Pre- and Post-Crisis Trust in Banks: Lessons from Transitional Countries

Abstract

We study the factors determining the level of trust in banks before and after the 2007- 08 financial crisis and how this crisis reshaped banking trust in transitional countries. We find that younger, rural, educated, banked and generally trusting people tend to have higher confidence towards banks in both periods. Among country-level covariates, growth rate of GDP and Rule of Law remain significantly associated with banking trust in both periods. Finally, our findings indicate that the financial crisis has temporary impact on trust in banks since pulling back the rate of GDP growth tends to recover banking trust.