Financial stability and public confidence in banks

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Title: Financial stability and public confidence in banks
Author: Chernykh, Lucy ; Davydov, Denis ; Sihvonen, Jukka
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
Series number: 2/2019
Year of publication: 2019
Publication date: 19.2.2019
Pages: 34
Subject (yso): pankit; rahoitusmarkkinat; vakaus; luottamus; liikepankit; riskit
Keywords: Bofit-kokoelma; Venäjä
JEL: G21; D14
Other keywords: financial stability; public confidence; bank failures; customer opinions; online reviews
Abstract: We use a novel, household opinions-based measure – Public Confidence in a Bank – to explore the role of bank-level and system-wide determinants of customers’ trust in banks. Our study covers a panel of approximately 260 large Russian commercial banks publicly monitored during 2010–2017. We find that public confidence in a bank is highly sensitive to the industry-level financial stability indicators, but less sensitive to bank-level risk characteristics. This result reveals an important role of overall banking sector stability in determining public perception of the safety and soundness of individual banks.

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