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Confidence in Banks Back to 2008 Levels, But Still Historically Low

by devteam June 15th, 2013 | Share

Americans’ confidence in U.S. banks hasrnrebounded a bit from the low it hit in 2012. Gallop reports that 26rnpercent of recent survey respondents said they have a “great deal”rnor “quite a lot” of confidence in banks compared to 21 percentrnsuch responses last year. This is the highest level for thesernresponses since June 2008 when confidence peaked at 41 percentrnbefore beginning to erode, ultimately by 20 percentage points.</p

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Gallup asks questions about banks and arnvariety of other institutions in regular surveys and has since 1993rnand periodically before that. In the most recent survey, conductedrnfrom June 1 to 4, banks ranked 10th among 16 Institutions</bbut showed greater improvement than any of the others.</p

The percentage of Americans saying they haverna great deal or quite a lot of confidence in banks is now about thernsame as the percentage expressing little or no confidence (28%). Notrnonly has the percentage of those who have confidence in banksrnincreased, but also the percentage of those expressing a lack ofrnconfidence has declined. </p

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Gallup said when it first asked aboutrnconfidence in banks in 1979 60 percent of respondents expressed thernhighest degrees of confidence, second only to the numbers garnered byrnthe church. This number hasn’t been matched since and Gallup saidrnthat earlier showing probably resulted from the strong U.S. bankingrnsystem established post-Great Depression and the related efforts ofrnbanks and their regulators to build confidence in the system. </p

Evenrnthrough the 1980s recession banks stayed above 50 percent andrngenerally ranked in the top half of institutions tested. The Savingsrnand Loan crisis of the late 1980s and early 1990s took its toll andrnconfidence fell to a new low of 30 percent in October 1991 butrngradually climbed back to 53 percent by May 2004.</p

Gallup said Americans’ confidence inrnbanks may finally be starting to recover from the recession andrnfinancial crisis of 2008-2009 but these perceptions generally take arnlong time to change as illustrated by the slow recovery after thernSavings and Loan crises. Behavioral economics suggests this time itrnmight take even longer.</p

It is not clear exactly what is driving the uptick in confidence -rnit might be the banks’ performance on ‘stress tests”, or thernimprovement in bank balance sheets and earnings, Gallup says. Thernimprovement might be linked to the U.S. Economy itself, which whilernstruggling, is performing better than most others in the world. </p

“Given this context,” Gallup says, “Americans’ improvingrnperceptions of their banking institutions appear to be realistic. Inrnturn, this provides an opportunity for banks, their regulators, andrntheir stakeholders to build on and create momentum for increasingrnAmericans’ confidence in the U.S. banking system. Arnstrong banking system, including strong public confidence, isrnessential if the U.S. economy is going to achieve strong, sustainablerneconomic growth.”

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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