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Americans are growing increasingly suspicious about the banking industry. Read on to see why, based on a new study.
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Americans are losing trust in the U.S. banking institution, according to a recent poll by The Associated Press-NORC Center for Public Affairs.
When asked how much confidence they had in U.S. banks, only 10% of a sampling of 1,081 adults gave banks their full stamp of confidence. Another 57% said they had “some confidence,” while 31% said they had “hardly any.”
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A 10% vote of full confidence is down from the 22% who believed in the strength of U.S. banks in 2020. Moreover, the poll was conducted between March 16 and 20, so there’s no telling how many still retain full confidence after the recent collapse of First Republic Bank.
Why are Americans losing confidence in banks?
According to the poll, around 56% of U.S. adults surveyed said the government wasn’t doing enough to regulate banks, while 27% said it was doing just enough and 15% said it was regulating too much.
More regulation, in this case, might mean increased supervision on how banks use depositors’ cash — limiting, for example, how much can be invested in uninsured deposits. Or it could mean stress testing banks with fewer than $250 billion assets, which could reveal cracks in midsize and small banks before higher interest rates find them first.
It’s unclear, however, if increased regulation would restore depositors’ confidence in U.S. banks, especially since the lack of faith appears to derive from something less concrete: political opinions.
Indeed, although a majority of Republicans and Democrats believe banks are under regulated (51% versus 63%), Republicans were more pessimistic about the future of the economy. Roughly 7% of Republicans would describe the economy as “good,” versus 43% of Democrats. Likewise, around 75% of Republicans thought the economy would only get worse from here, whereas only a third of Democrats agreed with that statement.
But before we get too pessimistic, let’s take a step back and look at the data from a different angle.
Even though only 10% of adults surveyed answered with full confidence, a majority of Americans still trust the banking system: around 67% answered that they had confidence, regardless of its level.
Secondly, although trust has eroded, this trend isn’t new, as AP itself pointed out. Americans have become increasingly more suspicious about institutions in general since the 1970s, when Watergate left Americans distrustful of the federal government. Since then, fewer Americans have placed their trust in institutions, from governments to banks to churches to Santa Claus.
Can you trust your bank?
A healthy amount of suspicion is OK. After all, you don’t want to deposit money in a bank that doesn’t have the capital to absorb losses or cash on hand to meet certain debt and depositor obligations.
That said, most Americans can trust their banks. As long as your institution is backed by the FDIC (or NCUA for credit unions), your deposits are insured up to $250,000 per bank ($500,000 for joint accounts). That means, if your bank or credit union fails, the FDIC or NCUA will pay out your deposit up to that maximum amount.
Plus, if bank fears are stopping you from depositing cash in savings accounts or certificates of deposit (CD), you could be forfeiting generous earnings on today’s high APYs. CD rates are currently averaging 4.25% and 5%, which is their highest in almost two decades. As long as the CD issuer is backed by the FDIC or NCUA — and most major CD providers are — you could lock in a fairly high rate before APYs start to go down.
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