Trust in Banks? Evidence from normal times and from times of crises
AbstractTrust in financial institutions is of great importance for financial intermediation. Against this background, we study two questions: Has trust in banks declined during the global financial crisis and what factors determine the level of trust in banks? Employing survey evidence from Austrian households, we show that trust in banks is mainly affected by "subjective" variables like the individuals' assessment of the current economic and financial situation and by their future outlooks. After controlling for these variables we show that the financial crisis has caused a reduction in trust (around -7.5pp) which is sizable but not dramatic. Even at its lowest point (in the first quarter of 2009) 65% still report to have trust in the banking system, which is a higher percentage than for many other institutions. Furthermore, the drop is only slightly larger than the drop observed after a small, non-systemic crisis that occurred in 2006. Thus, the much-stressed notion of a genuine "trust crisis" is not reflected in our data. Finally, we provide evidence that the degree of individual information does not influence trust, that banking trust is contagious and that the extension of deposit insurance coverage in October 2008 had a positive effect on trust.
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Bibliographic InfoPaper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 158.
Date of creation: 10 Nov 2009
Date of revision:
Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-27 (All new papers)
- NEP-BAN-2009-11-27 (Banking)
- NEP-CBE-2009-11-27 (Cognitive & Behavioural Economics)
- NEP-CFN-2009-11-27 (Corporate Finance)
- NEP-FDG-2009-11-27 (Financial Development & Growth)
- NEP-SOC-2009-11-27 (Social Norms & Social Capital)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- links for 2009-12-16
by Mark Thoma in Economist's View on 2009-12-17 07:02:53
- FÃ¶rtroendet fÃ¶r bankerna Ã¤r hÃ¶gt
by nonicoclolasos in Nonicoclolasos on 2010-01-21 06:37:38
- Das Vertrauen in das Bankensystem während der Finanzkrise
by Markus Knell und Helmut Stix in Ökonomenstimme on 2010-05-04 12:00:00
- Elisabeth Beckmann & Thomas Scheiber, 2012. "Not So Trustworthy Anymore? The Euro as a Safe Haven Asset in Central, Eastern and Southeastern Europe," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 65-71.
- Luigi Guiso, 2010.
"A Trust-driven Financial Crisis.Implications for the Future of Financial Markets,"
EIEF Working Papers Series
1006, Einaudi Institute for Economics and Finance (EIEF), revised Mar 2010.
- Luigi Guiso, 2010. "A trust-driven financial crisis. Implications for the future of financial markets," Economics Working Papers ECO2010/07, European University Institute.
- Corsetti, Giancarlo & Devereux, Michael P. & Guiso, Luigi & Hassler, John & Saint-Paul, Gilles & Sinn, Hans-Werner & Sturm, Jan-Egbert & Vives, Xavier, 2010. "A trust-driven financial crisis. Implications for the future of financial markets," Munich Reprints in Economics 20109, University of Munich, Department of Economics.
- Butzbach, Olivier, 2014. "Trust in banks: a tentative conceptual framework," MPRA Paper 53587, University Library of Munich, Germany.
- Julia Wörz, 2012. "Outlook for Selected CESEE Countries: Mixed External Environment Compounds Weak Domestic Demand," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 38-44.
- Afandi, Elvin & Habibov, Nazim, 2013. "Pre-Crisis and Post-Crisis Trust in Banks: Lessons from Transitional Countries," MPRA Paper 46999, University Library of Munich, Germany.
- Georgarakos, Dimitris & Inderst, Roman, 2014.
"Financial Advice and Stock Market Participation,"
CEPR Discussion Papers
9922, C.E.P.R. Discussion Papers.
- Giancarlo Corsetti & Michael P. Devereux & Luigi Guiso & John Hassler & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2010. "Chapter 2: A trust-driven financial crisis," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 53-70, 02.
- Tom Coupe, 2011. "Mattresses versus Banks - The Effect of Trust on Portfolio Composition," Discussion Papers 40, Kyiv School of Economics.
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