Examining the perspective of Dutch banks regarding the impact of corporate social responsibility on consumer trust

(1)

Master Thesis

Examining the Perspective of Dutch

Banks Regarding the Impact of Corporate

Social Responsibility on Consumer Trust

Executive Programme in Management Studies

Strategy Track

Amsterdam Business School

• Author: Justin Kuin

• Student nr: 11214244 • Date: August 2018 • Version: Final Version

(2)

(3)

3

Abstract

This research seeks to answer how Dutch banks perceive the role of corporate social responsibility (CSR) activities in re-establishing consumer trust. To answer this research question, an investigation of news articles, confidence monitor reports, Dutch bank annual reports, and interviews with CSR managers and policy makers have been conducted. In this research, the three large Dutch banks ABN-Amro, Rabobank and ING bank have been examined, together with a smaller niche player Triodos bank. This thesis developed insights about the perceptions of Dutch banks regarding their view of the relationship between CSR engagement and consumer trust. Hence, valuable insights into the way in which the Dutch banks utilize CSR activities in order to regain consumer trust have been acquired. In accordance with the academic literature, the banks agree that CSR engagement positively influences consumer perceptions of the company and consequently improves consumer trust. Furthermore, the large banks stress that this is of exceptional importance for the banking sector to regain consumer trust. Therefore, the large banks devote special attention to the ethical component of CSR. The main contribution of this research is that the large Dutch banks are paradoxical in their way of conducting CSR. The large banks recognize the importance of re-establishing consumer trust, while in practice the large banks still engage in practices which have a prominent negative effect on consumer trust. Their actions and words are paradoxical and conflicting. This research corresponds with the literature that trust seems to be an important strategic issue for the banking industry and that perceived CSR

engagement has the potential to enhance consumer trust. However, this thesis contributes to the literature that large banks are conflicted regarding CSR and for this reason, the large banks’ CSR engagement is unlikely to result in higher levels of consumer trust.

(6)

6

1. Introduction

Banks play an unquestionably important role in society, by affecting people and business through their actions and inactions. They provide capital for businesses, job creation,

and promote innovation and overall prosperity. However, the financial crisis of 2008 brought corporate social responsibility (CSR) in this industry dramatically into the public

consciousness and also highlighted the importance of trust as part of the CSR agenda of bankers (Decker and Sale, 2009). Since the global financial crisis, trust in the banking sector has dramatically eroded. Which is a alarming development because trust is central to

exchange and growth in the economy, and nowhere is this more apparent than in the financial arena (Gillespie & Hurley, 2013).

Hence, the major reason for the historically low levels of trust into the banking sector is primarily due to the global financial crisis. The role which the financial industry played in the global mortgage crisis is widely discussed and recognized. Cornett et al., (2016) state in this regard that ‘’banks obsession with profitability has been noted as the major reason for the advancement of financial innovations and risky speculations, the expansion of high risk loans and subprime mortgages, the increase in asset prices without economic basis, and

eventually, the sudden and unexpected decrease in financial asset prices prior to the financial crisis.’’ As a consequence, during and after the crisis, banks were heavily criticized for their failure to be socially responsible.

According to the confidence monitor report (2017) from the Dutch Banking Association, most Dutch consumers still do not have faith in their banks. More specific, only 25% of the

respondents stated that they have a feeling of trust towards their bank. This implies that there are great opportunities and possibilities for the Dutch banking sector to (re)establish the status of a trustable business partner. A study by Luo and Bhattacharya (2006) on Fortune 500 companies identified a direct positive path between engaging in CSR activities and customer satisfaction.

(7)

7 Pérez and del Bosque (2011) even argue that CSR is one of the most effective tools a

company can use to improve its public image. Even after more than 10 years since the global financial crisis, a study by Jansen, Mosch & van der Cruijsen (2015) among 2.500 Dutch households found that more than 2 out of 3 persons still have the feeling that Dutch banks place their own interests above their clients’ interests. The importance of being a trustworthy partner has also been recognized by the banking sector itself, and several academic studies have demonstrated that engaging in CSR activities leads to increased consumer loyalty and trust. As a result, stakeholders are requiring banks to improve their social and environmental performance, since trust is pivotal to trade and development in the financial sector (Gillespie & Hurley, 2013). Moreover, because most of the value of financial firms is based on

intangible assets, a strong reputation is essential (Csiszar and Heidrich, 2006; Gaultier- Galliard et al., 2009).

This thesis will contribute to the academic literature in several ways. First, the existing literature indicates that trust is a necessary condition for doing business in the financial sector (Schanz, 2009). Although trust is often taken for granted, it is an important strategic issue for the banking industry (Scholtens, 2009). Furthermore, Kolk (2008) argues that CSR activities are increasingly becoming a strategic priority. In the sense that they affect the core business of the firm and its growth, profitability and survival. Therefore, CSR engagement might serve as a potential source of competitive advantage (Porter & Kramer, 2006).

In addition, Pérez and del Bosque (2011) note that there is an significant lack of research analyzing the nature of CSR management styles in corporations, although this is especially relevant in the banking industry. This thesis aims to develop insights about the perceptions of Dutch banks regarding their view of the relationship between CSR and consumer trust. Hence, valuable insights into the way in which the Dutch banks utilize CSR activities in order to regain consumer trust can be acquired from exploring these topics- from a banking

(8)

8 Second, Malik (2015) argues that CSR became a main concern for academic research, since CSR investments, the issuance of CSR reports and the attention towards CSR dramatically increased. The author highlights that there is ample room for future research to contribute to the extant CSR literature by investigating the remaining unanswered questions. One of the proposed possibilities for future research is that of Swaen & Chumpitaz (2008), who concluded that firms’ engagement in CSR activities has a direct positive influence on

consumer trust. The authors suggest that future research should try to investigate the aspect of CSR activities and consumer trust in a different sector than the sportswear industry.

Lastly, CSR is a broad and complex phenomenon. According to Carroll (1991), CSR consists of 4 different components: economic, legal, ethical and philanthropic responsibilities

(figure 2). This research has been executed by using the pyramid of corporate social

responsibility of Carroll (1991). This method tries to identify the reasoning strategy of bankers with respect to the CSR components in re-establishing consumer trust. Carroll (1991) states that philanthropic responsibilities are highly desired but actually less important than the other three categories of social responsibility. This thesis also intends to determine if any CSR component is most prominent from a banker’s perspective. In light of the academic literature, the research question of this Master thesis is:

How do Dutch banks perceive the role of corporate social responsibility in re-establishing consumer trust?

Regarding the research sample, the following Dutch banks are examined: ABN-Amro, Rabobank, ING and Triodos bank. This sample was chosen, not only based on market capitalization, but also due to the different levels of performance in consumer trust. Selecting banks with relatively high and low levels of trust was more likely to provide a more diverse and complete understanding of the relationship between CSR and consumer trust in Dutch banking.

(9)

9 While seeking to answer the research question, an extensive investigation of the

following data sources was conducted:

• News articles from Het Financieele Dagblad and NRC (2012 – 2017) • Dutch banks annual reports (2013 – 2015 – 2017)

• Confidence monitor reports (2015 – 2016 – 2017)

• Semi-structured interviews with the CSR managers/policy makers of the Dutch banks represented in this study

A more extensive overview and clarification will be given in Chapter 4: data collection. By providing answers to these important topics, this study contributes to the academic literature with several important outcomes. Firstly, it appears that the topic of trust in banking is an important strategic issue. Therefore, this study provides valuable insights into how Dutch banks cope with this issue by identifying the similarities and differences among the various banks. Secondly, through qualitative analysis, this study analyzes what the banks’ annual reports, confidence monitor reports, news articles and respondents express regarding this topic. This has enabled the researcher to identify similarities and discrepancies in how banks should act, compared to how they act in practice in order to enhance trust.

In addition, which banking practices have a major impact on consumer trust have been identified and whether the banks share this knowledge is also investigated. Therefore, this study analyzes whether banks exclude certain banking practices which have a significant impact on trust, or whether this leads to conflicting circumstances. Lastly, the obtained results demonstrate how prominent the role of CSR really is in the process of regaining trust. More specifically, this study examines which components of CSR are of high relevance. After the execution of this study, several important insights and recommendations are drawn for Dutch banks concerning how they can apply CSR in order to have the desired effect on consumer trust.

(10)

10

2. Research context and background

In this chapter an overview and background information is provided about the ‘actors’ in my research sample: ABN-Amro bank, Rabobank, ING bank and Triodos Bank. It seems that the Dutch banking industry is being dominated by a few ‘’big players’’. These big players are the banks with the highest amount of total assets under management and consist out of ING bank, ABN-Amro bank and Rabobank. Who together are accountable for more than 80% of the total assets (figure 1).

Figure 1.

(11)

11 ING Bank

ING was created in 1991 by a merger between Nationale-Nederlanden and NMB Postbank Group. However, the roots of ING date to 1845. During the past several years ING has become a multinational corporation with diverse international activities.1_{ING bank is active in}

more than 40 countries and serves almost 9 million customers worldwide.

ABN-Amro bank

ABN-Amro bank finds its roots in 1824. When the Nederlandsche Handelsmaatschappij (NHM) was established. This party merged with De Twentsche bank in 1964 to the Algemene Bank Nederland (ABN). In 1991 Amro bank and ABN merged to ABN-Amro.2

ABN-Amro has almost 6 million customers and operates in 15 countries worldwide.

Rabobank

Rabobank is an international financial services provider operating on the basis of cooperative principles and is active in almost 50 countries. It offers retail banking, wholesale banking, private banking, leasing and real estate services and serves almost 9 million customers.3_The

bank was created in 1972 through a merger but has its roots going back to 1895. Rabobank is specialized in agricultural investments.

Triodos bank

Triodos Bank, founded in 1980, is a European bank with branches in the Netherlands, Belgium, the United Kingdom, Spain and Germany. The head office is in the Netherlands.4

Triodos Bank’s primary goal is to be, aside from their own profit motive, a socially

responsible bank. Their philosophy is to make money work for positive social, environmental and cultural change. As opposed to the large banks in the Netherlands, Triodos does not possess a CSR department, because CSR is integrated into their whole banking system.

1_{https://www.ing.com/About-us/Profile/History.htm}

2_{https://www.abnamroclearing.com/en/who-we-are/our-company/history/index.html} 3_{https://www.rabobank.com/en/about-rabobank/profile/who-we-are/index.html} 4_{https://www.triodos.com/en/about-triodos-bank/who-we-are/organisation/}

(12)

12

3. Literature Review and propositions

This chapter forms the theoretical basis of this research. After the literature review of each topic, research propositions are established. I begin with an examination of the literature regarding the challenges in terms of consumer trust in the banking sector. Subsequently, an in-depth analysis of the corporate social responsibility phenomenon is conducted, followed by an examination of the literature regarding the topic of consumer trust and the link between CSR and consumer trust.

3.1 Dutch banking sector and challenges among consumer trust

Banks act as financial intermediaries in modern society, by performing core functions that facilitate economic activity (Merton & Bodie, 1995). They manage financial risks, organize the payment system and price and value financial assets. Another important role of banks is allocating money across sectors of industry, thereby indirectly influencing the nature of economic growth. By executing these functions, banks have a tremendous impact on society (Scholtens, 2009). Bankers acknowledge in banks’ annual reports that their functions are necessary for sustainable economic growth and progression.

During the financial crisis of 2008, society experienced the consequences of the failure of the economic system. The financial crisis was associated with a massive loss of economic activity, financial wealth, an increase in government intervention, and other significant costs (Atkinson, Luttrell & Rosenblum, 2013). Many people considered it unfair that banks paid out high bonuses after the financial crisis, while the banks that had suffered great losses had to be bailed out by the government. The image was created if the bailout money was moved directly from taxpayers into the pockets of bank managers (Hakenes & Schnabel, 2014). The concluding observation is that the financial crisis brought CSR in the banking industry dramatically into the public consciousness and also highlighted the importance of trust and reputation as part of the CSR agenda of bankers (Decker and Sale, 2009).

(13)

13 Ever since the financial crisis, the reputation of banks has been severely damaged, customer trust has declined and consumers have become increasingly skeptical of banks (McDonald & Rundle-Thiele, 2008). The trust levels have eroded over recent years and banks are struggling to regain trust and a solid reputation. Economies depend on the social, structural, institutional, and cognitive preconditions that enable market exchange, namely: trust (Hurley, Gong & Waqar, 2014). The same authors also examined the current state of trust in banks and argued that there is a theoretical basis to suggest that trust is especially critical in financial services. There is empirical evidence that trust in banking is threatened and is now at an all-time low.

Therefore, the economic benefits of high levels of trust are widely recognized. According to the research of Alesina & Ferrara (2000), when people have trust in each other,

transaction costs in economic activities are reduced, large organizations function better, governments are more efficient and financial development is faster. As a result, more trust boosts economic success. Sirdeshmukh, Singh and Sabol’s (2002) study concludes with calls for a shift in the kind of questions that managers and researchers should ask regarding the role of trust in relational exchanges. Instead of asking if trust is important to have, or whether trust matters, the study of Sideshmukh et al., (2002) argues that managers should ask questions such as “how can firms build trust?” and “what actions will deplete trust?”

As stated earlier, the historically low trust levels seem of special relevance for the financial industry. Decker and Sale (2009) emphasize that a financial firms’ reputation is built on trust, and that trust is a particularly important intangible asset for financial institutions.

This reasoning results in the following proposition:

(14)

14 One might wonder whether the banking sector has ever experienced high levels of consumer trust at all. This seems to be the case. A report from De Nederlandsche Bank (DNB rapport: staat van het toezicht, 2015) reveals that before the financial crisis in 2008, levels of trust in banks in the Netherlands were high. Almost 90% of the respondents had feelings of trust towards the banking sector. Currently, only 25% of the respondents argue that they have a feeling of trust towards their bank (confidence monitor report, 2017), confirming a significant decline.

Ever since the financial crisis, the banking sector has not been capable of restoring these high levels of consumer trust. By engaging in CSR activities, the banking sector is trying to shift the collective opinion towards a more positive attitude in the sector. Therefore, it is necessary for banks to identify the material topics which are important for the Dutch banking consumers. In order to achieve this, the Dutch Banking Association (NVB) annually publishes a report regarding consumer trust which includes important conclusions and

recommendations for banks on how they can regain trust from society (confidence monitor report, 2017). According to the study of Jansen et al., (2015) the most robust reason why members of the Dutch general public would lose trust in banks relates to large bonuses. The authors furthermore argue that the public closely links trust to the size of executive compensation, which is therefore important food for thought in current debates. In addition, De Graaf and Stoelhorst (2013) also claim that there are mounting concerns in Dutch society about the fairness of remuneration policies in the banking sector.

Hence, it is of great relevance to examine if the Dutch banks deliberately avoid certain banking practices which have a negative influence on consumer trust. This aligns with the study of Sideshmukh et al., (2002), who argues that managers should be interested in questions such as: “what actions will deplete trust?”

Therefore, the following proposition is formulated:

• Proposition 2: Dutch banks comprehend which banking practices have a negative

(15)

15

3.2 Corporate social responsibility

Although the impacts of business on society and the environment is certainly not a new topic, in the past several years this topic has been given more attention because of pressing global problems such as poverty, inequality, climate change, and the financial crisis of 2008. Several academic studies have outlined the importance of corporate social responsibility in today’s business (Park, Lee and Kim, 2014; Grimmer and Bingham, 2013; Dawkins and Lewis, 2003; Freestone and McGoldrick, 2008; Kolk, 2008; Kolk and van Tulder, 2010; Ameer and Othman, 2012; Du, Bhattacharya and Sen, 2010; Kang and Hustvedt, 2014; Perez & del Bosque, 2011; Jizi, Salama, Dixon and Stratling, McDonald and Rundle-Thiele, 2008, Scholtens, 2009;). In recent years, tougher competitive conditions have put pressure on firms to investigate their philanthropic and other socially responsible activities (Burke & Logsdon, 1994).

Although there is growing importance for firms in adopting corporate social responsibility activities, there is no universal unambiguous definition of CSR. In fact, an issue regarding CSR is that there is an abundance of possible definitions. According to Pezzey (1989), after the 1980s, there were already twenty to sixty different definitions of CSR. Although these definitions differ, they are predominantly congruent, making the lack of one universally accepted definition less problematic than it might seem (Dahlsrud, 2008).

However, not all CSR definitions are equally significant. A lesser-used CSR definition is less significant compared to a definition which is used very often (Dahlsrud, 2008). The author concluded that the most frequently used definition of CSR was made by the Commission of the European Communities (2001), which defined CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their

interaction with their stakeholders on a voluntary basis”. For the purpose of this thesis, I use the most commonly accepted definition in the CSR literature, namely the definition of the Commission of the European Communities (2001).

(16)

16 According to Porter and Kramer (2011), the perceived legitimacy of businesses has fallen to unprecedented levels in recent history. The diminished trust in businesses has led to a decline in competitiveness and economic growth. Firms have primarily focused on creating value narrowly by optimizing short term financial performance and ignoring societal needs. Businesses should take the responsibility for bringing businesses and society back together.

Today, a clear trend is visible in the banking industry. Scholtens’ (2009) research concludes that CSR is an increasingly important issue in the international banking industry and has become integrated into the daily business of the industry. In today’s extremely competitive markets, it’s crucial for firms to obtain a sustained competitive advantage in order to achieve a higher level of firm reputation and consumer satisfaction. Hence, CSR engagement might result in this competitive advantage. The relationship between CSR and competitive advantage coincides with a noteworthy statement of Bhattacharya and Sen (2004). They argue that, “not only is doing good the right thing to do, but it also leads to doing better.”

Additionally, the research of Klein & Dawar (2004) demonstrates that even if positive CSR associations do not increase immediate profitability, it may reduce the risk of damage to brand evaluations in the event of a calamity. Their research is closely linked to the research of Coombs and Holladay (2006) which explores the advantages of the halo effect. When companies execute a proper CSR strategy, they are able to establish a favorable, pre-crisis reputation. This prior reputation can create a halo effect that protects an organization during a crisis or scandal. In recent years, Dutch banks have been involved in several scandals, such as the Libor affair, remuneration policies and SME interest rate swaps, just to name a few (more about this in chapter 5.2.1). It can be argued that a proper pre-crisis reputation could have protected the banks against the loss in trust and reputation during a period of crisis. Dutch banks should try to regain a positive reputation which, according to the halo effect, might limit the possible damages to the banks reputation at times of a prospective crisis. Hence, several academics suggest that when defining and implementing CSR policies, companies should find a balance among the several CSR definitions which stakeholders use.

(17)

17 This should be accompanied by identifying the most relevant social activities for the

organization (Truscott, Bartlett, & Tywoniak, 2009).

In order to better understand the CSR concept, Carroll (1991) outlines that CSR consists of four components: economic, legal, ethical and philanthropic responsibilities (figure 2).

Figure 2. Carroll (1991)

Carroll (1991) describes that the sole responsibility of a corporation in the past was to provide the maximum possible return to shareholders and create as much profit as possible. However, since the 1970s the pursuit of financial gain has also been accompanied by other corporate challenges. Not only does a firm have economic responsibilities, but also legal, ethical and philanthropic responsibilities. Carroll (1991) argues that philanthropy is highly desired and prized but actually less important than the other three categories of social responsibility. Using the pyramid of corporate social responsibility, this thesis aims to determine how Dutch banks think about the prioritization of these CSR components and whether this corresponds with the view of Carroll (1991). Although Pérez and del Bosque (2011) do not mention which dimension of CSR needs to be prioritized, they do argue that there is some sort of hierarchy in the fulfillment of these responsibilities. Therefore:

• Proposition 3: Dutch banks employ a hierarchy in the relevance of the CSR

(18)

18

3.3 Consumer trust

It has been sufficiently demonstrated that trust is of critical importance in the banking industry. Boatright (2011) explains in-depth why this is the case. The author argues that traditional banking is different from other businesses. The first reason is because banking cannot be conducted solely by bilateral market contracting because it serves an

intermediation function between multiple parties. Therefore, trust and integrity are

fundamental requirements. The second reason is because the utility character of banking also creates a need for trust due to the dependence of the economy on the banking industry.

Working together often involves interdependence; therefore, people must depend on others in multiple settings to accomplish their personal and organizational goals. Harrison (2003) asserts that financial services are highly intangible and difficult to fully comprehend as a result. Information asymmetry and high levels of perceived risk are often present when an exchange involves a clients’ savings. A highly established level of trust between a company and consumers significantly contributes to positive outcomes for that company, such as loyalty toward the company, customer retention, purchase intention, and overall market performance (Stanaland, Lwin & Murphy, 2011).

According to Barney and Hansen (1994), the resource-based theory of the firm suggests that trust is a resource that may directly or indirectly contribute to a firms’ competitive advantage. There is a broad consensus among academics that consumers’ trust in business is a

fundamental asset in order to establish and maintain long-term advantageous relationships between a firm and its stakeholders. This is supported by Morgan and Hunt (1994), who subscribe to the idea that there are important outcomes of trust, such as 1) reducing the perception of risk, which is associated with opportunistic behavior, 2) increasing confidence so that inequities will be resolved in short term and 3) reducing the transaction costs in an exchange relationship.

(19)

19 In conclusion, Mukherjee and Nath (2003) emphasize that there is a compelling agenda for both financial organizations and academics to better understand organizational trust. Although there is a growing body of literature in social psychology that examines trust

in dating and other such relationships (e.g., Larzelere & Huston, 1980), the nature and bases of such relationships may be different from those in organizations. Thus, the way to examine trust in an organizational setting should involve two specific parties: a trusting party (trustor) and a party to be trusted (Mayer, Davis and Schoorman, 1995).

Complementarily, Ganesan and Hess (1997) argue that despite the widespread agreement on the importance of trust in interorganizational relationships, there is a lack of consensus on a suitable conception of trust, since trust has been conceptualized in a wide variety of ways. However, there is a clear distinction between interpersonal trust and organizational trust. According to Ganesan and Hess (1997), interpersonal trust is the condition of trust that exists between individuals in separate organizations, whereas organizational trust is being defined as trust between an individual and the partner organization. Because this thesis focuses on the trust relationship between banks and individual banking customers, I distinguish between the different forms of trust and focus on organizational trust.

Furthermore, consumer trust seems to be a complex phenomenon which can be influenced by numerous factors. Even culture and ethnic origins seems to affect the extent to which people put trust in each other or in organizations (Hofstede, 1980). However, according to Alesina & Ferrara (2000), ethnic origins do not significantly affect trust. The same authors conclude that the determinants of trust are still unclear and indicate that “the theory of what determines 'trust' is sketchy at best”. Since it is almost impossible to identify and investigate all determinants which might have an influence on consumer trust, my focus in this thesis will be on banks’ CSR activities, which, according to the academic literature, influences

(20)

20 Despite the complexity of the concept of trust, the most widely adopted definition of

organizational trust is defined as “the willingness to be vulnerable to the actions of another party, based upon positive expectations of the intentions or behavior of the other, under conditions of risk and interdependence” (Mayer et al., 1995).

Even though academics agree that organizational trust can be influenced by numerous factors, Mayer et al., (1995) found that three characteristics of a trustee appear often in the literature. These factors are ability, benevolence, and integrity.

• Ability: competence to deliver on commitments and fundamental responsibilities • Benevolence: a positive orientation towards stakeholders, including concern for their

interests

• Integrity: adherence to commonly accepted moral principles, including fulfilling promises and contracts, honesty and fairness

Hence, there is no consistent interpretation among academics regarding the factors which influence consumer trust. As one author (Alesina & Ferrara, 2000) mention that the

determinants of trust are still unclear. Other authors Mayer et al., (1995) state that three factors predominantly affect consumer trust: ability, benevolence, and integrity. However, according to the literature, it seems that these three elements recur whenever consumer trust is being analyzed. Therefore, in this thesis I consider that these three elements are the most important regarding the concept of trust. An interesting observation is that these most

important characteristics of organizational trust can be linked to the components of corporate social responsibility. More specifically, ability, benevolence, and integrity display large

(21)

21

3.4 The link between corporate social responsibility and consumer trust

Now that the CSR and consumer trust concepts are investigated, the next step is to examine the relationship between these two concepts. The literature often outlined that CSR

engagement should allow firms to establish a better relationship with their consumers. Academic research has confirmed the existence of a direct relationship between a company’s CSR activities and consumer attitudes, where consumer trust is one of the outcome variables. This will be discussed in the following section.

The impacts of CSR actions and consumer trust has been tested in several settings. For example, Swaen & Chumpitaz (2008) surveyed more than 600 Belgian cosmetic and sports brand consumers about this relationship. They concluded that consumer perceptions of a company’s CSR activities have a positive effect on a company’s credibility and perceived integrity. Furthermore, perceived CSR initiatives are apt to strengthen a customer’s image of the company as a trustworthy partner. Therefore, customer’s CSR perceptions directly and indirectly influence a company’s perceived product quality and overall satisfaction. In their final conclusion, the authors conclude that consumer’s CSR perceptions of a company have a positive influence on trust in that company.

In a different context, Stanaland et al. (2011) examined almost 450 participants how their CSR perceptions of a company influenced their attitudes towards that company. Their results demonstrated that perceived CSR positively influences corporate reputation, consumer trust, and consumer loyalty. Their work provides evidence that a company which devotes a high amount of resources to engaging in CSR activities can expect several beneficial outcomes. Their work corresponds with earlier work from Maignan and Ferrell (2004), who have

examined how CSR initiatives can generate increased stakeholder support. Stanaland et al., (2011) also emphasize the importance of a company’s reputation, since “positive reputations are hard to build and easy to lose.”

(22)

22 Pivato, Misani and Tencati (2008) conducted research in another country and product

category. They examined the impact of perceived corporate social responsibility on

consumer trust in the organic food sector of Italy. Their findings are consistent with the extant literature that firms’ engagement in CSR creates trust among consumers. More specifically, they found that consumers had a greater feeling of trust towards an organic food retailer because they are perceived as more socially and environmentally conscious. This higher level of trust translated into a greater intention to purchase products from this retailer, resulting in a higher level of brand loyalty. Overall, their findings suggest that socially

oriented companies can achieve competitive advantages in those business areas where trust is a crucial factor in determining consumer choices. This conclusion is an important

contribution for this research area, since trust is a crucial subject in the banking industry. Academics also conducted research outside of Europe on how a company’s perceived CSR actions can influence consumer attitudes. Park et al., (2014) examined how Korean

consumers valued well-known Korean companies in terms of their CSR activities and reputations. Their results revealed that CSR initiatives would benefit corporations in building their reputation. This is of high importance because the authors also state that a proper firm reputation is fundamental for corporate success and that reputation is built on trust.

However, it might be naïve to think that simply engaging in CSR will in all cases have the same desired effect on consumer trust. It is important to examine the other side of the coin. The academic literature asserts that there are several moderators which influence the effect between the relationship of CSR engagement and consumer trust. The most important moderator seems to be the perceived sincerity of the companies CSR policy, because using CSR as a tool to increase consumer trust will only work if consumers will perceive this CSR policy as honest and sincere (Sen and Bhattachraya, 2001). Therefore, when CSR is being perceived as window dressing (a means of improving appearances or creating a falsely favorable impression)5_{it will not positively affect consumer perceptions.}

(23)

23 Furthermore, the research of Yoon, Gürhan-Canli, and Schwarz (2006) indicates that when consumers become suspicious and feel that the company's true motive for the CSR activity is solely to improve its image, CSR activities are not only inefficient but may actually backfire. This would leave the company with a more negative image than what would be the case without the CSR engagement.

In summary, the literature confirms that the outcomes of engaging in CSR activities lead to improved levels of consumer trust, satisfaction, and long-term relationships, which are the exact factors the Dutch banking sector is striving to improve. An important side note is that the banks’ CSR policy should be perceived as honest and sincere in order to enhance the desired outcomes.

In accordance, the following proposition is established:

• Proposition 4: Dutch banks perceive a positive relationship between engagement in

(24)

24

4. Methodology and data collection

This chapter provides more commentary regarding the research design, methodology, and procedures of this study. Additionally, this section provides an overview of the data which will be collected in order to answer the propositions and the research question, followed with the reasoning to confirm or negate the propositions. Firstly, the research design is presented in the following section.

4.1 Research design

My research question examines the perceptions of Dutch banks regarding the impact of CSR on consumer trust. In this thesis, the choice is to focus on consumer trust instead of

stakeholder trust in general. In this thesis, I define consumers as “everyone who uses the services of a Dutch bank”. There are several reasons for focusing solely on consumers rather than on all stakeholders. Firstly, secondary resources like the confidence monitor reports and other news articles specifically focus on “consumers”. In order to use this data correctly, I will focus on the same stakeholder group. Secondly, a stakeholder is defined here as “any group or individual who can affect or is affected by the achievement of the

organization’s objectives” (Bryson, 2004). This makes it difficult or even impossible to identify all of the banks’ stakeholders. This would also imply investigating how these several

stakeholders are being influenced, which is simply not achievable. This is also suggested by Pirson and Malhotra (2008), who claim that managing stakeholder trust is a complex

phenomenon because stakeholder groups have different needs and solving one trust problem can exacerbate others. Lastly, Pérez en del Bosque (2011) found that banks see their customers as “especially important stakeholders’’.

This research will be executed in a qualitative manner, which is defined as “the type of methodology that allows for contributing to and interpreting a deep knowledge of social reality, according to the study of social and material circumstances of individuals as well as their experiences, perspectives, and histories” (Rialp, A., Rialp, J., Urbano & Vaillant, 2005).

(25)

25 Finally, the qualitative data obtained was analyzed via Nvivo software. Nvivo has features such as character-based coding, rich text capabilities, and multimedia functions that are crucial for qualitative data management (Zamawe, 2015).

4.2 Data collection: methods and argumentation

In order to confirm or negate the established propositions and to answer the research question, the following data has been collected:

Ø Firstly, news articles are investigated in order to find out the relevant issues among trust in banking from society’s perspective. Combined with an examination of the Dutch banks confidence monitor reports (table 2 and 3).

Ø Secondly, an examination of the corporate annual reports is executed by conducting a textual analysis of the annual reports of ABN-Amro, Rabobank, ING and Triodos bank (2013, 2015, 2017) to examine the banks’ formal statements.

Ø Lastly, semi-structured interviews with the managers of Dutch banks’ CSR departments were conducted in order to conceptualize their vision on this subject.

The starting point of the data collection were the news articles regarding the subject of consumer trust and Dutch banks. Newspaper articles from NRC 2012 – 2017 and Het

Financieele Dagblad 2012 – 2017 were analyzed in order to establish a more independent

view of the relevant topics regarding this subject. NRC and Het Financieele Dagblad are the most prominent economic newspapers in the Netherlands, a similar approach has been conducted by De Graaf and Stoelhorst (2013).

Examining media articles should provide a clear view and a mirror of modern society, as described by Luhmann (2000). Furthermore, Eisenegger & Künstle (2011) argue that the media arena is functions as a mirror of wider society. Because the media can be seen as a mirror of society, one can identify the important topics among the banking industry, consumer trust, and societal issues.

(26)

26 The annual reports are formal public relations documents and can be used by management to portray a positive picture of a corporation’s social and environmental performance

(O’Donovan, 2002). Hence, media sources were examined to establish a holistic and independent view of the research area in order to avoid bias.

The newspaper articles were selected based on an analysis of all the articles published on the four banks. The articles were examined based on the keyword trust, but also on the most prominent synonyms: “trust”, “reliance”, “confidence” and “faith”.6_{Complementarily, in order}

to find other relevant articles, the newspapers archives were searched for the keywords “banking and trust.” In summary, the selected media articles and the banking confidence monitor reports of 2015, 2016 and 2017 were examined to identify the important topics relevant for society. In conclusion, by examining the media sources, confidence monitor reports, and annual reports, it is possible to compare these informational sources and this allows one to examine if the Dutch banks cover the same important items in their annual reports or whether certain gaps can be identified. The reason for examining the annual reports is that for the exchange of information, companies use communication channels that include both general and specific means of communication with each stakeholder. Among the general channels, the annual report is the most common tool (Pérez and del Bosque, 2011).

(27)

27 The investigation of the annual reports was conducted for the years 2013, 2015 and 2017. This allows the researcher to identify whether certain patterns over these years can be discovered. According to Carroll (1991), there is an impressive history associated with the evolution of the definition of corporate social responsibility. For this reason, several

synonyms and related definitions are examined during the textual analysis of the corporate reports. In order to establish a holistic approach of the relevance of the CSR and consumer trust phenomena in the corporate reports, I will consider the following keywords: “corporate social responsibility, social responsibility, environmental responsibility, corporate social performance and corporate citizenship. As Carroll (1991) mentions, these words are often used as synonyms for the same concept which highlight the importance of consumer trust (table 1). Additionally, a textual analysis was conducted in order to investigate which components of CSR are most prominent (table 4.1 – 4.3).

Lastly, the semi-structured interviews provide a final contribution in order to negate or support the established propositions and to answer the research question. The semi- structured interviews were conducted in order to provide more insights on how Dutch bank managers think about the CSR – consumer trust relationship. It also establishes an

understanding of how CSR is perceived and undertaken by bankers in relation to regain or maintain consumer trust. To conclude, several informational sources were utilized in order to confirm or negate a proposition and to answer the research question. However, an important side note is that, depending on the proposition, some sources might be more relevant than others. This is discussed per proposition in each sub-chapter of the results section.

(28)

28

4.3 Visualization of data collection

Figure 3 visualizes the method of the data collection. The figure below is related to the visualization of how proposition 1 will be answered.

(29)

29

4.4 Research philosophy, methodology and approach to theory development

There are several research philosophies in business and management research. My

ontological perspective of this research (my view of the nature of reality or being) is linked to an interpretivist way of conducting research because I’m interested in the way how Dutch banks think they should set out their strategies and how they think about the best way to regain or maintain consumer trust aligned with their strategy and business activities. This data is essentially socially constructed and subjective (Saunders and Lewis, 2018).

My view regarding what constitutes acceptable knowledge (epistemology) is also linked to interpretivism because I focus on subjective meanings and social phenomena (i.e. consumer trust and banks perceptions). Accordingly, Saunders and Lewis (2018) state that an

interpretivist perspective is especially relevant in business and management research, particularly in fields such as organizational behavior, the area where my research is

concentrated. Since I am studying an area in which certain knowledge is already available, a deductive approach is employed. This deductive approach will follow the sequential stages as discussed in Saunders & Lewis (2018):

1) Define the research question from the existing literature 2) Establish testable propositions

3) Collect data to test the propositions

4) Analyze the data to determine whether it supports the propositions

5) Confirm the initial general theory or modify it if the findings do not confirm the existing general theory

This research is categorized as exploratory research since my research aims to seek new insights, ask new questions, and assess topics in a new light (Saunders & Lewis, 2018). According to the same authors, exploratory research concerns discovering information about a topic that is not understood clearly by the researcher. Semi-structured interviews are recommended for this type of research.

(30)

30

4.5 Research strategy, techniques and procedures

How, what and why questions are suitable questions for a case study. Saunders & Lewis (2018) emphasize that case studies are particularly helpful at enabling the researcher to obtain a better understanding of the research context. They also state that if you are

concerned with understanding why managers make decisions in certain ways, a case study is the best choice of research strategy. Furthermore, Yin (2011) states that case studies aim for an in-depth understanding of a real-life phenomena which requires specific knowledge of contextual conditions.

4.5.1 Triangulation

This method of data collection follows a triangulation of informational sources: confidence monitor reports, media articles, annual reports, and interviews with the involved actors (figure 4). Triangulation is the use of two or more sources of data or data collection methods within one study. The triangulation method was utilized because triangulation is a prominent method to establish credibility of the research findings (Saunders and Lewis, 2018). Other advantages of triangulation, according to Jick (1979) are the enhancement of confidence, a clearer understanding of the research topic, and unique results. In conclusion, the

triangulation method also improves the validity of the results. This is because the perceptions of the respondents are likely highly subjective towards their own CSR policy and their own banking practices.

(31)

31

4.6 Confirming or negating the established propositions:

• Proposition 1: Dutch banks endorse the importance of re-establishing consumer trust. In terms of confirming or negating the proposition, I expect that the annual reports confirm the importance of this subject. Secondly, the data from the annual reports is supported by the confidence monitor reports and news articles. Lastly, the importance of this topic is confirmed through the respondents during the interviews. If the proposition is supported, the data demonstrates similarities with the existing literature and thus it would reveal that regaining consumer trust is of special relevance for Dutch banks.

• Proposition 2: Dutch banks comprehend which banking practices have a negative effect on consumer trust and therefore, they avoid these practices.

In order to confirm the proposition, examination of news articles was conducted. Secondly, the banking practices which have a prominent negative impact on trust (according to the news articles) are confirmed by the information from the confidence monitor reports. Thirdly, these practices are given special attention in the banks’ annual reports. Lastly, the

interviewees acknowledge that these banking practices have a major impact on trust and confirm that the bank will avoid these practices because enhancing trust is of paramount importance. If the proposition is negated, valuable information is obtained that banks seem to be conflicting in terms of CSR communication and how they actually conduct CSR practices in reality. They state that they need to live up to social responsibilities but don’t act on it.

(32)

32 • Proposition 3: Dutch banks employ a hierarchy in the relevance of the CSR

components.

In order to confirm the proposition, the annual reports were investigated on the CSR topic and demonstrate that certain components of CSR are more relevant than others, which is depicted in table 4.1 – 4.3. In addition, this is confirmed through the confidence monitor reports, news articles, and the interviews. If the proposition is negated, the data contradicts the existing literature and reveals that banks do not place relevance on certain CSR

components and treat all the same components with the same urgency in their CSR policy.

• Proposition 4: Dutch banks perceive a positive relationship between engagement in CSR activities and the level of consumer trust.

In order to confirm the proposition, the data obtained from the annual reports would reveal that when banks engage in CSR, consumer trust is enhanced. This would align with the data from the confidence monitor reports and this is confirmed by the respondents. News articles are also considered in the analysis. However, the relevance of news articles is less

prominent in this regard due to the fact that this proposition relates to the banks’ perceptions. If the proposition is negated, this implies that banks do not perceive CSR as a tool to

(33)

33

5. Results

This chapter presents the results from the obtained data. For a total overview of the obtained data from the annual reports, see Appendix 2. In order to maintain a clear structure in

presenting the results, this chapter is structured in the sequence of the propositions. Additionally, the results regarding the annual reports and interviews are presented per each individual bank in the following sequence:

1) ABN-Amro 2) ING bank 3) Rabobank 4) Triodos bank

Hence, per proposition, all data obtained from all banks will be presented in the sequence shown above. This means that the results chapter is divided in 4 sub-sections. Each sub- section presenting the results of the concerning proposition (figure 4). In the discussion chapter, all data sources will be compared and confronted with each other, as well as with the existing literature.

(34)

34 Interviews were carried out with CSR managers or policy makers of ABN-Amro, Rabobank, and Triodos bank. Unfortunately, it was not possible to establish an interview with a CSR policymaker or manager of ING bank. Even after persistent requests for the interviews, the responsible CSR managers of ING bank told me that they were not able to fulfill my request, due to a lack of time. This creates a lack of necessary information regarding ING’s

perspective of the CSR - consumer trust link.

However, information is publicly available about ING’s CSR policy and the consumer trust subject, such as annual reports (including CEO statements), other public statements, and news articles. However, due to the lack of interview data from ING bank, it should be noted that this lack of data might limit the internal validity of the research findings. This is because the validity of the research is concerned with whether the appearance of CSR conflicts with actual practice (Saunders & Lewis, 2018). Since the perception of banks are investigated in this research, the missing of an interview with one of the four banks should be noted as a limitation. This is discussed further in chapter 6.1

(35)

35

5.1 Results regarding the 1st_proposition

• Proposition 1: Dutch banks endorse the importance of re-establishing consumer trust.

Due to the fact that this proposition is being examined through the lens of the Dutch banks, some data is of greater relevance (annual reports, confidence monitor reports and

interviews) than other data (news articles). However, in order to maintain a consistent approach of triangulation, all data sources were examined, starting with the news articles.

News articles

This section presents the results from the news articles and more extensively presents the findings from the other sources due to the nature of the research question, as described above. The media articles indicate that banks are still not able to restore trust in the financial sector. Specifically, according to an article from Het Financieele Dagblad7_{banks receive the}

lowest scores in the area of “honesty and fairness”. Another article8_{indicates that banks}

actually do start many initiatives, but regardless of these efforts, the desired results are not being obtained. Additionally, the Dutch Financial Market Authority feels that the banking sector should change more on their own initiative and not because of external pressure.9_In

this same article, the top executive of the Dutch Financial Market Authority explains that they are concerned that banks only seem to support change due to this external pressure from society and the government. Furthermore, the top executive also mentions that banks do still not realize that they should do things differently. In conclusion, although the media opts that banks set up certain practices to enhance trust, it still seems externally driven and banks still engage in banking practices which have a major negative impact on trust (e.g. excessive remuneration).

7_{https://fd.nl/ondernemen/1226687/klant-centraal-blijft-lastig-voor-banken}

8_{https://fd.nl/beurs/1169900/verbeteringen-banken-leiden-niet-tot-meer-vertrouwen} 9_{https://www.nrc.nl/nieuws/2015/04/10/banken-schieten-in-eigen-voet-1485842-a282158}

(36)

36 Confidence monitor reports

As mentioned earlier, the confidence monitor reports are an initiative of the Dutch Banking Association (NVB). These reports have been published annually since 2015 on topics

regarding the scores and findings among trust in banking. The reports indicate that banks do take the trust matter seriously, which is endorsed by the statements in the reports. For example, the report from 2015 claims that “all banks together must take their responsibility to re-establish consumer trust in Dutch banks.” The 2016 report declares that, “it is up to the banks to continuously prove that they are worth of being trusted.” In addition, the 2017 confidence monitor report opts that “the banking confidence monitor of 2017 is an opportunity. An extra opportunity for banks to learn from their customers. Customers are ready to share their opinions and experiences. They can rely on the efforts of banks to further improve the quality of their services.” In conclusion, the reports indicate the importance of re-establishing consumer trust in the Dutch banking sector.

Annual reports and Interviews

Now that the news articles and the confidence monitor reports have been examined, an investigation of the banks’ annual reports is provided regarding the first proposition. Firstly, table 1 displays how often the topic of consumer trust is discussed in the banks’ annual reports (investigating the reports through a frequency count of this subject, see table 1). Tables 4.1 – 4.3 provides a more in-depth picture of how the annual reports relate the CSR components to consumer trust.

The results of table 1 provides the following overview:

Bank Frequency count trust / reliance / confidence Annual report 2013 Frequency count trust / reliance / confidence Annual report 2015 Frequency count trust / reliance / confidence Annual report 2017 Total Rabobank 10 13 15 38 ING 16 4 17 37 ABN-Amro 19 17 8 44 Triodos 2 0 0 2 Table 1.

(37)

37 The first remarkable observation is that Triodos bank rarely provides any attention towards the topic of consumer trust in their annual reports, especially in comparison to the other Dutch banks, who evidently provide more attention in their annual reports towards this subject. One reason might be that Triodos bank has already obtained the highest levels of trust compared to their competitors. Therefore, this topic might be less urgent on their

corporate agenda. This is an interesting finding, which might indicate that Triodos bank does not necessarily focus their attention on re-establishing consumer trust. The data obtained from the interview with the Triodos respondent provides a more holistic answer to this question. Below, a further outline of the findings per each banks’ annual report is explored.

ABN-Amro

The data obtained from the annual reports of ABN-Amro confirms that ABN-Amro endorses the importance of re-establishing consumer trust. However, they also perceive this as a great challenge: “regaining the trust of society and meeting increasing national and international regulatory requirements also continued to be big challenges for ABN AMRO, as they are for the entire financial industry” (ABN-Amro annual report, 2013). Furthermore, ABN-Amro has high goals and expectations. The annual report (2017) states that, “in 2020, ABN-Amro wants to be leading among Dutch banks regarding the level of consumer trust.” Additionally, ABN-Amro mentions in their annual reports that their core values are primarily safeguarded out of trust from their stakeholders. Their annual report (2013) asserts that, ”we want to be a trusted partner for our clients, both in personal finance and in business. The banking industry has suffered a loss of trust in recent years. Clients will only give us their trust if we put their interests first and provide full transparency on our business. We are committed to making this happen – and we have already made great strides in this area.” It also seems that ABN- Amro sees trust partially as a source of competitive advantage: “we recognize that our competitive advantage will always be our people, their talent and the trustworthy relationships they have with our clients” (ABN-Amro annual report, 2015).

(38)

38 In conclusion, from the formal statements in the annual reports, it seems that ABN-Amro takes the role of trust in banking seriously and during the interviews, this was confirmed by the respondent:

“The key performance indicator of our company is the Net Promotor Score. Without trust, the

Net Promotor Score will always be insufficient. For us, it is important to know how likely it is that a client will recommend our services to someone else. In the end, word of mouth promotion is the best promotion you can get as a firm.”

The respondent asserted:

“The confidence monitor report and our NPS are the two key performance indicators. These

are our focus points, more trust leads to a higher NPS. When trust is high, consumers will be more likely to use our services. I think that this will eventually lead to more business.”

To conclude, ABN-Amro aligns with the proposition that re-establishing trust is an important priority for Dutch banks, because the current levels of trust are too low and disappointing. As the representative of the bank states:

“Our levels of consumer trust are low, it is actually not quite good’. This is currently the situation for all large banks in the Netherlands.”

ING

A similar perspective was offered by ING, who also confirm the importance of re-

establishing consumer trust. For example, in their annual report of 2013, ING announces that “on the surface, the business of a financial institution such as ING may seem to be principally about money. In reality, ING’s business is centered on people and trust. Only by acting with professionalism and integrity can we maintain our stakeholders’ confidence and build the company’s reputation” (ING annual report, 2013).

Clear statements were made by ING in their annual reports. ING claims that “earning and keeping the trust of our customers is of paramount importance” (ING annual report, 2017) and mentions that “in our view customers basically want a solid bank they can trust” (ING annual report, 2013).

(39)

39 Rabobank

Rabobank also provides the same image that restoring trust is of particular importance. For example, Rabobank mentions that “it is essential for banks to regain the loss in trust“ (Rabobank annual report, 2013) and the annual reports publish extensively about the consequences of the Libor scandal. In the annual report of 2013, Rabobank mentions that in 2011, 50% of the Dutch consumers felt a feeling of trust towards the company, whereas in 2013 (after the Libor-affair)10_{, this percentage of consumers who felt a certain level of}

confidence in Rabobank was reduced to 30% (Rabobank annual report, 2013). The respondent answered aligned with the findings from the annual reports:

“Consumer trust is very important, it is the most important factor for a bank. Because a bank can fail or succeed due to consumer trust.”

Triodos bank

So far, the banks devote a large amount of attention towards the trust subject in their formal reports. The interesting finding from the examination of the annual reports is that Triodos bank seems to be the exception to the rule. Triodos bank only devotes a minimal amount of text towards this subject in their annual report of 2013 by stating that: “Triodos bank’s reputation is a strategic pillar, as confidence in Triodos bank is vital to its provision of services, so any risks to it are managed very carefully.“ The interviewee from Triodos bank explained in more detail why this is the case. During the interview, it became clear that at Triodos a different perspective towards the consumer trust topic is being adopted:

“We don’t really measure customer confidence in the traditional manner, it doesn’t tell us so much. We have a mission, and we see our customers as participants in a movement.

Measuring customer confidence is being executed through traditional economic thinking. You can measure it, and you are able to compare these scores between the banks.”

“For us, it is important that people still feel that they want to deposit their money at Triodos. We offer 0% interest on our savings accounts, according to classical economic thinking, it wouldn’t even be possible for us to survive. Measuring consumer confidence in a traditional manner is a bit aligned with the classical economic thinking. It doesn’t work like that.

Consumer trust lies in a very different context at Triodos.”

(40)

40

5.2 Results regarding the 2nd_proposition

• Proposition 2: Dutch banks comprehend which banking practices have a negative effect on consumer trust and therefore, they avoid these practices.

To provide an answer to this proposition, first it is necessary to identify which banking practices have a prominent negative impact on consumer trust. Therefore, according to the same sequence the propositions, I first analyze the news articles from the prominent Dutch economic newspapers in order to establish a view of which themes play a major role in society. As stated earlier, newspaper articles from NRC 2012 – 2017 and Het Financieele

Dagblad 2012 – 2017 were analyzed in order to establish a proper view of the relevant topics

regarding this subject.

News Articles

After an extensive news articles research, it is clear that the media points out two important factors of attention towards the process of regaining consumer trust, these contain:

Ø Bank remuneration policy

Ø Inability of banks to be customer focused

In the next sub-chapter, I will further investigate which major critical incidents occurred in the Dutch banking industry.

5.2.1 Critical incidents in the Dutch banking sector

Firstly, I will provide an overview on which kind of banking practices significantly affected the levels of consumer trust according to the news articles. Aside from the inability of banks to establish customer centricity and the commotion regarding remuneration, this sub-chapter examines which other incidents significantly harmed society’s trust in the banking industry.

(41)

41

Libor-rate scandal

During the year 2012, allegations broke out that Rabobank has been involved in

manipulating the London Interbank Offered Rate (LIBOR). Among other international banks involved, as a Dutch bank, Rabobank manipulated the index in order to gain more profits (O'Brien & Gilligan, 2013). The Libor rate is used as a benchmark for trillions of mortgages and loans and is therefore considered one of the most crucial interest rates in finance. Rabobank displayed their worst side in manipulating this rate in order to fill their own pockets. As a consequence, the trust in banking as a whole diminished even further.

Interest rate swaps

Another critical incident was the recent scandal regarding interest rate swaps for small- and medium sized enterprises (SME’s) in the Netherlands. These financial products proved to be all but transparent for banking clients. Banks failed to completely inform clients about the possible negative financial consequences of this complex financial product. All three large banks in the Netherlands displayed their negative side by misinforming their clients and by selling these products to SME’s. This scandal was perceived by society as one of the greatest examples that banks do not act in the best interests of their clients. Once again, society felt that banks were pursuing their own financial self interest over those of its clients.

Reckless investment policies (woekerpolissen)

In the 90’s, a lot of reckless investment policies were sold to Dutch consumers. Around ten years ago, it was discovered that these products contained large hidden costs, which led to the Dutch nickname: woekerpolis. There is no clear translation for this Dutch word, but the term reckless investment policies comes close. Although banks did not primarily sell these products, they were the intermediary in selling these products to uninformed Dutch

consumers. Again, consumers were harmed while banks profited. To date, there are still lawsuits against banks regarding these scandals. In 2015, ING received a claim of 2.5 billion Euros regarding this affair.11

Examining the perspective of Dutch banks regarding the impact of corporate social responsibility on consumer trust

Master Thesis