METHODOLOGICAL PRINCIPLES OF ELEMENT AND INTEGRATED ASSESSMENT OF PUBLIC TRUST LEVEL IN THE FINANCIAL SECTOR

Abstract

The article argues that the effective and coherent functioning of the financial sector requires public trust at all levels. In this regard, it is important to provide a thorough methodological basis that will be the cornerstone of an element-by-element and integrated assessment of the level of public trust in the financial sector of the economy. Much of the previous research on calculating the level of trust in the financial sector has been qualitative. Examining the existing approaches to calculating the level of trust in the financial sector of the economy, qualitative and quantitative indicators that are best to describe, influence, or characterize public trust in the financial sector have been identified. Using multivariate factor analysis based on the principal components method, all quantitative and qualitative indicators were grouped into three factors that characterize the formation of trust/distrust in (1) monetary authority and the monetary policy sequence of the central bank (macro-level); (2) financial services and products (micro-level); (3) financial institutions (meso-level). Based on the identified factor loads, the indicators of the balance of trust/distrust in the financial sector at the macro, meso, and micro levels, as well as the integrated indicator of the balance of trust/distrust in the financial sector of the economy for 2010-2020 have been developed and calculated. The calculated integrated indicator of the balance of trust/distrust in the financial sector had been negative during the analyzed period and ranged from -22.82 to -49.80%, indicating a chronic crisis of public trust in Ukraine. According to the obtained values of both element-by-element and integrated indicators, the aggravation of the trust crisis in the financial sector at all levels of its manifestation occurred in 2014, which coincides with the general trend of changes in socio-economic and financial condition. It is determined that the decline in dollarization has been found to indicate a return to public trust in the financial sector at the macro level. In contrast, an increase in the optimistic consumer sentiment and a decrease in cash outside the financial system accompanied by wages rise has been found as evidence of renewed trust in the financial sector at the meso and micro levels, respectively. The findings of this study have several important implications for financial policy improvement.