Continental co-operative banks survived the financial crash and seem to brush aside the eurozone crisis
In January this year the influential trade magazine The Banker ran a four-page feature on co-operative banks. "With a series of scandals shaking confidence in large listed banks and the financial crisis badly damaging their profits, European interest in co-operative lenders has been revived," the magazine stated. It went on to add: "The co-operative model has been more stable and efficient than many economists had predicted."
The Banker was not alone in offering an upbeat assessment of the state of co-operative banking. In April this year the UN's International Labour Organization published a report Resilience in a downturn: the power of financial cooperatives, written by University of Stirling academic Johnston Birchall. The ILO promoted the report with a media release boldly titled: Financial co-operatives: a safe bet in a crisis.
Such claims may now attract scepticism in the UK, where the Co-operative Bank's current difficulties have been well documented, but this is one occasion when it is worth taking a broader, more internationalist, perspective. Seen from the Brussels offices of the European Association of co-operative banks (EACB), for example, the outlook for the vast majority of the continent's 23 national co-operative bank federations and the 4,000 local banks they bring together looks encouragingly bright.
EACB's head of legal department Volker Heegemann says that, through the worst years of the financial crisis, some of his member banks had the best trading years in their history. He puts this down to a dogged determination by many banks to stay focused on their traditional retail business and avoid more exotic banking adventures. The attitude, he says, is: "We have our own local business, we're happy with that, and we don't do anything more."
Across Europe, co-operative banks have perhaps 20% of total retail banking business, with the co-operative sector being even more significant in a number of countries. In France, the three major co-operative bank federations – Crédit Agricole, Crédit Mutuel and BPCE – have an estimated 45% market share. In the Netherlands the highly successful Rabobank has 10 million customers and a 40% market share.
One potential difficulty for British people is that continental co-operative banks have traditions different from those in this country. What is now the UK's Co-operative Bank was originally established in 1872 to serve the thousands of local consumer co-operative societies, and it was owned collectively by them through the Co-operative Wholesale Society. Elsewhere in Europe, co-operative banking grew not from consumer co-operation but from what we would now describe as locally based credit unions. Germany was the cradle, with two 19th-century Germans, Hermann Schulze-Delitzsch and Friedrich Raiffeisen, the inspiration. The two movements they created (Raiffeisen's initially focused on rural areas, Schulze's on Prussia) spread rapidly across Germany and into neighbouring European countries. Some countries, including Austria and Italy, still have separate co-operative banking federations representing the two original movements.
In Germany today, the united Association of German People's Banks and Raiffeisen Banks (BVR), is the country's fourth largest, with about 30 million customers. But, unlike the UK's Co-op Bank, it is structured as a federation and owned by more than 1,000 local banks. Similarly in France, the national banking group BPCE brings together 17 regional Banques Populaires, two specialist national lenders (including Crédit Coopératif, which lends to producer co-ops), as well as 17 savings banks.
Volker Heegemann says that in the 1990s and early 2000s there was a widespread market view that co-operative banks had become irrelevant. He says: "Co-operative banking was seen as something of the past, as history," but the catalogue of major publicly-quoted banks that needed rescuing during the financial crisis caused attitudes to change. Today, the advantage that co-op banks are member-owned and not trading to provide dividends to shareholders is more widely understood, Mr Heegemann says. He adds that, leaving aside perhaps the particular case of the Co-operative Bank, he is not aware of any of his members struggling to find the capital they need to meet the new tougher capital requirements on banks being brought in through the Basel III banking reforms.
The co-operative banking sector also received a relatively positive appraisal from the consultancy company Oliver Wyman in a report last year, The Outlook for Co-operative Banking in Europe in 2012. This suggested that co-op banks' customer focus was particularly relevant at a time when distrust in financial institutions was very high. "Overall, co-operative banks appear well-positioned in the face of industry changes," the report concluded. It suggested that the way forward was for banks to re-emphasise their co-operative values, to reassess and strengthen their internal governance structures, and to review their operating models, including where appropriate further centralising of shared services.
Not everything is positive. In Austria, problems at Oesterreichische Volksbanken led to a state bail-out and has brought financial penalties to its majority shareholder, a group of 62 co-operative banks. As Johnston Birchall put it in his ILO report, co-ops are not necessarily immune from poor management: "The co-operative business model is strong, but like any other business financial co-operatives can sometimes fail: there is no substitute for good management and competent governance."
But his overall assessment is upbeat: "The banking crisis confirmed that financial co-operatives are stable and risk averse. Most came through without needing government bailouts, without ceasing to lend to individuals and businesses, and with the admiration of a growing number of people disillusioned with 'casino capitalism'."
*This content is brought to you by **Guardian Professional**. To join the **Guardian Social Enterprise Network**, click** here**.* Reported by guardian.co.uk 16 hours ago.
In January this year the influential trade magazine The Banker ran a four-page feature on co-operative banks. "With a series of scandals shaking confidence in large listed banks and the financial crisis badly damaging their profits, European interest in co-operative lenders has been revived," the magazine stated. It went on to add: "The co-operative model has been more stable and efficient than many economists had predicted."
The Banker was not alone in offering an upbeat assessment of the state of co-operative banking. In April this year the UN's International Labour Organization published a report Resilience in a downturn: the power of financial cooperatives, written by University of Stirling academic Johnston Birchall. The ILO promoted the report with a media release boldly titled: Financial co-operatives: a safe bet in a crisis.
Such claims may now attract scepticism in the UK, where the Co-operative Bank's current difficulties have been well documented, but this is one occasion when it is worth taking a broader, more internationalist, perspective. Seen from the Brussels offices of the European Association of co-operative banks (EACB), for example, the outlook for the vast majority of the continent's 23 national co-operative bank federations and the 4,000 local banks they bring together looks encouragingly bright.
EACB's head of legal department Volker Heegemann says that, through the worst years of the financial crisis, some of his member banks had the best trading years in their history. He puts this down to a dogged determination by many banks to stay focused on their traditional retail business and avoid more exotic banking adventures. The attitude, he says, is: "We have our own local business, we're happy with that, and we don't do anything more."
Across Europe, co-operative banks have perhaps 20% of total retail banking business, with the co-operative sector being even more significant in a number of countries. In France, the three major co-operative bank federations – Crédit Agricole, Crédit Mutuel and BPCE – have an estimated 45% market share. In the Netherlands the highly successful Rabobank has 10 million customers and a 40% market share.
One potential difficulty for British people is that continental co-operative banks have traditions different from those in this country. What is now the UK's Co-operative Bank was originally established in 1872 to serve the thousands of local consumer co-operative societies, and it was owned collectively by them through the Co-operative Wholesale Society. Elsewhere in Europe, co-operative banking grew not from consumer co-operation but from what we would now describe as locally based credit unions. Germany was the cradle, with two 19th-century Germans, Hermann Schulze-Delitzsch and Friedrich Raiffeisen, the inspiration. The two movements they created (Raiffeisen's initially focused on rural areas, Schulze's on Prussia) spread rapidly across Germany and into neighbouring European countries. Some countries, including Austria and Italy, still have separate co-operative banking federations representing the two original movements.
In Germany today, the united Association of German People's Banks and Raiffeisen Banks (BVR), is the country's fourth largest, with about 30 million customers. But, unlike the UK's Co-op Bank, it is structured as a federation and owned by more than 1,000 local banks. Similarly in France, the national banking group BPCE brings together 17 regional Banques Populaires, two specialist national lenders (including Crédit Coopératif, which lends to producer co-ops), as well as 17 savings banks.
Volker Heegemann says that in the 1990s and early 2000s there was a widespread market view that co-operative banks had become irrelevant. He says: "Co-operative banking was seen as something of the past, as history," but the catalogue of major publicly-quoted banks that needed rescuing during the financial crisis caused attitudes to change. Today, the advantage that co-op banks are member-owned and not trading to provide dividends to shareholders is more widely understood, Mr Heegemann says. He adds that, leaving aside perhaps the particular case of the Co-operative Bank, he is not aware of any of his members struggling to find the capital they need to meet the new tougher capital requirements on banks being brought in through the Basel III banking reforms.
The co-operative banking sector also received a relatively positive appraisal from the consultancy company Oliver Wyman in a report last year, The Outlook for Co-operative Banking in Europe in 2012. This suggested that co-op banks' customer focus was particularly relevant at a time when distrust in financial institutions was very high. "Overall, co-operative banks appear well-positioned in the face of industry changes," the report concluded. It suggested that the way forward was for banks to re-emphasise their co-operative values, to reassess and strengthen their internal governance structures, and to review their operating models, including where appropriate further centralising of shared services.
Not everything is positive. In Austria, problems at Oesterreichische Volksbanken led to a state bail-out and has brought financial penalties to its majority shareholder, a group of 62 co-operative banks. As Johnston Birchall put it in his ILO report, co-ops are not necessarily immune from poor management: "The co-operative business model is strong, but like any other business financial co-operatives can sometimes fail: there is no substitute for good management and competent governance."
But his overall assessment is upbeat: "The banking crisis confirmed that financial co-operatives are stable and risk averse. Most came through without needing government bailouts, without ceasing to lend to individuals and businesses, and with the admiration of a growing number of people disillusioned with 'casino capitalism'."
*This content is brought to you by **Guardian Professional**. To join the **Guardian Social Enterprise Network**, click** here**.* Reported by guardian.co.uk 16 hours ago.