Confidence and Trust

Confidence and trust are crucial for the functioning of the economy. Spending, saving, borrowing, investing, all depend on the confidence consumers have in the future economy, their personal finances, and on the trust they have in financial institutions such as banks, insurance and credit-card companies, investment and pension funds. Trust is also needed because the quality of many financial services cannot be inspected at purchase, but may become apparent years later. Without trust, transaction partners and society as a whole have to resort to legal enforcement of contracts, and this is a second-best alternative.