In 2015, Russians’ trust in banks dropped sharply as the country’s economy faced a crisis, yet at the same time, the amount of individual bank deposits paradoxically increased, according to findings from a survey conducted by LSES as part of the "Monitoring Financial Behaviour and Consumer Confidence in Financial Institutions" project (2009-2015).
This paradox may be due to specific behavioural aspects of people's response to crises and their selective trust in banks. The survey revealed that Russians tend to trust Sberbank and other banks with government participation more and private financial institutions far less.
The survey findings are presented in the article "The Dynamics of Trust in Financial Institutions and the Paradoxes of Savings Behaviour."
As of September 2015, the total amount of private savings in Russia stood at 30.4 trillion rubles, which is 20% higher than in September 2014; of these savings, 69% were deposited in bank accounts: almost 21 trillion rubles vs. 17 trillion rubles month on month in 2014.
People's preferences on whether to save in hard cash or in bank accounts have not changed between 2014 and 2015. According to the LSES survey of 1,600 Russians aged 18 and older, in September 2015, 32% preferred to keep their savings in bank deposits, mainly in rubles.
"Even if people are not saving more in the current economic crisis, we can at least say they are not saving less," Ibragimova notes, "and a certain deposit outflow observed in late 2014 and perhaps triggered by exchange rate fluctuations was later replaced by relative stability, where people continue to keep their savings in banks, adding to them as much as they can – even though they have fewer opportunities for saving today."
Russian families' incomes have been hit hard by the crisis, with the share of people who can barely afford to buy enough food, let alone anything else, exceeding 40% in the spring and summer of 2015.
In addition to this, the survey found a dramatic, 10-point decline in the index of trust in financial institutions in 2015, reaching 85 points, the lowest in the seven years of observation, in October 2015.
The survey measures consumer trust based on several aspects, such as safety, disclosure, terms and conditions offered on products and services, as seen by respondents in two time dimensions: recent changes and future prospects. "We observe an almost equal decline both in people's assessment of the current situation and their future expectations, indicating that the crisis really has affected society's mood," according to Ibragimova.
One may ask why people continue to save despite the economic crisis and lower consumer trust in banks. Ibrahimova explains this paradox in terms of psychological economics, whose founder, American psychologist George Katona, "examined the effect of objective economic conditions on people's behaviour via subjective perceptions. People tend to save less when they believe lower income to be a temporary setback, but once they expect a further decrease in income, they are likely to respond by saving more,” as in Russia today.
Apparently, Russians expect this economic crisis to last. Most (86%) people surveyed in October 2015 expressed concerns about continued price increases, lower family incomes, and loss of jobs. Therefore, "people will spend less and save as much as they can for a rainy day."
Another reason may be that consumer trust varies dramatically from very high (129 points) trust in Sberbank to very low (66 points) trust in private commercial banks.
Table 1. The dynamics of consumer trust in financial institutions
|
Financial Institutions |
2012 |
2013 |
2014 |
2015 |
|
Sberbank |
123 |
129 |
133 |
129 |
|
Russian Central Bank |
108 |
113 |
123 |
116 |
|
Other banks with state participation: VTB 24, Gazprombank, Rosselkhozbank, Bank of Moscow |
96 |
99 |
103 |
99 |
|
Other commercial banks, except those with state participation |
63 |
68 |
65 |
66 |
|
Deposit Insurance Agency |
78 |
85 |
86 |
87 |
|
Insurance Companies |
74 |
81 |
78 |
77 |
|
Mutual Funds |
67 |
74 |
72 |
69 |
|
Credit Cooperatives |
62 |
67 |
67 |
60 |
|
Private Pension Funds |
59 |
67 |
69 |
63 |
Source: HSE.
Consumer trust in financial institutions also depends on the use of financial services. According to the monitoring data, the proportion of financial service users increased from 70% to 74% between 2012 and 2015, mainly due to the rollout of payroll cards.
Table 2. Top 3 financial services (based on responses to the question, Which of the listed financial services do you currently use?, %)
|
Type of service |
2012 |
2013 |
2014 |
2015 |
|
Plastic cards used for recurring payments such as wages, pensions, scholarships |
44 |
43 |
48 |
51 |
|
Consumer loans (except credit cards) |
18 |
23 |
23 |
21 |
|
Term deposits with banks |
10 |
10 |
13 |
13 |
Source: HSE.
According to the study, holders of payroll cards who also use other bank services tend to have the highest trust in financial institutions. However, they also serve as 'conductors' of negative trends. The level of consumer trust in this group decreased by 6 points between 2011 and 2014, and by 10 points in 2015. There is a possibility that this group may change the way they use financial services in the current crisis.