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

Americans’ confidence in U.S. banks has
rebounded a bit from the low it hit in 2012. Gallop reports that 26
percent of recent survey respondents said they have a “great deal”
or “quite a lot” of confidence in banks compared to 21 percent
such responses last year. This is the highest level for these
responses since June 2008 when confidence peaked at 41 percent
before beginning to erode, ultimately by 20 percentage points.

Gallup asks questions about banks and a
variety of other institutions in regular surveys and has since 1993
and periodically before that. In the most recent survey, conducted
from June 1 to 4, banks ranked 10th among 16 Institutions
but showed greater improvement than any of the others.

The percentage of Americans saying they have
a great deal or quite a lot of confidence in banks is now about the
as the percentage expressing little or no confidence (28%). Not
only has the percentage of those who have confidence in banks
increased, but also the percentage of those expressing a lack of
confidence has declined.

Gallup said when it first asked about
confidence in banks in 1979 60 percent of respondents expressed the
highest degrees of confidence, second only to the numbers garnered by
the church
. This number hasn’t been matched since and Gallup said
that earlier showing probably resulted from the strong U.S. banking
system established post-Great Depression and the related efforts of
banks and their regulators to build confidence in the system.

through the 1980s recession banks stayed above 50 percent and
generally ranked in the top half of institutions tested. The Savings
and Loan crisis of the late 1980s and early 1990s took its toll and
confidence fell to a new low of 30 percent in October 1991 but
gradually climbed back to 53 percent by May 2004.

Gallup said Americans’ confidence in
banks may finally be starting to recover from the recession and
financial crisis of 2008-2009 but these perceptions generally take a
long time to change as illustrated by the slow recovery after the
Savings and Loan crises. Behavioral economics suggests this time it
might take even longer.

It is not clear exactly what is driving the uptick in confidence –
it might be the banks’ performance on ‘stress tests”, or the
improvement in bank balance sheets and earnings, Gallup says. The
improvement might be linked to the U.S. Economy itself, which while
struggling, is performing better than most others in the world.

“Given this context,” Gallup says, “Americans’ improving
perceptions of their banking institutions appear to be realistic. In
turn, this provides an opportunity for banks, their regulators, and
their stakeholders to build on and create momentum for increasing
Americans’ confidence in the U.S. banking system. A
strong banking system, including strong public confidence, is
essential if the U.S. economy is going to achieve strong, sustainable
economic growth.”

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