Time: June 1, 2016
Place: European Parliament, Brussels

Willem Pieter De Groen, associate researcher of the IRCCF, attended the EACB Academic Conference entitled “The Co-operative Difference in Banking” on June 1st, in Brussels.

During the conference, organized by the European Association of Co-operative Banks (EACB), the latest research on co-operative banks in Europe was presented. The EACB`s General Manager, Hervé Guider, mentioned that cooperative banks were still underrepresented in academic literature on banking. This was one of the main reasons why, for the last five years, the Association has organized its own annual gathering of researchers and support research with its own think tank and price.

The cooperative banking sector seems to be in transition – Prof. Hans Groeneveld stressed during his presentation on the developments in the European co-operative banking sector. On the one hand, many cooperative banks have recently changed their governance structure (e.g. Banche Popolari, BCC, Credit Mutuel, OP, Rabobank, RZB, UNACC, etc.) enhanced their cost-efficiency or responded, to regulatory or supervisory demands. On the other hand, banks are also changing their operations. The cooperative banks that traditionally have a relatively large number of offices, are increasingly interacting with their customers digitally. In response, the number of offices of cooperative banks is decreasing, which is reflected in improved operational efficiency.

Overall, the performance of the cooperative banks continues to be more resilient than other banks. In particular, the returns on equity were relatively strong in the aftermath of the financial and economic crises. Prof. David Llewellyn considered why the cooperatives had been performing stronger than other banks. He argued that culture, as well as trust in the organization, were important determinants. Cooperatives would, for instance, be less profit driven and short-term oriented, limit any conflict between customers and shareholders, take less risk and be more active in relationship banking. The importance of these more difficult to measure indicators makes them insufficiently addressed in the post-crisis legislative framework. In fact, there were only a few countries, like the Netherlands, where these qualitative elements were part of supervisory practice.

Although the cooperatives are important financers of SMEs, many smaller cooperatives banks, in particular, have not been able to participate in government schemes to provide SMEs with (cheaper) funding. Frank Lang, from the European Investment Fund, presented a new instrument that smaller banks could use to enhance SME lending. This new instrument would enhance SME financing and target small banks, like cooperatives. The main difference between this and an alternative credit guarantee is that the European Risk Enhancement Mandate does not require collateral.

Finally, Giorgio Caselli received the award for young researchers. In his prize-winning paper, he explored the responsiveness of stakeholder (e.g. cooperative and savings banks) and shareholder value banks to changes in monetary policy. The findings suggested that stakeholder banks are less likely to alter their risk-taking, due to changes in monetary policy.

More information available at eacb.coop.