October 16, 2013

Trust in the top 50 global financial institutions has remained negative overall, but results vary by region. Specifically, trust in financial services increased in Europe and remained flat in Asia and U.S., in the third quarter, according to a data analytics, news and social media sentiment analysis called TRust Index by Thomson Reuters.

Trust in financial institutions in Europe falls at -1.0% in the third quarter, up from the -1.5% in the second quarter. Asia and the U.S. remained at -1.0% and -1.6% respectively, according to a release.

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"Whilst social media sentiment analysis shows trust is still negative for the quarter, for the first time since January, European Financials have moved higher than U.S. financial, reflecting recent mortgage scandals in the U.S. and increasing confidence in U.K. and European institutions," states David Craig, president of financial and risk at Thomson Reuters in a release.

A driving factor for the U.S. score was the Justice Department suit against Bank of American for mortgage fraud in August and the JPMorgan London Whale settlement in September. The biggest factor for Europe includes European Central Bank signals not allowing money market rates to rise too high due to fears of Federal Reserve rate rising and the privatization of U.K. banks, which actually helped support increases in trust.

Concerns about the strength of the economy and shadow banking in China, a term coined for non-banking institutions providing banking services, have an impact on the trust levels in Asia.

Another indicator for an increase in confidence includes the long-term tightening of credit default spreads, with Asia having the tightest and Europe having the widest. The average for the top 50 global financial institutions falls at about 140 basis points, tighter in comparison to 350 basis points in 2011.

Other than stability in sentiment in the news and social media, trends include confidence in analyst expectations, conflict in opinions between investors and analyst and more regulatory activity.

Analysts have high expectations for growth estimates in the financial sector, according to the release. Analysts have forecast a five year growth rate at 9.0% for the top 50 global financial, according to an analyst monitor acquired by Thomson Reuters in 2008 called StarMine.

This quarter also reflects a roughly double the number worldwide regulatory alerts tracked by the risk and compliance solution Thomson Reuters Accelus.

“The proliferation of regulatory activity over the past five years, and its clear implications for the financial sector in terms of managing complains, shows no sign of receding,” states Scott McClesky, global head of regulatory intelligence at Thomson Reuters in a release.

“Although hiring continues to increase in the financial sector, a substantial proportion of the new hires are for roles related to compliance, risk or other regulatory related functions,” says McClesky in the Q3 TRust Index youtube video. “

McClesky adds, “HSBC alone announced that it would hire some 3,000 new staff to help meet regulatory obligations.”

The TRust index uses over four million business and financial news and media sources to track the state of trust.

ABOUT THE AUTHOR
Zarna Patel is a staff writer for InformationWeek's Financial Services brands, which include Bank Systems & Technology, Insurance & Technology and Wall Street & Technology. She received ...