BOFIT Discussion Papers: Financial stability and public confidence in banks

BOFIT Discussion Papers: Financial stability and public confidence in banks

Authors: Chernykh, Lucy; Davydov, Denis; Sihvonen, Jukka

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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