CHICAGO (7/25/12)--Only 21% of Americans surveyed trust the financial system, the lowest point on record since March 2009, according to the most recent Chicago Booth/Kellogg School Financial Trust Index. However, trust in credit unions increased, rising to 63% from 58%.
The overall decrease was largely driven by a drop in trust of big national banks, said the June 2012 report issued Tuesday.
The index measures public opinion over three-month periods to track changes in attitudes. The report is the 15th quarterly update and is based on a survey conducted in June. The previous survey (March) showed that 22% of the population trusted the financial system (PR Newswire
Key findings from the latest trust index include:
- Trust in stocks and large companies edged up, while trust in mutual funds dropped to 25% from 28% in March.
- Most Americans have a neutral view of the stock market, with 80% of survey respondents planning to leave their investments in the stock market unchanged. Also, the fear of a stock market collapse has subsided, with more than half of respondents saying that a drop of more than 30% within the next 12 months is unlikely. (Editor's note: The survey results were released before this week's market slide as a result of economic problems in Europe.)
- On the employment front, 15% of respondents said they fear losing their jobs in the next 12 months. This is lower than figures reported in the earliest months of the financial crisis (23% in December 2008). The all-time high of 26% was in March 2010.
"Trust in banks has collapsed," said Paola Sapienza, co-author of the index and the Merrill Lynch Capital Markets research professor of finance at the Kellogg School of Management at Northwestern University.
"Since last quarter's issue of the Financial Trust Index, trust in banks has fallen five percentage points to a low of 27%. It's worth noting that this data was collected in late June, so this drop could be reflective of consumer attitudes toward the news about JP Morgan's multi-billion hedging losses announced in late spring," Sapienza said.
Trust in national banks fell to 23% in the June 2012 report, from 25% in March. Trust in local banks increased to 55% from 51%.
"This suggests that the national banks may be 'too big to trust,' whereas there is still a relatively high level of trust in banks at the community level," said Luigi Zingales, co-author of the index and the Robert R. McCormack Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business.
Credit unions also have scored high in other national and local surveys on trust, loyalty and member satisfaction studies this year. They include:
- Credit unions were rated No. 1 in a survey of 5,000 consumers asked to rate the reputation of 34 business sectors in a study conducted by Denver-based Prime Performance (News Now May 14). Credit unions topped all business sectors in reputation with an average reputation score of 5.78 on a seven-point scale with seven as "very good." They were followed by grocery stores (5.50), and community banks (5.40). Regional banks came in seventh at 5.04 and national banks 18th at 4.15.
- Credit unions topped the list of U.S. financial institutions in member/customer satisfaction, according to the 2011 Customer Experience with Call Center Representatives Survey by Prime Performance (News Now March 9). Members/customers claim they were more satisfied last year in their interactions with credit union and bank call center representatives than in 2010. Based on a recent interaction with a call center representative, credit union members rated their overall satisfaction with a net score of 83%. The comparable score for small banks is 79%. The industry average is 70%. Falling below that are: large banks, 66%; Chase, 62%; Wells Fargo, 61%; and Bank of America, 56%.
- Credit unions were among the top customer satisfaction rankings in Temkin Group's release of its 2012 Temkin Customer Service Ratings, which examines how U.S. consumers rate the customer service of 174 large companies across 18 industries (News Now June 28).
- A National Cooperative Business Association (NCBA)/Consumer Federation of America (CFA) survey found more Americans think credit unions and other cooperative businesses have the best interests of their members and customers in mind more than do for-profit businesses (News Now May 3). The survey also revealed a favorable view of cooperatives in regards to their business trustworthiness and quality of service. Co-ops received higher marks across the board than for-profit businesses.
- Credit unions outshone banks in consumers' perceptions of safety and soundness, with 40% of respondents saying they believe credit unions are the safest financial institutions, compared to 34% naming banks (News Now Feb. 23). Nineteen percent of respondents said they trusted both types of institutions equally. The numbers are the results of the 2012 Credit Union National Association (CUNA) National Voter Survey.
- A CUNA survey in February found that 43% of respondents said credit unions were the best place for consumers to keep their day to day savings and checking accounts (News Now Feb. 22).
The quarterly Financial Trust Index survey is conducted by Social Science Research Solutions as part of its weekly national telephone survey, EXCEL.