PRINCETON, NJ -- As the Treasury and banking regulators prepare to provide a description of their banking "stress" tests on Friday and the results on May 4, the percentage of Americans saying they have a "great deal" or "quite a lot" of confidence in U.S. banks has fallen to 18% -- down 14 percentage points from a June 2008 Gallup Poll and 23 points from a June 2007 poll.
Confidence in U.S. Banking Takes a Plunge
New data from Gallup Poll Daily tracking, measured from April 6-19, show that one of the casualties of the ongoing financial crisis is the amount of confidence Americans have in U.S. banks. With only 5% expressing "a great deal" of confidence and 13% "quite a lot" of confidence, Americans' confidence in banking has now fallen to its lowest level since Gallup began asking about the subject in April 1979. The previous low of 30% confident was recorded during the 1990-91 recession and reflected the fallout associated with the S&L debacle of the late 1980s. More than one in three Americans currently say they have "very little" confidence in U.S. financial institutions.
Most Still Have Confidence in Their Main Bank
Despite the precipitous nature of this general decline in banking confidence, many Americans continue to express confidence in the main or primary bank where they do most of their banking business. In fact, 25% say they have "a great deal" and 33% "quite a lot" of confidence in their main bank. Only about 1 in 10 Americans express "very little" confidence in the bank where they do most of their banking.
Such a finding is consistent with what Gallup has found in ratings of other areas such as education, healthcare, and crime. Americans generally rate their own local providers and institutions as much better than those in the broader United States.
Given the much higher confidence in Americans' own banks and the current trend toward re-intermediation resulting from savers "shifting to safety," it follows that more Americans intend to increase their money with their primary bank than to decrease it. In this regard, the poll shows that over the next three months, 29% of Americans say they plan to increase the money they have with their main bank while 9% say they intend to decrease their balances. And while 72% say they are "not at all likely" to switch their main bank in the next three months, 7% say they are likely to do so.
The sharp drop in banking confidence over the past few years -- and during the past year in particular -- illustrates the enormous task facing the Treasury, the Federal Reserve, and banking regulators in their efforts to restore trust in the U.S. banking system. Given this context, it may be good news that only 9% of Americans say they intend to decrease the money they have with their primary bank and only 7% say they are likely to switch to another primary bank. On the other hand, the transaction costs associated with switching banks remain high and consumers tend to be less likely to switch their primary bank than other banks they deal with, so these results could also be seen as not so good.
Needless to say, however, the way the banking "stress" tests are framed and interpreted over the next couple of weeks could be important to the confidence Americans have in individual banks and in U.S. banking as a whole. Increased federal deposit insurance and the willingness of the Fed and the Treasury to act to keep a major financial services firm from collapsing have created a strong safety net for today's depositors. Still, uninsured depositors and stockholders could flee banking institutions that are perceived as not having done well in the government's stress tests.
In a sense, these kinds of evaluations almost invite a rush to safety and soundness in the form of quality banks. On the other hand, this whole stress-test effort could, at least over time, have the salutary effect of starting to rebuild Americans' confidence in U.S. banking institutions as a whole -- an essential first step in bringing the current financial crisis and associated credit crunch to an end.
Whatever happens, Gallup will continue to monitor and report on Americans' confidence in their banks and their intentions to change their deposits or switch banks in the weeks ahead.
Results are based on telephone interviews with 1,730 national adults, aged 18 and older, conducted April 6-19, 2009, as part of Gallup Poll Daily tracking. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.