Trust in Banks: Evidence from the Spanish Financial Crisis

Abstract

In this article we assess the economic problem of trust in banks employing unique survey evidence from Spanish bank customers. Almost no studies have been able to evaluate the impact of bank customers´ perceptions about banks on trust in the financial system, controlling simultaneously for the underlying levels of general distrust. In order to fill in this gap, we study the potential impact of factors that might determine the level of trust in banks and analyse the effects of the perception of the 2007 financial crisis by bank customers. Allowing for bank customer heterogeneity and controlling for general distrust, we show that trust in banks is mainly affected by bank customers' assessment of several performance characteristics and attributes of banks. Our results suggest that for the sub-population of bank customers with neutral levels of general distrust – who also consider that Spanish banks are changing their behaviour for the worse – an increase in banks' sensitivity towards customers' problems and banks' commitment to their customers would increase their probability of trusting banks by 34.7% and 34%, respectively.

Keywords: Financial Crisis, Trust in Banks, Financial Services, Distrust

JEL Classification: G01, G02, G20, D03, D12, D14