Czechs trust banks. And are not afraid of bank failures, a survey shows

Prague, 19 October 2022 – Even though this year’s rapid fall of Sberbank CZ could have shattered people’s trust in the stability of the banking system, the reality was different. The banking system and the banks themselves enjoy the trust of a clear majority of Czechs. Compared to the situation five years ago, the trust of Czechs in financial institutions has even increased, as indicated by a recent survey conducted by the Response: NOW agency 1for the Financial Market Guarantee System.

The survey has shown that banks enjoy the highest level of trust among the Czech population for saving or investing money. They are regarded trustworthy by 9 out of 10 respondents. Building savings banks (79%) and pension companies (67%) finished second and third respectively. Investment firms enjoy the trust of just 28% of the polled, while cryptocurrency exchanges and cooperative credit unions are both trusted by 11% of the respondents.

“In general, we see that people have stronger confidence in institutions where their deposits are automatically covered by statutory insurance in case an institution goes bankrupt – i.e. banks and building savings banks. The lower trust in cooperative credit unions can be explained by their tarnished reputation from the 1990s, when their bankruptcies were frequent. However, this risk is significantly lower today, especially thanks to a strict banking supervision by the Czech National Bank,” explains Renáta Kadlecová, Executive Director of the Guarantee System.

Comparisons have shown that confidence in financial institutions has been growing over time. Compared to 2017, all financial institutions are more trusted. Trust has increased by five percentage points for banks, by 4% for building savings banks and by more than 10% for pension companies or investment firms. In addition, confidence has also grown for cooperative credit unions: by 2 percent. “We believe that this is also thanks to the fact that people saw how quickly and smoothly the payout of deposit compensation for the bankrupt Sberbank CZ was carried out. Just 7 business days after the bankruptcy, the bank’s clients had their deposits back thanks to the Guarantee System. The knowledge that in the worst case scenario people will get their money back helps maintain the stability of the banking system,” says Renáta Kadlecová.

Those who are aware of the deposit insurance scheme trust the banking system

Almost three quarters (73%) of the respondents expressed their trust in the Czech banking system and the institutions operating within the system. A neutral stance on this issue has been taken by 22% of the respondents, while only 4% of the polled are not confident. Men are more likely to trust the Czech banking system than women. “Another takeaway from the survey is that the more educated an individual is or the higher the net monthly income of the household in which they live, the more often they trust this system. The system is also more often trusted by those who know that deposits in financial institutions are insured,“ says Renáta Kadlecová, commenting on the data.

The data also indicates that only 18% of the polled are afraid of a financial institution going bust. There are more people aged 45 to 75 who are not worried about the collapse of the financial institution where their money is deposited than those who are worried. 56% of the surveyed are not afraid of the fall of the financial institution where their money is deposited. However, according to the respondents, the failure of a financial institution is unlikely – this opinion is shared by 78% of the polled. Only 3% think the opposite.

When asked about trust in specific institutions that influence the operation of the financial market, the highest portion of the respondents (68%) answered that they trusted the Czech National Bank. The second place was taken by the Guarantee System, which is trusted by 47% of the polled and, conversely, distrusted by just 8% of the respondents. A relatively high level of trust has been also expressed for the Czech Banking Association (44%).

Deposit insurance has been operating in Czechia since 1995

The activities of deposit insurance schemes have a positive influence on the perception of the stability of the banking system and the safety of depositing money in financial institutions. The deposit insurance scheme has been operating in Czechia since 1995, originally bearing the name of the Deposit Insurance Fund; in 2016, it was transformed into the Financial Market Guarantee System.

Since their inception, the Deposit Insurance Fund and the Guarantee System have made payouts for a total of 20 financial institutions. The biggest payouts so far have been the payout for Union banka between 2003 and 2008 and the current payout for Sberbank CZ, where the Guarantee System is disbursing deposit compensation of nearly CZK 26 billion to a total of 121,000 clients.

1 Representative population in the age range of 18–75 years. Quantitative CAWI (Computer Administered Web Interviewing) research. Total number of 1,039 respondents. Surveyed between 20 and 26 September 2022.

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