Banks facing a crisis of confidence

November 2009

A good year has elapsed since the US investment bank, Lehman Brothers, was forced to file for bankruptcy and the financial crisis reached a temporary peak. The crash has also left its scars to this date in Germany: on accounts but, in particular, in the minds of consumers.

More than half of Germans have lost confidence in the banks. Only 16% trust financial institutions the way they used to; the remaining 30% range between two extremes. This is revealed in a study conducted in the spring by GfK Financial Market Research, for which more than 1,000 people were questioned. It is far from just being people who have at least lost money on investments that are mistrustful; that is the case for 27% to date. They have had to accept losses caused by falling share prices (13%) in particular, and losses on investment funds (12%). After all, 1% lost money because they were a customer of a bank that went bankrupt.

Less mistrust vis-à-vis advisors

In this connection, people’s skepticism regarding the banks is directed not so much at people as at the institution. Almost half continues to trust their own advisor at the bank; admittedly, a quarter also mistrusts their advisors. By comparison, trust in banks as institutions has collapsed among half of respondents.

Insurance companies fare better amongst the various respondents. A good third considers that their credibility remains intact even after the crisis. By contrast, 16% of respondents complain of having lost a great deal of trust. 21% also view the relationship with their advisor at the respective insurance company as having suffered. But, as in banking, trust in individuals seems to be greater, by and large, than in institutions. Just under half of respondents trust their own advisor just as much as they did before the crisis.

“At present, customers have taken a defensive stance with regard to doing anything at all with their money.” Rainer Neske, who is responsible for Deutsche Bank’s Private Client business, complained about this indecision regarding financial issues on the part of Germans about six months ago. But are consumers actually keeping their money under the mattress instead of investing it somewhere? The survey shows that Neske is only partly correct. Only 18% of Germans thinks it reasonable and advisable to keep their money at home; more than 60% reject that. It doesn’t look as though the mattress will be making a comeback.

Risk? No thanks!

Consumers do not want to waive interest – however low it may be – according to the current financial crisis monitor published in September. However, this does not mean that they would incur a risk for possible profits. It should not be forgotten either that the majority would also like to be able to access their savings at short notice in these uncertain times. This is why the call money account ranks right at the top of the hit list for financial investments. More than half of consumers consider this account attractive, while only 18% view it negatively. A similar number of respondents would prefer to invest their money in property. Occupational pension provision, which just under half of Germans consider sensible, ranks third. By contrast, skepticism regarding shares, investment funds and fund-linked insurance policies is less surprising. Not even a quarter of respondents include these forms of financial investment in their personal savings plans.

But what can banks, savings banks and insurance companies do to make the crisis fade from consumers’ minds? How can they regain their customers' trust? Detlev Dietz, Group Manager of Commerzbank’s Private and Business Customers’ Division, provided part of the answer for himself and other bankers when he said: “As a result of the crisis, we are seeing a sustained change in customer behavior. They will no longer buy everything but will demand more transparency.” The fact that that is correct is also clear from the survey. 17% of Germans require safe products and comprehensible advice. A further 22% would like to see more service and that includes reliable information. Banks, buildings societies and insurance companies should provide "better advice", keep customers "better informed" and only “make promises that they can keep in any case", are the comments from customers. Almost as many Germans are hoping for more responsibility in financial dealings. Management Board members should be liable in the event of any speculation, institutions should dismantle surplus structures and managers should no longer be focused on their own advantage, say 21%.

It remains uncertain how long it will take to rebuild trust in the German financial system. A majority of Germans continue to think that saving makes sense – which must benefit financial institutions. Nevertheless, one in three can envisage putting aside less in the future. This is unlikely to please banks and insurance companies. But retailers will be happy as savings will ultimately then be spent directly on consumption.

Data source: GfK Finanzmarktforschung (GfK Financial Crisis Monitor April and September 2009, representative Online survey)
For questions please contact: Markus Schmidt, GfK SE or Claudia Gaspar, e:mail: