Financial Stability and Public Confidence in Banks

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A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
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Date

2023-12

Department

Department of Accounting

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Language

en

Pages

15

Series

Journal of Financial Stability, Volume 69

Abstract

We use a novel, household opinion-based measure – Public Confidence in a Bank – to explore the role of bank-level and industry-level determinants of retail customers’ trust in commercial banks. Our study tracks bank-month confidence measures during the 1/1/2010–1/1/2019 period in an unbalanced sample of 181 closely monitored large Russian banks that collectively account for the supermajority of the country's banking assets. We find that contrary to common expectations, public confidence in a bank is heavily driven by the industry-level financial stability indicators, while bank-level risk measures play only a minimal – or, at best, supplementary – role. This result reveals the important role of overall banking sector stability in determining public perception of the safety and soundness of individual banks and justifies the leading role of industry-level stability in ensuring trust in banks.

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Funding Information: We would like to thank Zuzana Fungáčová, Alexei Karas, Michael Pagano, Laurent Weill, participants at the 2019 EFA annual meeting, the 2018 Annual CInSt Banking Workshop, and the 2018 Vaasa Banking Research Workshop, seminar participants at the Bank of Finland Institute for Emerging Economies (BOFIT) and Stockholm University for their feedback and suggestions on previous versions of this paper. We would also like to thank anonymous reviewers for their valuable comments and suggestions. Publisher Copyright: © 2023 Elsevier B.V.

Keywords

Bank risk, bank failures, Customer opinions, Financial stability, Online reviews, Public confidence

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DOI

10.1016/j.jfs.2023.101187

Citation

Chernykh, L, Davydov, D & Sihvonen, J 2023, ' Financial Stability and Public Confidence in Banks ', Journal of Financial Stability, vol. 69, 101187 . https://doi.org/10.1016/j.jfs.2023.101187

Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-202401041161

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