Our View: Low level of trust for bank advice understandable given our past

Cypriots trust their bankers less than anyone else in the European Union, according to the latest findings of the Eurobarometer. Despite trusting the advertising material of banks, only 17 per cent of people trust the suggestions of bank employees compared to an EU average of 45 per cent.

The main source of information on which they base their decisions on personal finances were specialized publications (40 per cent compared to 35 per cent in the EU). Some 34 per cent rely on advice from friends, relatives and acquaintances and 24 per cent on bank advertisements and flyers. This was significantly higher than the EU average of 14 per cent.

This low level of trust for the advice of bank employees is understandable. The 2013 collapse of the banking system, which led to the closure of Laiki, with customers losing all their deposits over €100,000, and the bail-in of the Bank of Cyprus depositors have left a mark on people. Experiences that turn people’s lives upside down are not easily forgotten.

It was bank employees who advised customers to invest in the bank bonds because of the high interest rates being offered, never warning them of the risks. Some were given bank loans to buy bonds and still had to repay these loans once the bonds became worthless. Then there was the reckless way in which bank loans were granted (even for holidays and shopping).

The loanee may have been to blame, ultimately, for signing on the dotted line, but a professional bank employee would have advised a valued customer not to take a loan that he did not have capability of repaying. Giving sound advice to customers, was not part of the job, the only interest being meeting the bank’s lending targets. The banks had the security of the ‘personal guarantees’ to fall back on if the loan was not repaid.

Given how the banks treated people, and how they squeezed them after the collapse, it is a small wonder that 17 per cent still trust the advice of their bankers. Their advice had led many people and businesses to financial ruin, while the selling of bonds to people that knew nothing about complex financial products, by promising them big returns was not just unethical it was ruthless exploitation of customers’ ignorance.

Will attitudes towards bankers change? Not in the foreseeable future because people have good reason not to show any trust. Things are not helped by the politicians, who often engage in bank-bashing – banks are an easy target – thus reinforcing the negative views of the public. Digital banking, in a way, has been helpful for the banks as their customers can now do their banking without coming into contact with the bankers.