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Trust in banks: a tentative conceptual framework

Since the 2007-08 crisis, banks in many countries have been facing what seems to be a serious “trust crisis”. This sharp decline in trust in banks and banking, the likely outcome of the near-collapse of banking systems during the crisis, is partly captured by a growing empirical literature. However, this literature presents serious shortcomings, which reflect a more general lack of theorization of trust in banks. This lack of theorization certainly has much to do with the distance between the economic literature on banks and banking and the sociological and economic literature on trust. This paper aims at bridging this gap by proposing a new conceptual framework. In particular, the paper identifies three related dimensions of trust that seem to have relevance for the banking industry: “relational”, “systemic” and “vertical” trust. While mainstream financial intermediation theory and agency theory provide a good understanding of relational trust, they are less well equipped to deal with the other dimensions of trust. The paper, therefore, builds on heterodox theories of money and debt to build a more comprehensive understanding of trust in banks. This tentative conceptual framework, in turn, has implications for current theories of banking and of trust.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 53587.

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Date of creation: 31 Jan 2014
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Handle: RePEc:pra:mprapa:53587
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  17. Jacklin, Charles J & Bhattacharya, Sudipto, 1988. "Distinguishing Panics and Information-Based Bank Runs: Welfare and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 568-92, June.
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