Despite the economy's sputtering, nearly all Americans feel the nation's banking system is humming along nicely.

Confidence in both the security and health of the U.S. banking and financial system reached all-time highs in the latest American Banker/Gallup Consumer Survey.

In this year's survey, 93% of respondents said they had either had a "great deal of" or "some" confidence in the system's safety and security, up from 89% in 2000. About 47% affirmed a great deal of confidence - a statistically significant increase from last year's 40%.

Since 1985, when the survey was begun, the share of respondents expressing a great deal of confidence in the system had never exceeded 40%, which it achieved for the first time last year. About 46% of this year's respondents said they had some confidence in the system, down from 49% in 2000.

Meanwhile nearly 90% of respondents said they feel the banking and financial system is healthy, up from 86% last year. Twenty-two percent called it "very healthy"; 67%, "fairly healthy." (The percentages in the survey are rounded.) The 67% who described the system as fairly healthy are a statistically significant increase from last year's 63%. The "very healthy" figure is virtually unchanged from last year's 23%.

"Those are great numbers," said Joe Belew, president of the Consumer Bankers Association. "Bankers should take heart - the public has a good, trusting relationship with their banks, and that is good."

James Chessen, the chief economist at the American Bankers Association, pointed out that "it's hard to get numbers" as high as nine out of 10 respondents endorsing the system's health.

And David L. Littmann, chief economist at Comerica Inc., said the uncertain economy may actually be fueling much of the contentment with the banking system. "People are looking at banks as a bastion of safety and security against the volatile stock market," he said.

Mr. Chessen agreed: "With a rather volatile stock market, people are reminded about how secure their bank savings accounts are," he said.

Though people may see bank holdings as secure, even in times of economic uncertainty, Mr. Littmann said, this feeling has yet to translate into new deposits. Conventional wisdom holds that depositors flock to higher-yielding mutual funds and stocks in an economic boom and pull back to bank certificates of deposit and savings accounts during a bust.

"Further or prolonged weakness in the economy might translate into more deposits," said Mr. Littmann. Because this has yet to happen, he said, he does not believe the economy is in a recession.

And though nearly all respondents say the banking and financial system is healthy, some analysts speculated on what might have kept the very healthy figure at only 22%, down a percentage point from last year.

The public is not quite sure what to make of all the recent mergers and acquisitions in the banking industry, said Bill Sharpe, senior economist at J.P. Morgan Chase & Co. "When a customer walks into the bank and suddenly has a new name to deal with, there has to be some uncertainty there," he said.

Gregory L. Miller, SunTrust Banks' top economist, also pointed to mergers. "When people see a bank named as a possible takeover target, they think that bank must be weak, and it leads them to question the viability of any one bank," he said.

The surveys have shown steady growth, from 1993 to 1999, in the proportion of consumers who described the U.S. banking and financial system as very healthy. Only 6% of respondents described it that way in 1993, in the wake of a recession. The share more than doubled in 1994, to 14%, and continued to rise through last year.

The 67% of this year's respondents who deemed the system fairly healthy could reflect a general understanding that, though any particular bank could be here today and gone the next, the industry as a whole remains strong, economists said.

"People expect some actors are weakening, but the overall industry continues to expand its influence," Mr. Miller said.

The Gramm-Leach-Bliley Act allowed banks to enter new markets, offer different products, and in some cases begin to look like investment firms and brokerages, he said. All of which leads people to the conclusion that this is still a vibrant industry.

The survey's timing - it was done from Feb. 14 to March 16 - may also have affected the results, Mr. Miller said. The interest rate yield curve had been inverted for the preceding couple of years so that borrowing costs for banks were outstripping their long-term profit potential from loans, he explained.

But things started looking up in February and March.

"When [the survey] was taken, financial services and banks in particular were improving," Mr. Miller said. "It was pretty clear that the Federal Reserve Board was moving quickly to provide liquidity."

As the Fed reduced short-term interest rates this year, it was easier for banks to do business. "Obviously banks do better when short-term interest rates are lower," he said "It's clear that as long as people think the Fed will continue to drop rates the public's confidence will remain high."

But he also cautioned that if the Fed shifts gears confidence could begin to fall off.

Banks made some overly optimistic decisions when the economy was going great guns, and the full effect of credit-quality problems stemming from those miscalculations could still emerge, say industry analysts and observers.

"If people see credit-quality problems, it could offset some of the glow of lower interest rates," Mr. Miller said.

Mr. Littmann advised banks, in the meantime, to capitalize on consumers' strong confidence in them.

Over the years this survey has typically shown a relationship between age and confidence. Industry analysts and observers have noted that the older people get, the more confident they are in the U.S. banking and financial system.

Confidence in the health of the banking and financial industry was highest among respondents 45 to 64 years old and lowest among those younger than 34. About 15% of those 18 to 34 described the system as very healthy, compared with 21% of those 35 to 44, 27% of those 45 to 54, 29% of those 55 to 64, and 26% of those 65 and older.

And confidence also rises with annual household income. Twenty-six percent of respondents with incomes of $75,000 or more said they believe the system is very healthy, compared with 9% of those earning less than $20,000.

The gender gap seen in past surveys persisted this year, with men exhibiting a rosier outlook than women. About 27% of the 498 men surveyed described the banking system as very healthy, compared with just 18% of the 503 women.

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