THE ROLE OF TRUST IN MAINTAINING THE RESILIENCE OF FINANCIAL MARKETS

The recent global financial crisis (GFC) threatened to bring world financial markets to a halt. It is now coming to light that in the run-up to, and at the height of, the GFC, investment banks and other participants in the financial markets acted unethically as well as imprudently. This article takes a closer look at this unethical behaviour and the way in which it constitutes a failure of trust. The article defi nes trust and outlines why it is important in the regulation of fi nancial markets. It then looks at three examples of breakdowns or failures of trust in the run-up to the fi nancial crisis. The article concludes by arguing that trust is important in commercial relationships at both the intra-firm level (the relations between the different constituents of the firm) and the inter-firm level (the relations between the fi rm and other firms).