Institutionalization of Trust in Banking Systems: The European Model and Implications for Financial Stability and Financial Inclusion in Ukraine

Abstract

This article examines the institutional nature of trust in the banking system and analyzes the specific features of its formation within the European and Ukrainian models of financial development. The purpose of the study is to identify the structural mechanisms of the institutionalization of trust in the banking systems of the European Union countries and to determine their significance for ensuring financial stability and expanding financial inclusion in Ukraine. The methodological framework of the research is based on the approaches of institutional economics, which interpret trust as a result of the functioning of formal rules, delegated monitoring mechanisms, and information institutions that reduce information asymmetry and transaction costs in financial markets.

The analysis demonstrates that in the European banking system trust is predominantly structural in nature and is reproduced through an institutional architecture that includes prudential regulation, banking supervision mechanisms, deposit guarantee schemes, information disclosure standards, and a developed digital financial infrastructure. Such a model allows trust to be transformed from an individual expectation of economic agents into a systemic resource of financial stability that supports the resilience of the deposit base, the intensity of lending to the real sector of the economy, and a high level of financial inclusion.

The comparative analysis shows that in Ukraine a functionally stabilized but normatively incomplete model of trust in the banking system has been formed. Public trust in banks is largely operational in nature and is based on the effectiveness of everyday financial services, the digital accessibility of banking services, and the stability of payment infrastructure. At the same time, a structural gap remains between the operational efficiency of banks and the institutional legitimacy of the financial system. This gap manifests itself in the persistent role of cash, the widespread practice of using several banks simultaneously, and the sensitivity of economic agents to informational and reputational signals.

Further strengthening trust in Ukraine’s banking system requires a shift from a predominantly pragmatic and instrumental understanding of trust toward a more structurally embedded and normatively grounded one. In such a framework, an essential role is played by what may be described as trust rationalizers – institutions that structure expectations and reduce uncertainty in financial interactions. These include regulatory bodies, supervisory authorities, deposit guarantee mechanisms, rating agencies, and systems of public disclosure. Through their activity, complex risks inherent in financial markets are translated into clearer and more interpretable signals for economic agents, thereby increasing the predictability of financial transactions and contributing to the expansion of financial inclusion.

The findings suggest that the institutionalization of trust should not be viewed solely as an outcome of macrofinancial stability, but also as one of its fundamental preconditions. The European banking model illustrates how a coordinated system of regulatory oversight, prudential supervision, and information transparency can transform trust into a stable resource supporting financial resilience. Such institutional arrangements are particularly significant for economies undergoing structural transformation, including Ukraine