Banks plagued by scandals have helped turn the financial sector into the least trusted industry for the third straight year.
According to the 2013 Edelman Trust Barometer, financial services remained the least trusted sector globally. The massive annual study, now in its thirteenth year, found that more than half (54%) of respondents don’t have much faith in banks.
More than one in two people globally (56%) say they were aware of major scandals in the financial industry within the last year. One third reported that their trust in banks declined as a result of learning of the scandals. When asked about the causes of the scandals, 59% of the group believes that the causes are internal and within business’ control. In the UK, three out of every five consumers blame banks’ bad behavior, lousy corporate culture and poor leadership.
More specifically, global respondents who said they were already familiar with the scandals said the top three causes were corporate corruption (25%), culture driven by compensation/bonuses (23%) and a lack of regulation (20%).
Consumers believe that banks have failed to monitor themselves and keep their greed in check. The think the banking industry needs:
- More government regulation (27%)
- More self-regulation within the banking/financial services industry (19%)
- Stricter rules on executive compensation (18%)
Edelman says this lack of trust is driven by the perception of unethical behavior and poor performance. Consumers in countries with developed economies rate bank performance much lower than emerging markets, and give the industry poor grades in small businesses lending and mortgage loans.
( Read More: How to Reverse the Loss of Trust in Financial Institutions )
Edelman’s Global Banking Report Card
The banking subsector of financial services may have been the most trusted globally among the general public vs. other subsectors Edelman studied (e.g., insurance), though still a muted 50% globally. Financial advisory/asset management is the least trusted financial services sector globally (43%), and is least trusted by countries hardest hit by the Eurozone debt crisis: Germany (23%), Spain (22%), Ireland (22%), and Italy (21%).
“The financial services industry must become more aggressive in explaining its business model, and do away with terms such as ‘proprietary trading,” said Alan VanderMolen, Edelman’s chief of global practices. “People have to understand how banks are making money and how the industry is working to benefit its shareholders and society,” he added.
“The public is demanding that financial services industry leaders reinforce new behaviors throughout their organizations in order to build trust.”
— Richard Edelman, CEO
Richard Edelman, CEO of Edelman is concerned that the never-ending flood of global banking crises continues to negatively impact trust in the financial services sector. “We see trust in the financial services industry begin to climb back to pre-crisis levels, but there is still a long path ahead,” Edelman said. “The public is demanding that financial services industry leaders reinforce new behaviors throughout their organizations in order to build trust.”
( Read More: Measuring ‘Trust’ In Banking: A Misguided Metric )
Breaking down trust by region, the financial services industry is most trusted in the Asia/Pacific region, Latin America, Russia, India, China and South Africa. In North America and the UK/Europe, the banking sector has some trust issues.
Banks and financial services remain the least trusted sectors particularly trust in banks in Germany (23%), UK (22%), Spain (19%) and Ireland (11%). Trust in these sectors reached their lowest point in the U.S. in 2011 and in the UK, France, Germany region in 2012. With trust in two-thirds of the markets below 50%, trust in banks, globally, is now 11 points lower than it was in 2008.
Asia Pacific includes China, Indonesia, Malaysia, India, Singapore, Hong Kong, South Korea, Japan and Australia. Europe includes the Netherlands, UK, Poland, France, Sweden, Germany, Italy, Spain, Ireland, Russia and the UAE. Emerging economies include Brazil, Mexico, Russia, India and China. Developed markets include the U.S., UK, France, Germany and Japan.
About the Study: The 2013 Edelman Trust Barometer consisted of 20-minute online interviews conducted with 26,000 respondents ages 25-64 across 26 countries. All terms within the survey were self-defined.