X marks the bank: digitalisation and depositor runs

This paper examines how digitalisation amplifies liquidity pressures on banks during periods of financial stress, emphasising the role of social media in triggering unprecedented outflows in both size and speed, as witnessed during the March 2023 banking turmoil. To address this issue, we introduce a game-theoretic model where depositors’ decisions are shaped by common information sources and the exchange of sentiments through social media networks. Our framework connects the global games literature, where agents receive private signals in isolation, with the classical Diamond and Dybvig (1983) setting, characterised by perfect information, which arises as a limiting case under full network connectivity. We highlight the critical role of depositor concentration and behavioural correlation in determining the likelihood and timing of withdrawals. The model also introduces two novel measures, UncertRisk and CorrRisk, which quantify uncertainty and correlation risks in modern banking environments. Finally, we assess the effectiveness of various policy interventions aimed at addressing the vulnerabilities associated with digitalisation and modern depositor behaviour.