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Trust in big banks collapses, CUs see largest gain

CHICAGO (7/25/12)--Only 21% of Americans surveyed trust the financial system, the lowest point on record since March 2009, according to the most recent Chicago Booth/Kellogg School Financial Trust Index. However, trust in credit unions increased, rising to 63% from 58%.  
 
The overall decrease was largely driven by a drop in trust of big national banks, said the June 2012 report issued Tuesday.
 
The index measures public opinion over three-month periods to track changes in attitudes. The report is the 15th quarterly update and is based on a survey conducted in June. The previous survey (March) showed that 22% of the population trusted the financial system (PR Newswire July 24).
 
Key findings from the latest trust index include:
"Trust in banks has collapsed," said Paola Sapienza, co-author of the index and the Merrill Lynch Capital Markets research professor of finance at the Kellogg School of Management at Northwestern University.
 
"Since last quarter's issue of the Financial Trust Index, trust in banks has fallen five percentage points to a low of 27%. It's worth noting that this data was collected in late June, so this drop could be reflective of consumer attitudes toward the news about JP Morgan's multi-billion hedging losses announced in late spring," Sapienza said.
 
Trust in national banks fell to 23% in the June 2012 report, from 25% in March. Trust in local banks increased to 55% from 51%.
 
"This suggests that the national banks may be 'too big to trust,' whereas there is still a relatively high level of trust in banks at the community level," said Luigi Zingales, co-author of the index and the Robert R. McCormack Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business.
 
Credit unions also have scored high in other national and local surveys on trust, loyalty and member satisfaction studies this year. They include:
The quarterly Financial Trust Index survey is conducted by Social Science Research Solutions as part of its weekly national telephone survey, EXCEL.
 
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