Nearly two thirds of senior executives working in financial institutions such as banks, insurers, investment associations and fund managers believe the level of trust in their organisations has been severely eroded and changes are needed.
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This was the chief finding of a survey entitled: The trust challenge: how the management of financial institutions can lead the rebuilding of public confidence, undertaken by Big Four firm PricewaterhouseCoopers, in the light of the spate of recent corporate collapses across the globe.
PwC interviewed 43 senior executives working in these institutions and found that 60% of respondents felt that structural changes were needed at the regulatory level, within the institutions themselves, as a result of this erosion of trust.
Furthermore, four in five said the failure to improve corporate governance levels would result in higher cost of capital, more volatile stock markets and a refusal by investors to buy their stock.
Worryingly, the results of the survey showed that financial institutions are not taking the lead on such issues with more than half saying they were coming under ‘intense pressure’ from regulators and the markets to improve governance, instead of actively seeking to make improvements themselves.
Ian Dilks, partner at PwC said: ‘Financial institutions are in the frontline of the debate on trust and need to respond appropriately if they are to restore investor confidence in themselves, in the capital markets, and in the wider economy.
‘We are not suggesting that the financial services industry is responsible for changing general standards of disclosure, but as reporters of corporate information and as major investors in companies that disclose results, they can certainly be vocal advocates and practitioners of improved transparency.
‘Our research suggests there is more to be done by the management of financial institutions if they are genuinely to play a leadership role in restoring public trust.’