deposits flowed out, and the bank failed just two days later on March 10. On March 12, New York’s Signature Bank also collapsed.

Furthermore, First Republic Bank (FRC) in San Francisco lost about 9.6 trillion yen ($71.9 billion) in deposits over a three-month period, its stock price plummeted, and it collapsed on May 1. It was the second largest bank failure in U.S. history. The total assets of Japan’s top regional bank, Fukuoka FG, were approximately 28.8 trillion yen (as of the end of 2010), which shows the magnitude of the impact of the collapse.

• March 10_Silicon Valley Bank (ranked 16th in the U.S.)
• March 12_Signature Bank (29th in the U.S.)
• May 1_First Republic Bank (14th in the U.S.)

In less than two months, a total of three banks have failed, an unprecedented situation.

In each case, credit concerns grew through “social networking” sites, and there was a run on deposits, including online, which led to the outflow of deposits in a short period of time, resulting in the bank’s failure. These deposit runs via social networking sites and the Internet are also known as “digital bank runs.

Deposit Runs” Occur Often in Japan

In both the U.S. and Japan, for example, banks do not always have ¥10 trillion in cash in their vaults ready for withdrawal in response to ¥10 trillion in deposits. Deposits are used as a source of funds for lending to corporations, etc., and deposits are not expected to be withdrawn in large quantities in a short period of time. Therefore, if a large amount of deposits were to flow out in a short period of time, for example through the Internet, it would become difficult to manage the funds, and the bank would be forced into bankruptcy.

Although many people say that “the situation is different between Japanese and U.S. banks” and “Japan’s financial system is rock solid,” do you know that deposit outflows and runaway failures have actually occurred frequently in Japan as well?

The “hoax fiasco” in Aichi and Saga

In 1973, exactly 50 years ago, a high school girl’s joke about the danger of credit unions spread by word of mouth at Toyokawa Shinkin Bank in Aichi Prefecture, causing a bank run. 20 years ago, in 2003, a hoax e-mail triggered a bank run at Saga Bank in Japan, In 2003, a bank run by Saga Bank occurred as a result of a hoax e-mail.

The above cases in Aichi and Saga were caused by unsubstantiated hoaxes. However, in 1995, when the bubble economy burst and bad loans became a major problem, there was a run on Cosmo Credit Union and Kizu Credit Union, which subsequently went bankrupt. It was widely reported on NHK news and in newspaper reports at the time, and many readers may remember it.