Contemporary Trends In European Cooperative Banking

The cooperative banks’ business model is unique in the financial market. It is featured by democratic foundations (one-head-one-vote principle), proximity to the members and the community they serve, limited profit-seeking nature, and prudent management. However, these principles are applied in a variety of organisational structures and economic and regulatory contexts, making cooperative banks significantly different from one country to another. This book expands existing knowledge on the European cooperative banking sector by analysing recent trends affecting cooperative banks. Namely, the book discusses the role of cooperative banks in the policy and societal movement towards sustainability, including in adopting sustainable finance practices. It explores the digital transformation journey of cooperative banks and the impact of the consolidation of Fintech players in the financial services markets. It further showcases the need to evolve the cooperative banks’ governance structures and processes in order to foster (and in some cases restore) democracy and transparency in the decision-making. Lastly, the book debates the specific role of cooperative banks in the economic crisis that has followed the unfolding of the Covid-19 pandemic vis-à-vis their members and the communities they serve. Of interest to scholars, professors, students, and practitioners of banking and finance, this book will build on the existing research and explore the latest trends in the space.

This edited volume showcases how the European cooperative banks have continued to evolve amid a new competitive scenario that resulted from the Global Financial Crisis started in Europe in 2008. The cooperative banking paradigm has been put under an unprecedented pressure as a consequence of factors such as the exceptionally low interest rates set by the European Central Bank, low profitability generated by traditional banking services—which are the backbone of the cooperative banking business—and the entrance of fintech companies into the banking market. Furthermore, tightening regulation since the beginning of the crisis has produced an increased capital and liquidity burden which in some cases have forced cooperative banks to reduce lending to their members and customers, putting under question the traditional countercyclical role of cooperative banks in periods of crisis. For these reasons, it is of the utmost value to observe and analyse how cooperative banks have been reacting in the attempt to preserve their unique business model and, at the same time, to keep providing credit to the economy. A number of scholars active in the cooperative banking sector have been involved in this edited volume as contributors.

This paper explains the continuing success of European cooperative banks through evolving comparative advantages. It points out that a cooperative is built around an intergenerational endowment without final owners, which creates particular governance challenges. Risks include the use of the endowment for purposes other than members' best interest, such as empire-building, and attempts at appropriation. The risk of empire-building is reinforced by mechanisms that foster capital accumulation and asymmetric opportunities for consolidation. The paper concludes that some form of independent external oversight of corporate governance is warranted and that cooperatives need mechanisms enabling them to better manage their capital.

The book “New Cooperative Banking in Europe. Strategies for Adapting the Business Model Post Crisis”, edited by Marco Migliorelli and published by Palgrave Macmillian in 2018, rigorously delves into the future of the European cooperative banking sector. Corroborated by up to date and hard to find information and data, the book addresses four major challenges pertaining to: i) the macroeconomic adversities; ii) the regulatory challenge; iii) the internal governance issues; and iv) the consequences of the digital revolution. The overarching question is: Can Europe afford to do away with its cooperative banks, or should the old continent find a manner to safeguard these banks which are deeply rooted in its tradition? Although some issues could have been investigated more in depth, the book stands out for its merits and serves as an important and timely reference on the topic.

The book describes the current role and rationale of co-operative banking and examines features such as governance, consolidation, outsourcing, shareholder value and rating evaluation. It then analyses the likely impact on the strategic, organisational and operative model of cooperative banks.

This paper complements the existing scarce literature on financial cooperatives in various ways. First, we describe the background and evolution of European Cooperative Banking Groups (ECBGs). Second, we summarize the main reasons for the past disregard and recent revaluation of the cooperative banking model. Third, we empirically investigate to what extent the financial performance of ECBGs over recent business cycles is related to the original cooperative characteristics. To this end, we have constructed a new database with a broad range of financial variables for fifteen ECBGs in ten countries and collected similar indicators for entire banking systems of the countries in question. Our empirical findings suggest that many previous assertions and qualitative statements about ECBGs really hold in practice and not just in periods of financial distress. Furthermore, ECBGs do exhibit a different performance compared to all other banks throughout different stages in recent business cycles. Their corporate governance with members' influence and specific decision making mechanisms seems to lead to a relatively low risk appetite and high capitalization, a high degree of stability and a predominant focus on retail banking. It must be emphasized that these conclusions cannot be extrapolated into the future. Indeed, an abundance of historical examples of successes and failures among all types of banks exists.

This book investigates the main features of the evolution of the co-operative banking model in European countries, using 'country case-study' analysis. Structured in two parts, the first deals with a sample of countries that joined the European Union before 2000; the second part with a sample of newly-admitted European Union member countries.

This volume features a selection of contributions presented at the 2018 Wroclaw Conference in Finance, which cover a wide range of topics in finance and financial economics, e.g. financial markets; monetary policy; corporate, personal and public finance; and risk management and insurance. Reflecting the diversity and richness of research areas in the field, the papers discuss both fundamental and applied finance, and offer a detailed analysis of current financial-market problems, including specifics of the Polish and Central European markets. They also examine the results of advanced financial modeling. Accordingly, the proceedings offer a valuable resource for researchers at universities and policy institutions, as well as graduate students and practitioners in economics and finance at both private and government organizations.

A midst stormy waters, financial systems develop and evolve. New institutional forms and instruments are invented and put into use. Some of them turn out to be successful while others disappear: a natural process of creative and dynamic competition argues for diversity. Diversity offers an optimal environment in which new ideas can come to life, existing ideas can evolve and old ideas make a comeback. In the aftermath of the financial crisis, the foundations of several decades of modern and innovative financial systems have suffered serious damage. This has triggered massive state interventions and has led authorities to revamp the regulatory structures and frameworks. While many voices have called for a return to more traditional approaches to banking and finance, no one has argued the merits of diversity. This book investigates the merits of a diverse banking system with a special focus on the performance and role of cooperative banks in seven European countries where they are prominent (Austria, Finland, France, Germany, Italy, the Netherlands and Spain). The theoretical and empirical arguments that are developed in this book tend to support the view that it is economically beneficial to have stakeholder-value banks with a dual bottom-line function, such as cooperative banks. For those who accept this premise, it would suggest that policy-makers should not take or support actions that could jeopardise this valuable element of the financial system in various countries in Europe and of the emerging integrated European financial system. Book jacket.