The impact of financial crises on public trust in banking: evidence from Greece and Cyprus

Purpose: This study investigates the impact of the 2007–2008 global financial crisis on public trust in the banking systems of Greece and Cyprus. It focuses on how perceptions of banking reliability, regulatory oversight and financial behavior evolved post-crisis. The research aims to provide a comparative analysis of two EU economies that experienced distinct financial crises – Greece’s sovereign debt crisis and Cyprus’s banking collapse with deposit “haircuts.” Design/methodology/approach: The study employs a quantitative research methodology, collecting survey data from 234 participants (65.6% from Greece and 34.4% from Cyprus). The survey assesses citizens’ perceptions of banking reliability, awareness of regulatory oversight and behavioral changes in financial decisions following the crisis. Statistical analysis is used to quantify shifts in trust and behavior. Findings: The findings indicate a significant decline in public trust in the banking systems of both countries post-crisis. Despite the existence of deposit protection schemes, a substantial proportion of citizens prefer to store large deposits outside the banking system, reflecting persistent mistrust. Awareness of regulatory bodies, such as the European Central Bank (ECB), was moderate. While respondents expressed confidence in the ECB’s supervisory role, skepticism about the effectiveness of crisis management measures and supervisory changes remained high. EU membership was seen as a stabilizing factor; however, dissatisfaction with national banking reforms was prevalent. Research limitations/implications: The study’s findings are limited by the sample size and the reliance on self-reported data, which may introduce response bias. Additionally, focusing solely on Greece and Cyprus limits the generalizability of the results to other regions. Future research could expand the sample size and include additional countries for a more comprehensive analysis. Practical implications: The study offers policy-driven insights, emphasizing that enhanced transparency, financial literacy programs and stricter supervision can rebuild public trust in the banking sector. It also discusses how institutional investors can be attracted through stronger banking governance and how deposit protection mechanisms influence financial behavior. Originality/value: This research contributes to the literature by providing empirical evidence on public trust decline in the banking sector following a financial crisis, using a comparative approach between Greece and Cyprus. Unlike prior studies that focus on macroeconomic indicators or banking sector performance, this paper directly measures public sentiment and behavioral shifts, offering valuable insights into post-crisis financial trust dynamics.