Bank run and financial literacy: assessing trust in deposit guarantee schemes from a third mission perspective. Evidence from Italy

Economic and geopolitical crises since 2006 have progressively eroded trust in the banking system (Tobias et al., 2024). During this period, a substantial body of research has examined various dimensions of banking crises, exploring their causes, dynamics and consequences. Notable contributions relevant to this study include works by Dell’Ariccia et al. (2008), Borio and Drehmann (2009), Angkinand (2009), Laeven (2011) and Laeven and Valencia (2018). At the same time, several banks, such as Northern Rock in 2007 (House of Commons Treasury Committee, 2008; Shin, 2009), Banco Popular in Spain in 2017 (Single Resolution Board, 2017) and Credit Suisse in 2023 (Federal Department of Finance, 2023), experienced significant distress, all linked by the phenomenon of bank runs. To mitigate this risk, the Banco Popular case prompted changes to Pillar 2 of the European Banking Union, granting authorities the power to temporarily suspend deposit withdrawals and establish specific terms for such suspensions ^[1]. This provision reflects the authorities’ acknowledgment that early signs of a banking crisis can trigger bank runs, a phenomenon recently confirmed by the failure of Silicon Valley Bank (FDIC, 2023).

The persistence of current economic and geopolitical instability, combined with technological advancements, may increase both the risk and speed of bank runs, potentially transforming manageable banking crises into irreversible failures (UNCTAD, 2025; IMF, 2025; BGFR, 2025). In this context, the presence of DGSs is vital for maintaining financial system stability. As noted by Giorgio et al. (2024), these schemes play a crucial role in the proper functioning of financial markets and in preventing systemic risk from bank runs (Diamond and Dybvig, 1983; Arnaboldi, 2015; Kozinska, 2020). Such phenomena can exacerbate pre-existing problems within banks, as seen during the 1920s crisis in the USA, which led to the establishment of the Federal Deposit Insurance Corporation (FDIC) in 1933 (FDIC, 1998). Unlike the USA, Europe does not have a single European DGS but follows a minimum harmonization approach outlined in the Deposit Guarantee Schemes Directive (hereinafter also “DGSD”) ^[2], aimed at fostering stability and trust in the banking system. This study operates on the premise that DGSs and the regulations governing them are key to financial system stability. However, the effectiveness of these institutions in building trust in bank deposits is not always fully realized (Iyer and Puri, 2012), and this effectiveness may depend on depositors’ knowledge and awareness of DGSs, which significantly influence their behavior (Iwanicz-Drozdowska et al., 2024).

This leads to the main research question: Can greater awareness of DGSs, facilitated by enhanced financial education, reduce the risk of a bank run?

This is a critical question because bank runs can destabilize entire economic systems, and this phenomenon has been extensively analyzed from various perspectives in the literature (Diamond and Dybvig, 1983; Kaufman, 1988; Arnaboldi, 2015; Brown et al., 2014; Campioni et al., 2017; Kozinska, 2020; De Cesare et al., 2023). Considering the absence of a third pillar within the European Banking Union to safeguard against bank runs, examining the European context is particularly relevant. This study focuses on Italy, a significant case because of the high volume of protected deposits and its reputation as a nation of savers, with steadily increasing bank deposits in recent years (Russo, 2024). Moreover, Italy is a bank-centric country that has faced several banking crises, such as those involving Veneto Banca, Banca Popolare di Vicenza and Monte dei Paschi di Siena (Ministry of Economy and Finance, 2017a, 2017b, 2017c). Despite being one of the world’s leading economies, Italy exhibits relatively low levels of financial literacy (OECD/INFE, 2023), including among micro-entrepreneurs (D’Ignazio et al., 2022). This has prompted the adoption of legislation aimed at enhancing financial education (Italian Parliament, 2024), emphasizing the relevance of the Italian context for this analysis. Financial education is defined as the process aimed at enhancing financial literacy, which Kaiser and Lusardi (2024) describe as “domain-specific human capital related to personal finance”. The specific relationship between financial education, awareness of DGSs and bank run risk remains underexplored, particularly among university students.

These factors make this study a valuable benchmark, with findings potentially relevant to other countries. This paper uses a regression model to analyze data from a survey of Italian university students, who exhibit particularly low levels of financial literacy (Bank of Italy, 2024). This underscores the need for stronger financial education initiatives, especially as younger generations are more susceptible to the “Bank Click Run” – a modern form of bank run driven by the rapid spread of information and the ease of withdrawing deposits with a single click (De Cesare et al., 2023). Enhancing financial education for students and their families, within the framework of universities’ third mission – which focuses on disseminating knowledge throughout society and supporting communities – is essential (Compagnucci and Spigarelli, 2020). An original aspect of this study, compared to previous research (Letamendia and Poher, 2020; Lanciano et al., 2024; Adu-Ntim et al., 2024), is its use of regression analysis to quantify and measure the potential reduction in bank runs attributable to the influence of the examined variables.

This leads to the second research question: Which variables within the domains of financial education, knowledge of DGSs and trust in banks most significantly influence the risk of a bank run?

The following sections address these research questions. Section 2 reviews relevant literature and regulations, outlining the significance of the topics discussed. Section 3 explains the methodology, which includes the questionnaire structure (Section 3.1), descriptive statistics (Section 3.2) and the regression model with its results (Section 3.3). Section 4 presents the findings, and Section 5 concludes the paper, discussing theoretical and practical implications (Section 5.1), as well as limitations and directions for future research (Section 5.2).  Appendices 1 and  2 provide additional data on covered deposits in EU-20 countries and the complete questionnaire, respectively.

Banking crises are characterized by heightened default rates, capital losses and bank runs, which can lead to bankruptcies, public interventions or forced mergers (Laeven and Valencia, 2008; Boissay et al., 2013). Although these crises occur more frequently in economies with less concentrated banking systems (Beck et al., 2006), they exhibit recurring patterns often influenced by both endogenous factors and exogenous shocks, such as negative gross domestic product growth (Klomp, 2010). Among the major contributing factors, sharp increases in credit and asset prices tend to precede banking crises, making them reliable indicators of stress within financial systems (Borio and Drehmann, 2009). Banking crises are typically associated with simultaneous declines in credit growth and gross domestic product, with particularly severe effects in sectors heavily dependent on external financing (Dell’Ariccia et al., 2008). These crises are often more detrimental in high-income countries, where they tend to last longer and result in greater losses (Laeven and Valencia, 2018). Such episodes are frequently accompanied by cyclical fluctuations in credit and asset prices, typically necessitating extensive government intervention for their resolution. Thus, beyond early detection, maintaining a robust regulatory framework for crisis management and resolution is critical.

Given the destabilizing impact of banking crises, regulations have been progressively strengthened to mitigate their effects. Ineffective or delayed crisis management can impose substantial societal costs by restricting credit flow to the real economy (Laeven, 2011). In Europe, the necessity for a more comprehensive regulatory framework became evident after the 2008 financial crisis, which revealed significant shortcomings in existing mechanisms. The initial response was the creation of the Single Supervisory Mechanism ^[3], which centralized bank supervision under the European Central Bank. This was followed by the introduction of the Single Resolution Mechanism ^[4], designed to facilitate the orderly resolution of failing banks, alongside the establishment of the Single Resolution Fund and coordinated European regulations, including the Bank Recovery and Resolution Directive (BRRD) ^[5] and its subsequent revision (BRRD II) ^[6], which provided harmonized tools for crisis management. Another essential safeguard in this context is the role of DGSs, which are crucial for maintaining depositor confidence, particularly in times of distress. In Europe, there is no unified European DGS; rather, each country maintains its own DGS, though they must adhere to minimum harmonization standards set by the DGSD. Significant progress has been made in European legislation over the past decades. The 1994 Directive on DGSs ^[7] marked the beginning of harmonization by mandating DGS participation for all credit institutions and establishing coverage on a per-depositor rather than per-deposit basis. This was later amended in 2009 ^[8] to increase coverage levels and shorten repayment periods. The adoption of Directive 2014/49/EU (DGSD) further introduced harmonized coverage limits per depositor and established the current framework for deposit insurance, with the overarching goal of strengthening confidence in the banking system. Research indicates that extending deposit insurance coverage has a stabilizing effect on depositor confidence (Knell and Stix, 2015), provided this protection is communicated effectively (Schich, 2008). Empirical evidence supports the notion that countries with comprehensive deposit insurance and stringent capital requirements face lower economic costs during financial crises (Angkinand, 2009). Thus, the role of DGSs should be widely recognized beyond expert circles to ensure all depositors understand their importance in the economy.

The literature and regulatory frameworks highlight the critical role of DGSs in preserving depositor confidence. Foundational studies, such as Diamond and Dybvig (1983), demonstrate that deposit insurance can effectively prevent bank runs, which, as Kaufman (1988) points out, can be contagious, destabilizing the entire financial system and creating systemic risks. Therefore, an effective DGS is a fundamental element in preventing banking crises and maintaining trust in the financial system. However, to avoid moral hazard, the powers granted to DGSs must be carefully defined and restricted to avoid broad interventions that could encourage risky behavior by banks (Kozinska, 2020). DGSs play a pivotal role in enhancing financial stability by reducing the likelihood of bank runs, which, in turn, strengthens the protection afforded to depositors, financial institutions and the broader financial system. However, this protection may give rise to moral hazard, as deposit insurance can incentivize banks to take on riskier behaviors. Since the introduction of DGSs and the subsequent increases in coverage limits, some banks have adopted riskier strategies, contributing to the frequency of crises. This phenomenon, known as increased risk appetite, arises because banks can attract deposits regardless of portfolio risk, as depositors are protected by insurance and may continue depositing even in the presence of rising risks (Calomiris and Chen, 2022). Conversely, in China, where an implicit state guarantee existed before the establishment of a formal DGS, the implementation of the scheme effectively limited this guarantee, thereby reducing moral hazard risks (Chen and Shen, 2023). The International Association of Deposit Insurers (IADI, 2014) identifies four key functions of DGSs: the paybox function, providing direct reimbursement to depositors in case of bank insolvency; the paybox-plus function, which also involves financing resolution operations; the loss-minimizer function, supporting restructuring and recovery efforts under the least-cost principle; and the risk-minimizer function, involving early intervention, prudential supervision and resolution strategies. The European Commission (2016) emphasizes the role of depositor confidence in determining the benefits of a single DGS, noting that an integrated European system could further strengthen this trust.

The literature shows that banking crises have a profound impact on public trust in the banking system. Osili and Paulson (2013) found that US immigrants with firsthand experience of banking crises used the banking system 11% less than their peers without such experience. This effect is even more pronounced among older individuals, who are more likely to have held accounts in their home countries during crises. Fungáčová et al. (2022) distinguish between severe and mild banking crises, noting that while both reduce trust in banks, crises with significant real economic consequences tend to erode trust among younger individuals, while milder crises predominantly affect older people. Trust in banks is shaped by various factors, including religious, political and economic values, as well as sociodemographic characteristics, with women generally trusting banks more than men, and trust increasing with income (Fungáčová et al., 2016). Van Esterik-Plasmeijer and van Raaij (2017) identify key factors contributing to trust in banks, including bank integrity, transparency, customer orientation and competence. Conversely, factors such as executive compensation, negative media coverage, falling stock prices and opaque product information can erode public trust (Jansen et al., 2015). Finally, van der Cruijsen et al. (2023) note that trust in the banking system behaves procyclically, decreasing during financial crises.

In this context, it is evident that a banking system effectively protected by a DGS enhances depositor confidence and reduces the likelihood of bank runs. In an environment marked by frequent crises and increasing instability, DGSs are critical for preserving trust in the banking system and reinforcing overall stability by providing guarantees on protected deposits (Sova and Poliakova, 2021; Farkhondeh et al., 2023). To ensure the credibility of these schemes, government support is often necessary (Bonfim and Santos, 2023). This is especially relevant in light of bail-in legislation, which has eliminated implicit public guarantees, thus increasing banks’ reliance on deposits as a primary funding source. Fiordelisi and Scardozzi (2022) emphasize that, in the absence of such guarantees, investors demand higher returns on banks’ liabilities, prompting banks to favor safer, more cost-effective funding options such as deposits. The effectiveness of DGSs depends significantly on the level of depositor awareness, as this knowledge directly influences depositor behavior (Iwanicz-Drozdowska et al., 2024). Public awareness is critical for the effectiveness of DGSs, as it helps foster trust in the banking system and reduces the likelihood of bank runs. Although trust is also influenced by cultural, political and economic factors (Alamsyah et al., 2020), the importance of knowledge about DGSs cannot be overstated. Furthermore, research shows that awareness tends to increase during crises, provided that information campaigns are adequately robust and widespread (Goedde-Menke et al., 2014).

Financial education is crucial for enhancing depositor knowledge about DGSs, preventing premature withdrawals and mitigating banking crises. Awareness of deposit insurance is vital for financial stability, as it helps reduce the risk of bank runs. Effective dissemination of this knowledge requires coordinated initiatives from competent authorities, who must recognize its importance in crisis prevention (Bank of Italy, 2020). The international literature further supports the link between poor financial literacy and the occurrence of crises. For instance, Kapparov (2018) connect banking crises in Kazakhstan to a severe lack of financial literacy, while Plakalović (2011) attributes a significant portion of post-conflict debt issues in Bosnia and Herzegovina to inadequate financial literacy. Moreover, poor financial literacy, low income and low savings correlate with the likelihood of crises in Georgia (Babych et al., 2018), while Cyprus, which experienced a severe financial crisis in 2013, has a financial literacy rate of just 37.33% (Andreou and Anyfantaki, 2021). Financial education serves as a preventive measure against economic crises, helping individuals make informed decisions during macroeconomic shocks (Klapper et al., 2013) regarding savings (Lewis and Messy, 2012), deposits and potential withdrawals. It also empowers individuals to compare financial products, understand their rights and obligations (Gortsos, 2015) and manage debts responsibly (Plakalović, 2012). These factors are critical for enhancing the stability of the financial system, as pointed out by Widdowson and Hailwood (2007), and financial literacy is fundamental to trust in the financial system (Letamendia and Poher, 2020). Financially literate consumers are more likely to trust banks, insurance companies, pension funds (van der Cruijsen et al., 2021) and central banks (Niţoi and Pochea, 2024).

Financial education plays a vital role in promoting trust in the banking system, financial inclusion and reducing income inequality, thus improving the economic position of low-income households (DerMesrobian, 2023; Heyert and Weill, 2024; Hasanova, 2018). However, consumers cannot fully benefit from access to financial services without a clear understanding of these products, underscoring the importance of financial education (Morgan et al., 2018). It also helps reduce financial fragility (Lusardi et al., 2021; Chhatwani and Mishra, 2021). Research indicates that higher financial literacy increases the likelihood of entrepreneurial activity and improves business performance (Li and Zhang, 2024; Ahmad, 2024). Additionally, financially literate individuals are less prone to mortgage stress and make more prudent investment decisions, including better market timing (Hu et al., 2024; Adil et al., 2022; Guiso and Viviano, 2015). Financial literacy also empowers individuals to explore innovative investment opportunities (Aren and Nayman Hamamci, 2023) and influences participation in financial markets, with a U-shaped relationship between literacy and market participation (Fisch and Seligman, 2022). Thus, financial education is essential for improving welfare outcomes and should guide policies aimed at enhancing financial knowledge among the population (Lusardi and Mitchell, 2014). In today’s financial landscape, effective engagement with modern financial instruments – including digital banking platforms – requires not only financial education but also digital financial literacy. The latter, which encompasses the ability to use digital tools for e-banking transactions, is increasingly critical for informed financial decision-making (Ferilli et al., 2024). As financial technology has transformed the accessibility and complexity of financial services, digital financial literacy has become indispensable, particularly in engaging with emerging developments like cryptocurrencies and artificial intelligence-driven investment solutions (Cascavilla, 2024; Bartáková et al., 2025).

The OECD/INFE (2023) recognizes financial literacy as a fundamental life skill, regularly assessed internationally. The 2023 survey, covering 39 countries, found that only 34% of adults met the minimum target score for financial literacy, with significant gaps in knowledge, behavior and attitudes. While 84% of respondents understood inflation, only 42% could correctly answer questions on compound interest. In Italy, IACOFI (2023) reported an average score of 10.7 out of 20, highlighting persistent deficiencies. Young people generally display lower financial literacy compared to adults, with only 35% of young Italians familiar with basic economic concepts. Furthermore, regional disparities are evident, with central, southern and island regions disproportionately disadvantaged. Globally, poor financial literacy correlates with distrust of banks, a major factor in the lack of checking accounts in the USA (FDIC, 2021). Such deficiencies result in suboptimal financial choices, undermining the stability of the financial system. The unpredictability of individual behavior complicates effective intervention, as noted by Hastings et al. (2012), and weakens the effectiveness of DGSs. Therefore, promoting financial education is crucial for improving trust in the banking system and enhancing its stability.

Governments and universities play a key role in this endeavor. In Italy, the legislative proposal “Competitiveness of Capital” has made financial education mandatory in schools, a policy that has now been enacted (Italian Parliament, 2024). Universities, as part of their third mission, are increasingly involved in promoting financial education. They can contribute significantly to financial literacy through academic programs and outreach initiatives, helping to bridge the knowledge gap in society. Research by Grable et al. (2012) highlights the effectiveness of university programs in enhancing students’ financial literacy. Additionally, universities can establish financial education centers and peer-to-peer programs to further enhance financial literacy (Dwivedi et al., 2015). By prioritizing financial education, universities can foster a deeper understanding of DGSs and support informed depositor decision-making. However, current awareness of these institutions remains limited, hindering trust in banking, as evidenced by a 2024 questionnaire on DGS awareness presented in the next section.

This research is based on a questionnaire of our own elaboration, disseminated through bachelor’s and master’s university courses-following approaches adopted by Balkenborg et al. (2011) and more recently by Semenova (2023) – as well as via word of mouth, social media platforms (LinkedIn, Facebook, Instagram and WhatsApp) and during the presentation of an article published on the “PhD Salon” blog (Giorgio and Crisafulli, 2024). Students were specifically encouraged to further share the questionnaire within their families. This initiative is consistent with the third mission of universities, which emphasizes engagement with society beyond the student body. The questionnaire method was selected for its suitability in evaluating qualitative variables, as demonstrated by its widespread use in similar studies within this field (Lanciano et al., 2024; Iwanicz-Drozdowska et al., 2024). The survey investigates depositors’ awareness of the existence and functioning of DGSs, as well as their trust in these schemes and in the Italian banking system-factors that are crucial for maintaining the financial stability of banks and the system as a whole. The collected data were used to develop a regression model aimed at assessing the relationship between the risk of bank runs and knowledge of DGSs and trust in banks. While regression analysis is commonly used in this field, previous studies such as Adu-Ntim et al. (2024) have focused on its application to financial literacy and savings account ownership, without directly linking it to phenomena like bank runs or trust in banks. This distinction underscores the originality of the present study.

The questions were created on the basis of what was previously done by Iwanicz-Drozdowska et al. (2024): they developed a questionnaire, administered to clients of failed banks, to investigate knowledge of DGSs, representing an original approach within the relevant literature. Differently from their questionnaire, in the one proposed, the number of questions was reduced to focus on the ones that more effectively demonstrate the knowledge of deposit guarantee and to make it more accessible. Considering that financial literacy and knowledge about DGSs are qualitative factors, using a questionnaire as a basis for a quantitative elaboration is regarded as a good strategy to analyze the phenomenon; many rich descriptions of social phenomena are accomplished best with qualitative approaches (Mezmir, 2020).

The questionnaire comprises nine questions designed to explore depositors’ knowledge and awareness regarding the existence, functioning and regulation of DGSs. Additionally, it assesses their trust in banks and their propensity to engage in bank runs. The latter aspect is further examined through a regression analysis. To this end, the questionnaire is structured as follows: the first two questions collect qualitative demographic data (age and gender); the third and fourth assess financial literacy, using responses as proxies for financial knowledge. These questions are included in light of evidence from the Bank of Italy, which has documented low levels of financial literacy among adults, young adults and micro-entrepreneurs (D’Ignazio et al., 2022; Bank of Italy, 2023; Bank of Italy, 2024). The fourth question uses a Likert scale, a widely recognized instrument in social science research for capturing attitudes and opinions by enabling respondents to indicate their level of agreement or disagreement (Ankur J. et al., 2015). Questions 5–8 evaluate knowledge of DGSs, considered an integral part of financial education, and are inspired by Iwanicz-Drozdowska et al. (2024), who emphasized both the importance and scarcity of such knowledge. The ninth question measures the propensity for bank runs, the central focus of this research, in recognition of the significant risks bank runs pose to financial stability, as highlighted by numerous studies (Diamond and Dybvig, 1983; Kaufman, 1988; Arnaboldi, 2015; Campioni et al., 2017; Kozinska, 2020; De Cesare et al., 2023). For the full questionnaire, see  Appendix 2. Collectively, these questions are designed to assess respondents’ awareness of deposit insurance mechanisms and their understanding of how such schemes operate. The data provided by the questionnaire is then used for a regression analysis that shows the links between knowledge and awareness regarding DGSs and bank run risk.

There were 1,000 respondents to the questionnaire. As shown in Figure 1, about 65% of respondents are young people between the ages of 18 and 24 years, with the remainder being 25 years old and older. The number of young respondents is because the questionnaire was disseminated also in universities. All respondents are of such an age at which they can manage their own bank deposit and be responsible for their own money; for this reason, they should be in possession of adequate financial literacy.

Figure 2 shows that the gender of the respondents is divided almost equally.

As highlighted in Figure 3, in terms of educational level, 0.4% have completed only middle school, 46.4% hold a high school diploma and 53.2% possess at least a bachelor’s degree. This means that respondents are educated and should, theoretically, be financially literate and be able to make rational choices about the management of their money and, if so, then understand when it is appropriate to withdraw money from bank deposits.

The responses to the fourth question, as presented in Figure 4, reveal a low level of trust in the banking system: only approximately 24% of respondents express the highest level of trust in depositing money, despite the existence of DGSs. Furthermore, 15% of participants report a trust level of 4 or lower on a Likert scale ranging from 1 (very low) to 7 (very high). These findings constitute one of the most significant outcomes of the study, highlighting a pronounced mistrust among depositors. This is particularly notable given the high degree of security that depositors should perceive when placing funds in deposits, as responses indicating trust levels of 6 and 7 are less frequent than expected.

Another concerning finding, illustrated in Figure 5, is that nearly 36% of respondents are unaware of the current repayment criterion, which stipulates that each depositor can receive reimbursement up to the maximum amount guaranteed for each of their deposits held across different banks (if a depositor holds multiple deposits within the same bank, then these are aggregated and the guarantee limit applies to the total amount). This lack of awareness may foster mistrust and lead to suboptimal financial decisions. Greater knowledge that Article 8 of the DGSD requires reimbursement of the full refundable amount within seven working days would likely improve these outcomes.

Figure 6 further reveals that fewer than half of the respondents are aware of the names of the two DGSs operating in Italy. This finding clearly indicates insufficient public awareness of DGS, highlighting the need for targeted efforts to address this issue.

Further evidence, as illustrated in Figure 7, indicates that only 58% of respondents are aware of the maximum deposit guarantee limit. This lack of awareness may lead to irrational withdrawal decisions during banking crises, thereby exacerbating bank run phenomena and increasing financial system instability in such circumstances.

Figure 8 reveals that nearly half of the respondents are unaware of the existence of a bank deposit guarantee. This finding highlights the risk of bank runs arising from depositors who, unaware of the guarantee, may withdraw even guaranteed funds upon hearing news of a banking crisis.

Figure 9 corroborates the previously identified risk: only 24.5% of respondents who have deposited a guaranteed amount would leave the funds unchanged upon news of the bank’s insolvency. Consequently, 75.5% would withdraw all or part of the guaranteed sum, a behavior attributable to a lack of trust stemming from insufficient financial literacy on the subject.

The results reveal that depositors often show unawareness of the existence of a guarantee on their deposits. This leads to an unfounded mistrust in banks. This statement is supported by findings that indicate a significant propensity for bank runs, even in instances involving guaranteed deposits. To identify, among those considered, the main determinants of bank run, a regression analysis is conducted.

The data provided by the questionnaire is used in a regression model to demonstrate how more trust in banks and more knowledge of DGSs can lead to less bank run risk. This was made using the answers to the questionnaire as variables. As the dependent variable was used the answer “Leave the amount unchanged” to Question 9, “How would you behave if news spread about a state of dissolution of the bank with which you deposited funds in the amount of €80,000?”; this choice was made because it can be used as an indicator of low propensity to bank run, and this allows to search for the independent variables that help reduce bank run risk. Independent variables were derived from the responses to the other questions, necessitating the processing of the data set. As a first step, the variable names were modified to create a more concise and formal model. The first two variables, “Age” and “Gender”, remained unchanged. The third variable, originally labeled “Education level”, was renamed “Financial_Education_1”, as an individual’s education level serves as a preliminary indicator of their financial literacy. The fourth question, “On a scale of 1–7, how confident are you in depositing and keeping your money in a checking account?” was shortened to “Financial_Education_2” reflecting its role as a proxy for trust in banks, which is believed to be influenced by financial education. The fifth question, “What is the criterion for reimbursement?” was abbreviated to “DGS_Knowledge_1”, as it signifies knowledge of DGSs. Similarly, the sixth question, “How many and which are the Deposit Guarantee Systems in Italy?” was renamed “DGS_Knowledge_2” and the seventh question, “What is the amount limit within which funds in your bank account in Italy are protected?” became “DGS_Knowledge_3”. The eighth question, “Before reading the article, were you already aware of the guarantee on your bank deposits?” was shortened to “DGS_Knowledge_4”, indicating awareness of DGSs. Finally, also, the dependent variable corresponding to the ninth question, “How would you behave if news spread about a state of dissolution of the bank with which you deposited funds in the amount of €80,000?” was renamed “Bank_Run_Risk”, reflecting its association with the propensity for a bank run. Then, considering the new variable names, barplots were created. Finally, the variables were recoded to accommodate their qualitative nature. Specifically, “Financial Education 2” was coded to assign a value of “0” for responses ranging from 1 to 4 (indicating low trust in banks) and “1” for responses from 5 to 7 (indicating high trust in banks). This distinction helps separate low trust levels from higher ones.

For “DGS_Knowledge_1”, “DGS_Knowledge_2” and “DGS_Knowledge_3”, which contain specific correct answers, responses were coded as “0” for incorrect answers and “1” for correct answers.

The variable “Bank_Run_Risk” was recoded to differentiate between individuals who would engage in a bank run (withdrawing part or all of their deposits), assigned a value of “0”, and those who would not withdraw their funds, assigned a value of “1”.

The variables “Gender”, “Age”, “Financial_Education_1” and “DGS_Knowledge_4” were not specifically transformed but were instead subjected to automated dummy coding by the statistical software.

Using the adjusted dataset, a logistic regression was applied considering that the dependent variable is a dummy variable with two levels. The general regression model used is the following:

where:

• “$(π1-π)$” indicates the odds (ratio between the probability of the event “success” and the probability of the event “insuccess”).

• “$π$” indicates the probability of the event “success”.

• “k” indicates the number of independent variables considered by the model.

• “$β0$” indicates the intercept of the model, so the value of the log odds if the value of the x variables is equal to 0.

• “$βj$” indicates the relationship between the j-th x variable and the log odds (for j = 1,2,…,k).

Considering the variables deriving from the questionnaire, the model is declined in the following way:

where:

• “$π$” indicates the probability of the event “leave the amount unchanged”.

• “1-$π$” indicates the probability of the event “Withdraw the entire amount” or “Withdraw a part”, the other two modalities (answers) of Question 9 that would indicate higher bank run risk.

From the first output of the regression model, it resulted that some variables have a p-value > 0.05, and this suggests that should be excluded from the model; choice confirmed by the first drop1 analysis; the process was repeated and then we obtained the regression output with just the significant variables that can be seen in Table 1.

This means that what decreases more the risk of bank run is: having high trust (from 5 to 7) in banks (Financial_Education_2_Dummy); knowing the limit within which the funds in the bank deposits are protected (DGS_knowledge_3); and being aware of the guarantee on bank deposits (DGS_knowledge_4). Then, as shown in Table 2, an ANOVA was made to understand which is the most significant variable.

This means that the most significant variable is “DGS_knowledge_3”, so knowing the limit within which the funds in the bank account are protected is the most important determinant of the reduction of bank run risk.

Finally, average marginal effects (AMEs) are analyzed to assess how much the probability of the event y (specifically, the absence of a bank run) varies with a unit change in the independent variable x. The results are reported in Table 3.

The AME agrees with the results of the ANOVA: knowing the limit within which the funds in the bank deposits are protected is the most influential variable, among considered ones, for the bank run; indeed, knowing the limit lowers the risk of bank run by 18%. Moreover, being aware of the guarantee on bank deposits lowers the risk of bank run by 14% and having high trust (from 5 to 7) by 11%. It is interesting to see, in Figure 10, how the percentage of people that would withdraw all the deposits is lower when increasing trust in banks.

To ensure the robustness of the model, a bootstrap was made, using casual samples. The confidence intervals of the model reported in Table 4 and the ones resulting from the bootstrap reported in Table 5 are similar, confirming that the model is robust. The goodness of fit is also confirmed by the Chi-squared test that shows a value higher than 0.05: 0.5831546.

Then, to understand if the model is adequately predictive, for the different combination of predictors, predicted values are compared to observed ones in Figure 11.

As shown in Figure 11, predicted and observed values are distant, this is because of high association between DGS_Knowledge_3 and DGS_Knowledge_4 as confirmed by the Yule’s Y and by the Cramer’s V that are, respectively, 0.665795 and 0.373267. Considering that DGS_Knowledge_3 is about the limit in which the deposits are guaranteed and DGS_Knowledge_4 is about the awareness of the existence of DGSs, this last one is in part included in the precedent, so it was decided to exclude it. As can be seen in Figure 12, repeating the model after this variable was excluded, there is more coherence between observed and predicted values, and the AMEs are higher; indeed, knowing the limit within which the funds in the bank deposits are protected lowers the risk of bank run by 23% and having high trust (from 5 to 7) by 12%, results reported in Table 6.

To assess the robustness of the two-variable model, an additional Jackknife test was performed. The coefficients estimated via the Jackknife method, reported in Table 7, are highly similar to those derived from the regression analysis, thereby confirming the model’s robustness. This consistency between the estimates indicates that the results are not overly dependent on individual data points in the sample. In other words, even when systematically removing one observation at a time (as the Jackknife method does), the coefficient estimates remain stable.

Furthermore, as shown in Figure 13, a ROC AUC analysis was performed, with an AUC value of 0.6797, indicating that the model exhibits modest discriminative ability.

As shown in Table 8, further analysis was made through the confusion matrix: the model demonstrates a strong ability to identify true positives, as evidenced by the high sensitivity (0.80); however, it tends to generate a considerable number of false alarms, as indicated by the relatively low precision (0.36) and specificity (0.55). The overall accuracy is moderate (0.61), while the F1 score (0.50) reflects a suboptimal balance between the capacity to detect positives and to avoid false positives.

The predictive accuracy of the estimated probabilities is further supported by a Brier Score of 0.1670. Additionally, cross-validation was conducted by applying the model to ten subsamples and deriving the ROC curve to assess the model’s goodness of fit across different samples and its associated variability. The results, as can be seen in Figure 14, indicate that the model performs better on certain subsamples than on others.

Subsequently, a split between training and validation sets was performed: the model was trained on a subset of the data (70%) and applied to make predictions on the remaining portion (30%). The model’s performance was then assessed via a confusion matrix. As demonstrated in Table 9, predictions on the validation set do not significantly differ from those generated using the entire data set. However, even in this case, the model lacks sufficient robustness in predictive performance (low Precision). As can be seen in Figure 15, the relative ROC curve was generated, and the validation AUC value is 0.6375428.

The primary limitations of this model stem from the absence of questions to differentiate based on the university faculty chosen, geographic region of origin or whether individuals hold a deposit.

The regression model identifies the key determinants of bank runs, based on responses from the questionnaire, as trust in banks, knowledge of the deposit guarantee limit and awareness of the deposit guarantee. The ANOVA analysis reveals that the most significant determinant is knowledge of the deposit protection limit. This finding is further corroborated by the AMEs, which show that understanding the deposit guarantee limit is more important than any other variable in reducing the risk of bank runs. Before excluding DGS_knowledge_4, the AME also indicated that awareness of the existence of DGSs reduces the risk of bank runs, albeit less effectively than knowing the specific guarantee limit. This suggests that a deeper understanding of DGSs is more effective in mitigating bank runs than merely being aware of their existence.

These results emphasize the crucial role of financial literacy in reducing the risk of bank runs. A higher level of financial literacy enables individuals to understand not only the existence of DGSs but also the scope and limitations of deposit protection, thereby fostering greater trust in financial institutions. Therefore, the model suggests that promoting financial education is an essential strategy for reducing the frequency of bank runs. By enhancing public awareness of deposit guarantees and their limits, individuals are more likely to develop confidence in banks and retain their funds in bank accounts, even during periods of economic uncertainty.

These findings are relevant not only for Italy but also for other European countries or financial systems facing similar issues, such as the absence of a unified DGS, low financial literacy – especially regarding DGSs – and a lack of trust in banks. The OECD/INFE survey (2023) highlights that many European countries exhibit low levels of financial literacy, a trend observed in countries like Cyprus (Andreou and Anyfantaki, 2021), Bosnia and Herzegovina (Plakalović, 2011) and Spain (Letamendia and Poher, 2020). Additionally, numerous studies point to low trust in banks across Europe, including in Spain (Carbó-Valverde et al., 2013), as well as a general decline in trust following the 2008 financial crisis (Ehrmann et al., 2012).

Raising financial literacy is crucial, especially as its deficiency leads to a lack of awareness about DGSs, which in turn erodes trust in banks. This relationship, confirmed by the questionnaire data, illustrates the correlation between financial literacy, trust in DGSs and banks and the likelihood of bank run phenomena. This complex relationship has been underexplored in the existing literature (Campioni et al., 2017), making this study unique in its attempt to identify the link between financial literacy, knowledge of DGSs and the risk of bank runs through a regression model applied to a predominantly young sample living in an era marked by high digitalization (Ferilli et al., 2024), which could facilitate fund withdrawals (De Cesare et al., 2023).

As demonstrated in this study, knowledge of deposit protection limits, awareness of guarantees and strong trust in banks can mitigate the risk of bank runs. These factors are heavily influenced by financial literacy, particularly in relation to these topics. Given the findings from this research and other authoritative studies highlighting significant gaps in financial literacy (Lusardi et al., 2010; Garg and Singh, 2018; Bank of Italy, 2023), awareness of DGSs (Goedde-Menke et al., 2014; Iwanicz-Drozdowska et al., 2024) and trust in banks (van der Cruijsen et al., 2023; Tobias et al., 2024), it is essential to accelerate efforts to promote financial education through various channels.

As the risk of bank runs can be mitigated by increasing awareness of DGSs – which can be enhanced through financial education – and recognizing that students will soon become depositors, an initial intervention could involve collaboration between DGSs and schools, particularly at the upper secondary level, when students typically open their first bank accounts. Classroom presentations or short seminars by professionals could effectively educate young people to become informed depositors as they open their first accounts, thereby increasing their trust in banks.

A second intervention would be to introduce financial education courses into school curricula. These programs should be tailored to the specific needs of the target group, as suggested by Rosciano and Starita (2024). Engaging younger generations may prove especially effective, given the growing complexity of financial decisions facing youth in today’s rapidly changing socio-economic landscape. Integrating financial education at the high school level equips students with essential skills for managing personal finances, making sound investment choices and understanding deposit guarantees. Moreover, this could help address social inequalities by offering structured learning opportunities to students from disadvantaged backgrounds. High school students are at a critical stage, starting to make important financial decisions like managing budgets, opening bank accounts and considering student loans. Therefore, incorporating financial education into the curriculum through modules on money management, investments and deposit guarantees is vital. Regular updates and adaptations of curricula are necessary to address evolving financial challenges, such as digital banking and cybersecurity risks. This approach ensures the ongoing relevance and effectiveness of financial education. Additionally, financially educated youth can have a positive influence on their families, creating a “neighborhood effect” that spreads financial knowledge. In conclusion, implementing financial education in high schools is a strategic way to equip young individuals with the skills needed to navigate the modern financial environment. Policymakers should also evaluate and monitor the effectiveness of these initiatives.

A third intervention could involve DGSs collaborating with universities, reaching out to various departments, particularly those focused on banking studies and organizing seminars on the topic for students across all fields. Involving faculty experts and researchers in such efforts could foster innovative research projects aimed at enhancing depositor awareness and trust in the financial system.

Universities can play a key role in spreading knowledge about deposit protection schemes through their “third mission”, which involves disseminating knowledge to not only students but also their families and the wider community via public events, partnerships with local authorities and the creation of educational materials. The issue of deposit guarantees is not solely an economic concern for experts; it affects all depositors who contribute to the stability of the financial system. Therefore, increasing knowledge about DGSs can help build trust in banks among students and their families.

A fourth intervention could involve leveraging the internet, mass media and social media platforms. DGSs should increase their presence on these channels to disseminate concise and effective information about the operation of guarantees, reaching a broader audience. Partnerships with government communication agencies and trusted social media influencers can boost the reach and credibility of financial education campaigns, making the information more accessible and relatable. Mass media should actively participate in raising awareness, and diverse platforms – including mobile applications – should be used to enhance financial literacy (Ibadoghlu, 2018).

A fifth intervention could involve banks collaborating more actively in educating their customers. This should go beyond pre-contractual and periodic documents. For instance, when an individual opens a deposit account, whether in person or online, the bank should provide detailed information about deposit guarantees. Furthermore, banks should monitor the depositor’s understanding by using surveys, either in person when the customer returns to the bank or digitally via their online banking platform. This ensures that customers fully comprehend the guarantee information. Europe could draw inspiration from countries like the USA, where communication about deposit guarantees is effectively integrated into the account-opening process. Banks could also incorporate interactive educational tools, such as videos, FAQs and quizzes, into their digital platforms to reinforce customers’ understanding of deposit guarantees.

In conclusion, DGSs, universities, policymakers, schools, mass media and banks all play critical roles in enhancing financial education. Specifically, DGSs have a central responsibility to raise public awareness, as mandated by their governing statutes. It is crucial to highlight key aspects, such as the amount guaranteed and the role of DGSs, as the regression model in this paper suggests. Effective communication about these aspects will help reinforce the perception of DGSs as stable institutions that offer essential protection. This is vital to their role in preventing bank runs, which could otherwise trigger or worsen systemic banking crises. This responsibility is particularly important in today’s economic and geopolitical context, where banking crises may become more frequent and severe because of growing instability, globalization and concentration within the financial sector.

The proposed interventions aim not only to increase depositor knowledge about deposit guarantees but also to stimulate discussion about the actual levels and timing of guarantees set by current legislation. These efforts could promote more rational and responsible behavior among depositors, contributing to the overall stability of the financial system by reducing the risk of bank runs.

The limitations of this study include its geographically restricted scope, sample size and composition. Future research could expand the sample and segment it by factors such as faculty or occupation. As this study focuses on Italy, its findings may not be fully generalizable to other countries; thus, further research should explore similar issues in other national contexts. The questionnaire is currently being distributed to increase the sample size, including consumer and business associations. Future studies could also investigate questions related to bank account ownership to assess the effectiveness of bank communication with depositors. Comparative surveys across different countries could help identify additional factors influencing bank runs, providing valuable insights for both Italy and Europe. It would also be useful to study how deposit risk perception might differ in countries with a unified DGS, such as the proposed European Deposit Insurance Scheme, which could improve system stability and depositor confidence.

The authors would like to express their sincere gratitude to the editor, the associate editor and the referees for their useful suggestions. The authors also thank all the participants of the questionnaire and extend their gratitude to the Department of Management at the “Università degli Studi di Roma La Sapienza”, the Foundation for Financial Education and Savings (FEduF) and the PhD Salon Sapienza, as well as to Professors N. Cucari, P. Ferretti, P. Fersini, S. Forte, M. Gatti, F. M. Mango, P. Martino, P. Porretta and F. Santoboni, in addition to Doctors M. Gori, G. Petroccione, A. Vigorelli and G. Zaghini for their support in disseminating the questionnaire. The authors would also like to thank S. Forte, M. Spallone, S. Marzioni, L. Frongillo and W. Milton for their support regarding methodology. Collectively, your efforts have significantly enhanced their contribution to academia.

The authors also extend their thanks to all participants of the British Accounting and Finance Association Annual Conference and the Compliance and Strategy in International Banking Conference, where this paper was presented.

Question 1

Age:

• 18/24;

• 25/29;

• 30/50;

• 50/60; and

• 60+.

Question 2

Gender:

• M;

• F; and

• I prefer not to declare.

Question 3

Education level:

• None;

• Elementary school diploma;

• Secondary school diploma;

• High School Education diploma;

• Technical Education diploma;

• Vocational Education Diploma;

• Bachelor’s degree;

• Master’s degree; and

• PhD.

Question 4

On a scale of 1–7 how confident are you in depositing and keeping your money in a checking account?

• 1;

• 2;

• 3;

• 4;

• 5;

• 6; and

• 7.

Question 5

What is the criterion for reimbursement?

• Each depositor can be reimbursed up to the maximum amount set.

• Each depositor can obtain a refund up to the maximum amount set for each of his guaranteed accounts.

Question 6

How many and which are the Deposit Guarantee Systems in Italy?

• Two: FITD and FGDCC;

• Two: FITD and FDIC; and

• One: EDIS.

Question 7

What is the limit of the amount within which the funds in your bank account in Italy are protected?

• €50,000;

• €80,000;

• €100,000; and

• There is no amount limit.

Question 8

Before reading the article, were you already aware of the guarantee on your bank deposits?

• Yes; and

• No.

Question 9

How would you behave if news spread about a state of dissolution of the bank with which you deposited funds in the amount of €80,000?

• I would withdraw the entire sum.

• I would withdraw some of it.

• I would leave the amount in my bank account unchanged.

Source: Own elaboration