Rebuilding Trust

Battered, bruised and distrusted they may be, but for financial institutions repairing trust is often understood to mean restoring confidence in the rationally driven market and its associated practices and underlying norms. David De Cremer charts the financial world’s attempts to rebuild trust and provides three steps to jumpstarting trust.


Battered, bruised and distrusted they may be, but for financial institutions repairing trust is often understood to mean restoring confidence in the rationally driven market and its associated practices and underlying norms. The suspicion is that the financial world would like to maintain the economic system that has so gloriously failed. David De Cremer charts the financial world’s attempts to rebuild trust and provides three steps to jumpstarting trust.

Trust and, more specifically, the absence of trust lie at the heart of the financial crisis of the last two years.  Banks find it difficult to trust each other and to maintain the trust of their clients.  It has become painfully clear that the integrity and moral responsibility of banks is judged to be dismally low.  Surveys repeatedly indicate that customers believe that banks routinely act more as agents interested in the products they sell rather than in providing services promoting the interest of their clients. 

Given this it is no surprise that banks and the financial world in general are looking for ways to repair trust among their clients and society as a whole.  The question is whether the financial world is succeeding in this.  The answer, clearly and unequivocally, is no.

Indeed, the financial world does not appear to understand what repairing trust is really about.  Banks and other financial institutions appear convinced that repairing trust entails restoring confidence in the unrealistic expectations and working methods the financial world employed before the current crisis hit. Even worse, a belief exists that this type of confidence needs to be restored in order to get the global economy working again. Ironically, it was exactly these sorts of unrealistic expectations that led to the current crisis.

Transparency is not enough

To psychologists viewing this situation, repairing trust means taking responsibility for the failure of the unrealistic expectations and communicating transparently what will have to change and how this will happen.

The media has, of course, been filled with communication from financiers and bankers.  Too often they defend their perspective by referring to the norms that exist within the financial world. Because these norms and habits exist their behaviour is, and was, justified. As these norms are mostly described in formal contracts and agreements (such as decision-making procedures involving the allocation of bonuses) it is a legitimate claim, according to banks, that these norms should be further supported if we want the economic crisis to end quickly.

Of course, banks have the right (and the obligation) to inform us about the procedures and agreements they use and how this has led to the existing formal contracts and agreements.  Making things transparent is a good thing. But, that’s not where the process of repairing trust ends.  Simply being accountable for procedures and the resulting contracts will not restore trust in a crisis.  The repair of trust is largely psychological. As a result, it demands solid and firm management of impressions.

Independent from rights and wrongs, repairing trust requires that the parties capable of stimulating the money flow and economy have to take the first step to motivate the rest of the world (you and me) to join in with the act of repair. If this does not happen, then nothing will change and the current status quo will remain.

The initial apparent unwillingness of the financial world to apologise for the actions which may have partly caused the crisis did not help in restoring trust. They simply did not feel guilty and perceived themselves to be victims as well. If you issue an apology, you do it spontaneously and immediately; if you cannot do that or want to do that, don’t bother.

So, from a psychological perspective, financial institutions should be firm in taking the lead in constructively and positively managing the impressions they give to the outside world.  The feelings and moral values of clients require attention by these institutions. As the Dutch politician Wim Camp recently said: “The financial crisis is a crisis of values.”

Three repairing steps

Repairing trust could begin with three steps:

Step 1. Communicate change, a breach with the unrealistic expectations of the past.  These expectations do not have to be abandoned, but they have to be left behind.

This first step comes close to the underlying philosophy advocated by US president Barack Obama. The crisis has to be seen as an opportunity to make a new start in which we can build relationships and new ways of interacting that can be trusted.

Paradoxically, this idea holds that the financial crisis should be looked at as an opportunity to promote your reputation as a trustworthy partner. The science of psychology clearly shows that if everything goes well it is difficult to demonstrate you are a sincere and trustworthy person. Everyone simply acts according to the norms and these norms work.  Under such circumstances your behaviour says little about how trustworthy you are. A crisis, however, can – in a counterintuitive way -- provide you with an opportunity to enhance your reputation. A crisis is ambiguous and uncertain and the norms dictating how to act are no longer clear.

As a result, any action you take will be considered as more revealing of who you really are and, critically, of how trustworthy you are. 

It is, of course, important to realise that this process of change has to be managed well and communicated in a sincere manner if it is to promote your reputation. Otherwise, your reputation may be damaged forever.

Step 2. Show in your communication of change that you are serious and sincere.

To use the crisis as an opportunity to rebuild their reputation as a trustworthy partner, banks and financial institutions must outline how they want to change things. They must clearly articulate why they value sustainability and a long-term perspective. It is only then that they will show what they stand for.

If financial institutions truly want to convince their clients and society of their sincere intent then they have to show that their behaviour and decisions are motivated by a sincere desire to change things for the better and not simply dictated by a need to preserve the existing norms within the financial world.

Some unconventional behaviour -- in contrast to what is regarded as common behaviour within the financial world -- is necessary to convince people you are taking change seriously.  This should make clear what you stand for and will create good faith in your intentions.  As the old norms no longer work, they cannot be used as the motivational basis for change. While adopting new norms and behaviours will bring accompanying costs (and means accepting less financial rewards), these costs are necessary to build trust on the long term.

Step 3. To really make this change succeed, sacrificing leadership is needed.

Sacrificing leadership means showing that you are prepared to be the first one to carry the weight of the costs associated with change. You are prepared to show your more vulnerable side and work with it for the good of the community. In a way, you will become a servant, but this change of position (albeit temporarily) indicates that you are being serious about the change you are trying to lead. My research shows that sacrificing leadership is particularly effective when people are intent on avoidance and caution.

An illustration of how to show self-sacrificing behaviour is provided by the Dutch bank Rabobank, the largest supplier of mortgages in the Netherlands. Like other banks, Rabobank regularly updates its mortgages to attract new clients. One way to attract new clients is to provide them with enticing lower interest rates than those offered to existing customers. Rabobank decided that in the current crisis it is not morally acceptable for current mortgage holders to pay higher interest rates than new customers. It lowered interest rates for older clients to the same level as offered to new clients.  On such decisions will trust be rebuilt.

David De Cremer ( is a visiting Professor of Organisational Behaviour at London Business School and Professor of Behavioural Business Ethics at Rotterdam School of Management.