Edinburgh Napier University

  Confidence in the banking system is critical to the health of households, businesses and the overall economy. Government intervention in the financial services sector and the strict regulation of the banking industry is rationalised by the need to minimise the occurrence of events that could undermine the reputation of banks and threaten confidence in the system.

This aim of this research is to answer the question, ‘Are Scottish consumers confident in retail banking regulation?’ This research has taken a unique approach to answering this question by measuring the levels of confidence in each of the specific rationales identified in the literature for regulating the retail banking system.

Analysis of the findings was undertaken in three distinct stages: individual demographics in relation to levels of confidence; the direction of confidence in relation to these demographics; and the combined demographic factors that have the greatest impact on the levels of confidence in each of the areas that regulation seeks to address.

In designing the survey, a three-stage approach was also adopted; theorists, practitioners and end-users contributed to the development of a consumer survey. The questions were derived from the theoretical framework and developed into the final consumer survey that would gather the demographic information and test the hypotheses.

The main findings are that the youngest age group (18-29 years) have the highest levels of confidence in their retail banks. Those with a higher income and those with higher educational attainment have the least confidence in the areas that regulation seeks to address. This has implications for both industry and the regulators in terms of how they target these specific groups to increase their levels of trust and satisfaction. A lack of trust threatens the stability of the financial system and the wider economy.

Finally, this research has contributed to the continued debate into the use of parametric methods of data analysis when using Likert scales. The finding is that the use of parametric tests for the analysis of Likert scale data is robust.