Z.Fungáčová and E.Kerola: Does Experience of Banking Crises Affect Trust in Banks?

Z.Fungáčová and E.Kerola: Does Experience of Banking Crises Affect Trust in Banks?

Co-author: Laurent Weill (EM Strasbourg Business School, University of Strasbourg)

Abstract
This paper investigates if and how past experience of banking crises influences individuals’ trust in banks. We combine data on banking crises for the period 1970-2017 with individual data on trust in banks for a sample of 52 countries. We find that past experience of banking crises deteriorates trust in banks. An experience of banking crisis in the lifetime reduces the degree of trust in banks and a higher number of years of banking crises in the lifetime is negatively related with trust in banks. Age at the time of the crisis matters: trust of banks is eroded when the individual is between 41 and 60 at the time of the banking crisis. Both severe and less severe crises diminish trust in banks. However severe banking crises affect young people at the time of the crisis while less severe banking crises influence more mature people. The impact of past experience of banking crises on trust in banks is more pronounced for women and low-income individuals.

BOFIT seminars are open to all researchers interested in the subjects covered. Those wishing to attend a seminar are kindly asked to register in advance, by email bofit(at)bof.fi or tel. +358 9 183 2268.

Seminars take place, as a rule, on Tuesdays, starting at 10.30 a.m. Visitors are escorted to the seminar room from the Rauhankatu 19 B (Library) entrance.