Trust in banks: a tentative conceptual framework

Butzbach, Olivier (2014): Trust in banks: a tentative conceptual framework.

Abstract

Since the 2007-08 crisis, banks in many countries have been facing what seems to be a serious “trust crisis”. This sharp decline in trust in banks and banking, the likely outcome of the near-collapse of banking systems during the crisis, is partly captured by a growing empirical literature. However, this literature presents serious shortcomings, which reflect a more general lack of theorization of trust in banks. This lack of theorization certainly has much to do with the distance between the economic literature on banks and banking and the sociological and economic literature on trust. This paper aims at bridging this gap by proposing a new conceptual framework. In particular, the paper identifies three related dimensions of trust that seem to have relevance for the banking industry: “relational”, “systemic” and “vertical” trust. While mainstream financial intermediation theory and agency theory provide a good understanding of relational trust, they are less well equipped to deal with the other dimensions of trust. The paper, therefore, builds on heterodox theories of money and debt to build a more comprehensive understanding of trust in banks. This tentative conceptual framework, in turn, has implications for current theories of banking and of trust.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trust; banks and banking; trust crisis; financial intermediation theory; institutional theory; money and debt, heterodox economics.
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B25 - Historical ; Institutional ; Evolutionary ; Austrian; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D89 - Other; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z13 - Economic Sociology ; Economic Anthropology ; Social and Economic Stratification

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