RETROSPECTIVE STUDY OF THE DYNAMICS OF CHANGES IN PUBLIC DISTRUST IN THE FINANCIAL SECTOR IN THE CONTEXT OF MAJOR EVENTS
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Abstract
Introduction. The banking and non-banking sectors constitute crucial components of the financial system. If society exhibits a high level of distrust towards these sectors, it can escalate the risk of vulnerability within the entire financial system, making it susceptible to both external and internal threats. When individuals lack trust in banks and other financial institutions, they may choose to keep their money outside of these institutions or allocate it towards the purchase of goods and services. This predicament can restrict access to capital for businesses and citizens, leading to financial imbalances and hindering the country's economic growth. Therefore, it is of utmost importance to examine the fluctuations in public distrust towards the financial sector comprehensively. By comprehending the factors and events that contribute to or weaken this mistrust, we can significantly influence the condition of the financial system and its future development.
Purpose. The article aims to investigate the formation and evolution of public distrust in the financial sector and to establish a periodization of this phenomenon through an analysis of the historical development of the banking and non-banking financial sectors in Ukraine since its independence.
Results. The periodization of the development of mistrust in the financial sector and the analysis of factors and events contributing to its exacerbation have revealed several catalysts for distrust in Ukraine's banking and non-banking sectors. Macroeconomic and political shocks such as the 2008 financial crisis, the "Orange Revolution," the "Revolution of Dignity," the COVID-19 pandemic, and the ongoing war have played significant roles. These events have generated negative expectations, panic, and discontent among the public, leading to increased inflationary and exchange rate expectations and a heightened mistrust of financial institutions. In the case of the non-banking sector, a major reason for the widespread distrust of non-bank financial institutions has been their tarnished reputation and involvement in fraudulent activities.
Examining events that have had a stabilizing effect on the financial sector reveals a trend where regulatory actions aimed at market regulation of financial institutions have played a crucial role. These actions include the establishment of supervisory bodies overseeing the activities of National Financial Institutions, the development of legislation pertaining to insurance and credit unions, the implementation of stricter requirements for banks' authorized capital, the creation of a deposit guarantee fund for individuals, and other similar initiatives. These measures have contributed to fostering stability and trust in the financial sector.
Originality. A periodization of the evolution of public distrust in the financial sector has been developed, which, unlike existing models, incorporates the banking and non-banking systems. Additionally, this new framework spans over twenty years, encompassing recent events in Ukraine.
Conclusions. The foundations of distrust in the financial sector were established during the Soviet era. The newly formed state faced economic instability, inadequate regulation, and a series of political, financial, and military crises, all of which contributed to the widespread distrust in the financial sector across various levels of society. The prevailing lack of trust weakened the financial system, as it lacked the support of the population. Consequently, the financial mechanism was ill-prepared to confront both internal and external challenges. During periods of instability, economic actors exhibited fear of losing their savings, leading to bank panics and chaotic situations. These factors hindered the recovery process, making it difficult and slow. Thus, the distrust of the financial sector in Ukraine can be described as a historically ingrained and empirically substantiated characteristic of Ukrainian society.
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