New Cooperative Banking in Europe (eBook)

Marco Migliorelli is a researcher in finance at the IAE of the University Paris 1 Panthéon-Sorbonne (Sorbonne Business School), France and an economist at the European Commission. He holds a PhD in banking and finance from the University of Rome Tor Vergata, Italy. His main research interests include cooperative banks, green finance and financing instruments innovation.

Foreword 5
Preface 7
Acknowledgements 10
Contents 11
Notes on Editor and Contributors 15
List of Figures 18
List of Tables 20
Chapter 1: An Overview of Cooperative Banking in Europe 22
1.1 Cooperative Banks: Origins and Fundamental Principles in Today’s World 22
1.2 Types of Cooperative Banking Groups and Networks 26
1.3 Size and Geographical Presence of Cooperative Banks in Europe 29
1.4 Cooperative Banks and Relationship Banking 34
1.5 Characteristics of the Support of Cooperative Banks to the Economy 38
1.6 Stability of Cooperative Banks 40
1.7 Cooperative Banks and Savings Banks 41
References 43
Chapter 2: The New Economic Scenario and Its Impact on the Cooperative Banking Business Model 49
2.1 Introduction 49
2.2 Key Elements of the New Economic Scenario 50
2.2.1 Low Interest Rates 50
2.2.2 Regulatory Burden 51
2.2.3 Digitalization 53
2.3 The Impact of Extremely Low Interest Rates on Cooperative Banks 54
2.3.1 Interest Rates and Their Impact on Bank Profitability 54
2.3.2 Cooperative Banks and Cooperative Banking Groups 57
2.3.3 Development of Cooperative Banks’ Net Interest Income and Profitability 59
2.4 Reacting to the New Economic Scenario 63
2.4.1 Bringing Risk to the Market 63
2.4.2 Reducing Costs 64
2.4.3 New Sources of Income 64
References 65
Chapter 3: Cooperative Banks Lending During and After the Great Crisis 66
3.1 Introduction 66
3.2 Lending Behaviour of Cooperative Banks in the Different Areas of the Continent 68
3.2.1 Analysing Lending Behaviour Via the Bank Lending Channel 68
3.2.2 Research Method 70
3.2.3 Empirical Observation and Discussion of Results 80
3.3 Lending Supply, Capitalisation and Non-performing Loans During the Great Crisis: The Italian Case 87
3.3.1 Credit Crunch and Levels of Banks’ Capitalisation 87
3.3.2 Research Method 91
3.3.3 Empirical Observation and Discussion of Results 95
3.4 Limits to the Countercyclical Role of Cooperative Banks 101
References 103
Chapter 4: Cooperative Banks and Banking Regulation in the EU: Key Elements 105
4.1 Introduction 105
4.2 The Cooperative Banking Singularity in the EU Regulation 107
4.3 Relevant Aspects of Regulation for Cooperative Banks 111
4.3.1 Capital Requirements 111
4.3.2 Governance Requirements 113
4.3.3 The Institutional Protection Schemes 114
4.3.4 The Opening of the Market of Payment Services to Third Party Providers 116
References 118
Chapter 5: National Initiatives to Drive the Evolution of the Cooperative Banking Sector 120
5.1 Introduction 120
5.2 The Reform of the Cooperative Banking Sector in the Netherlands 121
5.2.1 Overview 121
5.2.2 External Environment 122
Macroeconomic Environment 122
Banking Regulation and Supervision 122
Banking Sector Shake Up 123
5.2.3 Internal Challenges 124
5.2.4 Strategic Responses 126
Fundamental Governance Reform 126
Cost Reductions, Efficiency Improvements and Capitalisation 127
Strategic Reorientation 128
Evolution of the Rabobank Group 129
5.2.5 Concluding Remarks 130
5.3 The Reform of the Cooperative Banking Sector in Italy 131
5.3.1 The Cooperative Banking Industry in Italy and Its Recent Evolution 131
The Legal Framework 132
The Need for a Reform 133
5.3.2 The Banche Popolari Experience 135
5.3.3 The Role of BCCs in the Italian Economy 138
5.3.4 The BCC Network Organisation 140
5.3.5 The BCCs Reform: Context and Background 140
5.3.6 The BCCs Reform: Principles and Contents 142
5.3.7 The Implementation of the Reform: First Results and Main Challenges 145
5.4 Other Country-Level Developments in Europe from the Beginning of the Great Crisis 146
5.4.1 Germany 146
5.4.2 France 147
5.4.3 United Kingdom 149
5.4.4 Austria, Finland and Spain 152
References 154
Chapter 6: The Governance of Cooperative Banks: Main Features and New Challenges 157
6.1 Introduction 157
6.2 Features of the Cooperative Banking Model of Governance 158
6.2.1 Democracy 159
6.2.2 Autonomy 159
6.2.3 Accountability 159
6.2.4 Non-monetary Compensation and Recognition 160
6.2.5 Territorial Entrenchment 160
6.3 Models of Governance in Europe 161
6.4 Cooperative Banks and Risk Appetite 167
6.4.1 The Specific Place of Risk Governance in Banking 167
6.4.2 Does Risk Appetite Framework Push Really to Centralization? 170
6.5 The Governance Bodies of Cooperative Banks 171
6.6 The Challenges for the Cooperative Banks’ Governance Model Under New Regulatory Provisions 173
6.7 Conclusions 175
References 176
Chapter 7: The New Paradigm of Digital Proximity for Cooperative Banks 178
7.1 Introduction: The Banks’ Reputation Might Need Working On and Yet a Real Bond Is Actually There 178
7.2 The Bank-Client Relationship, the Bank’s Main Challenge Since Time Immemorial 179
7.2.1 Client Scepticism: Bank Employees Torn on the Fence Between Giving Advice and Financial Objectives 179
7.2.2 A Rich Relational Context Between Employees and Clients 180
7.2.3 Differentiating Between Banks Is No Longer Solely Relational 181
7.3 The Bank-Employee Relationship, a Connection Built on the Individual and Not Institutional Level 183
7.3.1 Employees Appreciative of Their Bank 183
7.3.2 Contrast Between a Fuzzy Brand Identity and Strong Employee Attachment to Their Cooperative Bank 184
7.4 Digital, a Lever of Competence and Positive Relations 184
7.4.1 More Streamlined Communication Between Colleagues 185
7.4.2 Greater Efficacy Between Employees and Clients 185
7.4.3 Clients Attributed Greater Value by the Bank 186
7.5 Cooperative Values, a Similar Vision Between Clients and Employees But Not Rooted in Banks’ Own Identities 188
7.5.1 Cooperative Values Clearly Established in Clients’ Minds 188
7.5.2 Employees Not That Convinced by the Meaning of the Word “Cooperative”, But Still Proud of the Proximity Established with the Clients 189
7.5.3 A Trilogy: Cooperative-Proximity-Digital 190
7.6 Conclusions: Brand, a Lever for Cooperative Banks to Create Enduring Relations with Their Clients 191
7.6.1 Digitality at the Service of Brand and Cooperative 191
7.6.2 Brands: Vectors of Meaningful Values 192
Appendix 1 194
Appendix 2 194
References 195
Chapter 8: The Way Forward for Cooperative Banks 197
8.1 Introduction: Innovation and Cooperative Banks 197
8.2 Keeping Membership at the Centre of the Project 200
8.3 Aggregation Versus Many Independent Small Entities 202
8.4 How to Leverage the Unique Relationship with the Client 205
8.5 Cooperative Banks, Digitalization, and Fintech 207
8.6 How to Limit the Regulatory Burden 209
8.7 Conclusions 210
References 213
Chapter 9: The Cooperative Banks Today in the EU Perspective 215
9.1 Introduction 215
9.2 Cooperative Banks and Diversity in Banking 217
9.2.1 Measuring Diversity in the Banking Sector 219
9.2.2 Financial and Economic Implication of Diversity in Banking 223
Diversity in Banking and Financial Stability 224
Diversity in Banking and Access to Credit 227
9.3 ‘One-Fits-All’ Regulatory Approach and Proportionality 229
9.3.1 Regulation and Diversity in the Banking Sector 229
9.3.2 Challenges of a ‘One-Size-Fits-All’ Regulatory Approach to Diversity in Banking 230
9.3.3 Proportionality in Banking Regulation 232
Principle of Proportionality in EU Regulation 232
Application of Proportionality to EU Banking Regulation 233
9.4 Diversity in Banking and Impact on Society 236
9.5 Summary and Conclusions 239
References 240
Chapter 10: Cooperative Banking in Europe Today: Conclusions 244
10.1 Stressing the Importance of Cooperative Banks in Europe 244
10.2 An External Environment That Carries Unprecedented Challenges 245
10.3 The Imperative of Restoring Profitability 248
10.4 The Call for Challenging the Cooperative Business Model 249
10.4.1 Rethink Proximity 249
10.4.2 Embrace Sustainability 251
10.4.3 Learn to Communicate the Cooperative Difference in Banking 252
10.4.4 Do Not Leave Fintech Companies Leading the Change 253
References 255
Index 256