by whom and when [ 5 ]. These rules can be quite complex, spanning markets,
informal systems like the hawala system for international remittances, computer
systems that link different investment banks, and the polity and laws of participating
nations. As a result, understanding risk and trust in financial institutions requires an
analysis of complex dependence relationships that go far beyond a simple pairwise
relationship in the scope of a single transaction.
Trust in Legal and Political Institutions
In a study of trust in political institutions, Levi and Stoker [ 37 ] observe that trust
for a political institution must be distinguished from the trust for those currently in
power and trust for political parties. The distinction lies in whether the actions of
a given organization or government are attributed to a specific person or people, or
to the system in general. In particular, governmental institutions are expected to tell
the truth to the people, and allow them to achieve autonomy, accumulate wealth and
live free from fear and danger in their daily activities.
We can consider the dependence on political institutions in two general areas.
First, political institutions provide general expectations of risk in different aspects of
their citizens' lives. When a system is successful in protecting its citizens against bad
behavior in a social or economic area, this reduces the risk involved in interacting
with trustees. In fact, trust between a trustor and the trustee involved in an economic
transaction becomes more important in societies where formal support for credit is
low because of civil conflict, widespread corruption, or ethnic discrimination [ 29 ].
Hence, when the system is trusted to safeguard the trustor against possible damage
from the trustee, then the dependence of this transaction is shifted to the system. If
the system works properly, possible problems will be resolved fairly and efficiently.
Fig. 3.2 Trust in legal