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Confidence in the Banking System Has Eroded Post-2023 Bank Failures

Confidence in the Banking System Has Eroded Post-2023 Bank Failures

Mar 24, 2024

Confidence in the Banking System Has Eroded Post-2023 Bank Failures

The financial services firm Ampersand Inc. has released its inaugural Depositor Priorities Survey report, which reveals significant insights into depositor attitudes towards bank safety, interest rates, and the alignment of financial practices with social values post the 2023 bank failures. The survey, conducted in late 2023 and encompassing over 100 executives and senior managers, reflects the changing landscape of deposit management and the evolving expectations of depositors.

Key findings from the survey indicate a pervasive sense of unease among depositors, with 55% expressing concerns about bank safety and stability going forward. This anxiety has shifted depositor preferences, with a striking 77% willing to accept lower returns in exchange for guaranteed safety of their deposits. This contrasts with the financial institutions' narrative, which claims that depositors prioritize interest rates.

The survey also uncovers a disconnect between the services offered by banks and the preferences of their clients. Notably, 28% of respondents feel constrained in their choice of financial institutions due to loan requirements, despite 91% prioritizing safety over rates. Furthermore, there is a growing demand for values-based banking, with two-thirds of financial professionals reporting increased interest in this area. A substantial 55% of depositors are prepared to forgo up to 15% in returns to partner with banks that share their social values.

Reid Thomas, Chief Strategy Officer at Ampersand, commented on the findings, "It's a new world out there for depositors and their banking partners, who must seek realignment in an era of mounting concern for social issues and heightened risk of bank failure. This report—the first in what will be an annual survey—will equip the financial services industry with a deeper understanding of depositor motivations and concerns, positioning them to better design products and services to meet their clients' needs."

The Ampersand survey underscores a critical period of realignment in the financial services industry, highlighting a clear lack of confidence in the banking system in the aftermath of the 2023 bank failures.

Originally reported by Yahoo Finance


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