Call the influencers: How the CDIC tried to quell fears after SVB’s collapse

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Canadians may have had flashbacks to the 2008 financial crisis last week when it looked like the collapse of Silicon Valley Bank was spreading before Washington stepped in. The bank turmoil adds to the economic uncertainty caused by inflation, rising food and gas prices and high interest rates. Ahead of the federal budget announcement on March 28, "The West Block" host Mercedes Stephenson speaks with Kevin Page, former Parliamentary Budget Officer and head of the Institute of Fiscal Studies and Democracy, and Lisa Raitt, former Conservative cabinet minister and vice chair of global investment banking at CIBC, about the state of Canada’s economy. – Mar 19, 2023

Fears that banking instability in the United States could creep north of the border in the wake of Silicon Valley Bank’s collapse this past March resulted in a spike in calls to Canadian Deposit Insurance Corp. from people worried about their money.

Documents obtained by Global News via an access to information request show a surge of interest in the Crown corporation during the weekend after SVB and its Canadian arm were seized by regulators in each country.

The release contains emails sent within the corporation as staff sought to gauge the impact in the early days of banking instability. It reveals an effort to calm worried Canadians as American customers began to fret about whether their deposits at SVB would be insured, and even attempts to tap a network of influencers to adopt CDIC messaging.

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The CDIC received more than 200 calls on March 13 — the first Monday after SVB’s collapse — up from the typical 30 to 50 calls it would receive at the start of the week, according to the release. CDIC employees noted this was especially significant as the uncertainty from the early days of the COVID-19 pandemic in March 2020 yielded an average of 110 calls per day.

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Email volumes followed a similar trend to calls, according to the documents. Social media interactions were up 177 per cent over the weekend, compared with the earlier half of the week before SVB’s collapse was making headlines.

Canadians were asking CDIC basic questions about coverage, according to emails describing the nature of calls, emails and social media interactions. The corporation’s website was seeing similar spikes in traffic to pages about how deposit protection works, what’s covered and which institutions belong to the CDIC.

California banking regulators moved quickly to shut SVB down on March 10 after depositors withdrew US$42 billion in 24 hours. Signature Bank swiftly fell after SVB, with banking turmoil spreading to First Republic Bank and Credit Suisse in Switzerland in the weeks that followed.

The Office of the Superintendent of Financial Institutions seized SVB’s Canadian arm that weekend and Finance Minister Chrystia Freeland met with the regulators and the Bank of Canada to gauge any Canadian impact from the fallout.

In a statement at the time, she looked to reassure Canadians that the country’s “well-regulated banking system is sound and resilient.”

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A CDIC spokesperson told Global News at the time that in over 55 years, “no one has ever lost a dollar protected by CDIC.”

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SVB’s Canadian arm acted largely as a lender to Canadian firms, and did not hold individual or corporate deposits.

SVB’s former CEO Greg Becker testified to U.S. Congress in May that, in addition to being unprepared for higher interest rates, social media played a role in downing the bank as rumours spread rapidly online about if deposits were at risk.

The Federal Deposit Insurance Corporation (FDIC), the CDIC’s American counterpart, eventually said it would guarantee all deposits held by SVB’s customers.

CDIC taps influencers as Canadians turn to ‘non-traditional’ financial sources

In response to Canadians’ concerns, the CDIC in March redoubled its advertising efforts to get its existing messaging about deposit insurance in front of more eyeballs.

One of the ways the corporation did this was by reaching out to “influencers” it had worked with in the past. If these social media personalities were writing about SVB or getting questions on what would happen in the event of a bank failure in Canada, the CDIC asked its partners to link back to them for more information, according to the email.

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Global News followed up with the CDIC to ask more about this strategy.

A CDIC spokesperson said in an email that public awareness is a “key risk mitigator that helps prevent bank runs and contagion in times of uncertainty.”

As part of its awareness campaigns, the CDIC worked with 12 influencers in its last fiscal year and reached out to half in the wake of SVB’s failure. The corporation, which is funded by its member institutions and not taxpayers, did not pay for these requests, the spokesperson said.

Tapping a network of influencers is a recognition that many Canadians are increasingly getting financial guidance from “non-traditional sources,” according to the CDIC rep.

“Working with influencers helps reach a broader audience, particularly younger Canadians. Working with influencers helps CDIC broaden its reach.”

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After SVB’s collapse, the CDIC also broadened its existing social media marketing campaigns to capture “all Canadians,” rather than its target demographics, which the corporation listed in the documents as “young women.”

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Global News asked as well why the CDIC’s messaging is typically aimed at young women.

The spokesperson said that, in quarterly monitoring of financial awareness among demographics, “young women have demonstrated lower levels of awareness.”

“Therefore, our public awareness efforts aim to increase the level of awareness among this group, as well as to sustain and build awareness across other demographics.”

Banking turmoil echoing out from the SVB collapse stretched into May with the seizure and sale of First Republic Bank in the U.S.

Knock-on impacts to Canadian banks have been muted, with TD Bank singled out for its exposure to the U.S. banking system. TD’s planned acquisition of First Horizon Bank was scuttled in early May after it was unable to secure necessary regulatory approvals for the deal.

The Bank of Canada signalled in its annual financial system review that uncertainty in the U.S. would likely pose limited risk to the Canadian banking sector, though some economists have warned the turmoil would lead to a tightening of credit globally.

However, multiple sections in the documents obtained by Global News about the CDIC’s assessment of risks to Canada’s banking sector were redacted under provisions citing potential economic harm to the country.

The CDIC launched a review of Canada’s deposit system in February — pre-dating the U.S. banking turmoil — to assess whether Canada’s current scope of coverage is warranted, a spokesperson confirmed to Global News.

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The results of that study will be presented to Freeland if coverage limits need to change to “protect depositors and maintain financial stability,” the statement read.

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