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

Purpose This paper aims to corroborate the findings of Iwanicz-Drozdowska et al. (2024), highlighting that a lack of trust in Deposit Guarantee Schemes (hereinafter also “DGSs”) may stem from insufficient financial literacy. This study further demonstrates that greater knowledge of DGSs and increased trust in banks could help mitigate the risk of bank runs. Design/methodology/approach Results of a survey examining both the awareness and knowledge of DGSs regulations are used to assess, through a regression model, the risk of bank runs and identify the variables exerting the most significant influence on this risk. Findings This study reveals a significant deficiency in knowledge and awareness regarding DGSs. This finding is reinforced by another crucial discovery: increased familiarity with these schemes, along with a better understanding of their operational principles and heightened trust in banks, collectively contribute to reducing the likelihood of bank runs. Research limitations/implications Limitations of this study include the restricted geographical scope, the sample size and its composition, which can be categorized into specific clusters. However, the sample is considered satisfactory because of the significant characteristics of the analyzed country. Practical implications This study highlights the need for enhanced financial education to strengthen trust in DGSs as a strategy to reduce the risk of bank runs. Collaboration among various stakeholders at different levels – including DGSs, universities, governments, policymakers, schools, media and banks – is essential to promote financial education from an early age. Social implications Improving financial education and knowledge about DGSs would enable depositors to make rational and informed decisions, thus reducing the occurrence of bank runs. This, in turn, would contribute to the stability of the financial system. Originality/value This research stands out by exploring the interaction between bank runs and depositors’ financial literacy, emphasizing the role of universities in mitigating this risk through third-mission activities and public–private partnerships.