Cooperative banking
Encyclopedia
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
basis. Cooperative banking institutions take deposits and lend money in most parts of the world.
Cooperative banking, as discussed here, includes retail banking carried out by credit union
Credit union
A credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
s, mutual savings bank
Mutual savings bank
A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc., are paid. Profits after deductions are shared between the members...
s, building societies
Building society
A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially mortgage lending. These institutions are found in the United Kingdom and several other countries.The term "building society"...
and cooperative
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
s, as well as commercial banking services provided by mutual organization
Mutual organization
A mutual, mutual organization, or mutual society is an organization based on the principle of mutuality. Unlike a true cooperative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship...
s (such as cooperative federation
Cooperative federation
A co-operative federation or secondary co-operative is a co-operative in which all members are, in turn, co-operatives.Historically, co-operative federations have predominantly come in the form of co-operative wholesale societies and co-operative unions...
s) to cooperative businesses.
Credit unions
Credit unions have the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members.Its members are usually required to share a common bond
Bond of association
The bond of association or common bond is the social connection among the members of credit unions and co-operative banks. Common bonds substitute for collateral in the early stages of financial system development...
, such as locality, employer, religion or profession, and
credit unions are usually funded entirely by member deposits, and avoid outside borrowing.
They are typically (though not exclusively) the smaller form of cooperative banking institution.
In some countries they are restricted to providing only unsecured personal loans, whereas in others, they can provide business loans to farmers, and mortgages.
Cooperative banks
Larger institutions are often called cooperative banks.Some are tightly integrated federations of credit unions, though those member credit unions may not subscribe to all nine of the strict principles of the World Council of Credit Unions
World Council of Credit Unions
The World Council of Credit Unions is an international trade association and development agency for credit unions headquartered in Madison, Wisconsin. Members of the WOCCU include regional and national credit union associations, cooperative associations and business service organizations in 97...
(WOCCU).
Like credit unions, cooperative banks are owned by their customers and follow the cooperative principle
Rochdale Principles
The Rochdale Principles are a set of ideals for the operation of cooperatives. They were first set out by the Rochdale Society of Equitable Pioneers in Rochdale, England, in 1844, and have formed the basis for the principles on which co-operatives around the world operate to this day. The...
of one person, one vote. Unlike credit unions, however, cooperative banks are often regulated under both banking and cooperative legislation. They provide services such as savings and loans to non-members as well as to members, and some participate in the wholesale markets for bonds, money and even equities. Many cooperative banks are traded on public stock markets, with the result that they are partly owned by non-members.
Member control is diluted by these outside stakes, so they may be regarded as semi-cooperative.
Cooperative banking systems are also usually more integrated than credit union systems. Local branches of cooperative banks elect their own boards of directors and manage their own operations, but most strategic decisions require approval from a central office. Credit unions usually retain strategic decision-making at a local level, though they share back-office functions, such as access to the global payments system, by federating.
Some cooperative banks are criticized for diluting their cooperative principles. Principles 2-4 of the "Statement on the Co-operative Identity
Statement on the Co-operative Identity
The Statement on the Co-operative Identity, promulgated by the International Co-operative Alliance , defines and guides co-operatives worldwide. It contains the definition of a co-operative as a special form of organization, the values of co-operatives, and the currently accepted cooperative...
" can be interpreted to require that members must control both the governance systems and capital of their cooperatives. A cooperative bank that raises capital on public stock markets creates a second class of shareholders who compete with the members for control. In some circumstances, the members may lose control. This effectively means that the bank ceases to be a cooperative. Accepting deposits from non-members may also lead to a dilution of member control.
Building societies
Building societies exist in Britain, Ireland and several Commonwealth countries. They are similar to credit unions in organisation, though few enforce a common bondBond of association
The bond of association or common bond is the social connection among the members of credit unions and co-operative banks. Common bonds substitute for collateral in the early stages of financial system development...
. However, rather than promoting thrift and offering unsecured and business loans, their purpose is to provide home mortgages for members. Borrowers and depositors are society members, setting policy and appointing directors on a one-member, one-vote basis. Building societies often provide other retail banking services, such as current accounts, credit cards and personal loans. In the United Kingdom, regulations permit up to half of their lending to be funded by debt to non-members, allowing societies to access wholesale bond and money markets to fund mortgages. The world's largest building society is Britain's Nationwide Building Society
Nationwide Building Society
Nationwide Building Society is a British building society, and is the largest in the world. It has its headquarters in Swindon, England, and maintains significant administration centres in Bournemouth and Northampton...
.
Others
Mutual savings bankMutual savings bank
A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc., are paid. Profits after deductions are shared between the members...
s and mutual savings and loan association
Savings and loan association
A savings and loan association , also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans...
s were very common in the 19th and 20th centuries, but declined in number and market share in the late 20th century, becoming globally less significant than cooperative banks, building societies and credit unions.
Trustee savings bank
Trustee Savings Bank
The Trustee Savings Bank was a British financial institution which specialised in accepting savings deposits from the poor. They did not trade their shares on the stock market and, unlike mutually held building societies, depositors had no voting rights nor the ability to direct the financial and...
s are similar to other savings banks, but they are not cooperatives, as they are controlled by trustees, rather than their depositors.
International associations
The most important international associations of cooperative banks, both based in BrusselsBrussels
Brussels , officially the Brussels Region or Brussels-Capital Region , is the capital of Belgium and the de facto capital of the European Union...
, are the International Association of Cooperative Banks (CIBP), which has member institutions from around the world, and the European Association of Co-operative Banks
European Association of Co-operative Banks
The European Association of Co-operative Banks is the supranational body for co-operative banks, with member national governing bodies in 23 countries and an associate member in Switzerland....
.
Quebec
The caisse populaire movement started by Alphonse DesjardinsAlphonse Desjardins (co-operator)
Gabriel-Alphonse Desjardins , born in Lévis, Quebec, was the co-founder of the Caisses Populaires Desjardins , a forerunner of North American credit unions and community banks.- Early life :...
in Quebec
Quebec
Quebec or is a province in east-central Canada. It is the only Canadian province with a predominantly French-speaking population and the only one whose sole official language is French at the provincial level....
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, pioneered credit unions. Desjardins opened the first credit union in North AmericaiIn 1900, from his home in Lévis, Quebec
Lévis, Quebec
Lévis is a city in eastern Quebec, Canada. It is located on the south shore of the St. Lawrence River, opposite Quebec City. A ferry links Old Quebec with Old Lévis, and two bridges, the Quebec Bridge and the Pierre Laporte Bridge, connect western Lévis with Quebec City. The Société de transport de...
, marking the beginning of the Mouvement Desjardins
Mouvement Desjardins
The Desjardins Group is the largest association of credit unions in North America. It was founded in 1900 in Lévis, Quebec by Alphonse Desjardins....
. He was interested in bringing desperately needed financial protection to working people.
United Kingdom
British building societiesBuilding society
A building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially mortgage lending. These institutions are found in the United Kingdom and several other countries.The term "building society"...
developed into general-purpose savings and banking institutions with ‘one member, one vote’ ownership and can be seen as a form of financial cooperative (although some de-mutualised
Demutualization
Demutualization is the process by which a customer-owned mutual organization or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form...
into conventionally-owned banks in the 1980s and 1990s). The UK Co-operative Group includes both an insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
provider, the CIS, and the Co-operative Bank
Co-operative Bank
The Co-operative Bank plc is a commercial bank in the United Kingdom and Guernsey, with its headquarters in Manchester.The bank markets itself as an ethical bank, and refuses to invest in companies involved in the arms trade, global climate change, genetic engineering, animal testing and use of...
, both noted for promoting ethical investment.
Continental Europe
Important continental cooperative banking systems include the Crédit AgricoleCrédit Agricole
Crédit Agricole S.A. is the largest retail banking group in France, second largest in Europe and the eighth largest in the world by Tier 1 capital according to The Banker magazine. It is also part of the CAC 40 stock market index....
, Crédit Mutuel
Crédit Mutuel
Crédit Mutuel is a major French bank, with headquarters in Strasbourg, Alsace. Its slogan is "La banque à qui parler" . It is currently run by Michel Lucas and Alain Fradin and has 7.4 million customers - roughly half of whom live in the Grand-Est, i.e...
, Banque Populaire and Caisse d'épargne in France, Rabobank
Rabobank
Rabobank is a financial services provider with offices worldwide. Their main location is in the Netherlands. They are a global leader in Food and Agri financing and in sustainability-oriented banking...
in the Netherlands, BVR/DZ Bank
DZ Bank
DZ Bank AG is an acronym for Deutsche Zentral-Genossenschaftbank . DZ Bank is the fourth largest bank in Germany by asset size and the central institution for more than 900 co-operative banks and their 12,000 branch offices...
in Germany, Banco Popolare
Banco Popolare
Banco Popolare is an Italian cooperative bank, formed in 2007 from the merger of Banco Popolare di Verona e Novara and Banca Popolare Italiana . In June 2009 the company became the first Italian bank to receive state aid from the Government of Italy due to the ongoing financial crisis. It sold...
, UBI Banca
UBI Banca
Unione di Banche Italiane S.c.p.A., branded as UBI Banca, is the fifth-largest banking group in Italy by both market capitalisation and number of branches. The firm is primarily a holding company for a number of Italian cooperative banks, although it also controls the publicly-traded online bank...
and Banca Popolare di Milano
Banca Popolare di Milano
-History:The second cooperative bank in Italy , it was founded in 1865 in Milan by Luigi Luzzatti, who later served as the nation's Prime Minister...
in Italy, Migros
Migros
Migros is one of Switzerland's largest enterprises, its largest supermarket chain and largest employer. It co-founded Turkey's largest retailer, Migros Türk, which became independent of Migros Switzerland in 1975....
and Coop Bank in Switzerland, and the Raiffeisen
Friedrich Wilhelm Raiffeisen
Friedrich Wilhelm Raiffeisen was a German mayor and cooperative pioneer. Several credit union systems and cooperative banks have been named after Raiffeisen, who pioneered rural credit unions.- Life :...
system in several countries in central and eastern Europe. The cooperative banks that are members of the European Association of Co-operative Banks
European Association of Co-operative Banks
The European Association of Co-operative Banks is the supranational body for co-operative banks, with member national governing bodies in 23 countries and an associate member in Switzerland....
have 130 million customers, 4 trillion euros in assets, and 17% of Europe's deposits. The International Confederation of Cooperative Banks (CIBP) is the oldest association of cooperative banks at international level.
In Scandinavia
Nordic countries
The Nordic countries make up a region in Northern Europe and the North Atlantic which consists of Denmark, Finland, Iceland, Norway and Sweden and their associated territories, the Faroe Islands, Greenland and Åland...
, there is a clear distinction between mutual savings bank
Mutual savings bank
A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc., are paid. Profits after deductions are shared between the members...
s (Sparbank) and true credit unions (Andelsbank).
India
The origins of the cooperative banking movement in India can be traced to the close of nineteenth century when, inspired by the success of the experiments related to the cooperative movement in Britain and the cooperative credit movement in Germany, such societies were set up in India. Cooperative banks are an important constituent of the Indian financial system. They are the primary financiers of agricultural activities, some small-scale industries and self-employed workers. The Anyonya Co-operative Bank in India is considered to have been the first cooperative bank in Asia.Microcredit and microfinance
The more recent phenomena of microcreditMicrocredit
Microcredit is the extension of very small loans to those in poverty designed to spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit history and therefore cannot meet even the most minimal qualifications to gain access to traditional credit...
and microfinance
Microfinance
Microfinance is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services....
are often based on a cooperative model They focus on small business
Small business
A small business is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships...
lending. In 2006, Muhammad Yunus
Muhammad Yunus
Muhammad Yunus is a Bangladeshi economist and founder of the Grameen Bank, an institution that provides microcredit to help its clients establish creditworthiness and financial self-sufficiency. In 2006 Yunus and Grameen received the Nobel Peace Prize...
, founder of the Grameen Bank
Grameen Bank
The Grameen Bank is a microfinance organization and community development bank started in Bangladesh that makes small loans to the impoverished without requiring collateral...
in Bangladesh, won the Nobel Peace Prize
Nobel Peace Prize
The Nobel Peace Prize is one of the five Nobel Prizes bequeathed by the Swedish industrialist and inventor Alfred Nobel.-Background:According to Nobel's will, the Peace Prize shall be awarded to the person who...
for his ideas regarding development and his pursuit of the microcredit concept.
List of cooperative banking institutions
| Name | Country | Members (2010) |
Assets (2010 US$ millions)!! Type !! Alternative name !! Notes |
|||
|---|---|---|---|---|---|---|
| Crédit Agricole Crédit Agricole Crédit Agricole S.A. is the largest retail banking group in France, second largest in Europe and the eighth largest in the world by Tier 1 capital according to The Banker magazine. It is also part of the CAC 40 stock market index.... |
France | Joint stock bank | CASA | Majority owned by federation of credit unions | ||
| DZ Bank DZ Bank DZ Bank AG is an acronym for Deutsche Zentral-Genossenschaftbank . DZ Bank is the fourth largest bank in Germany by asset size and the central institution for more than 900 co-operative banks and their 12,000 branch offices... |
Germany | Bank | Deutsche Zentralgenossenschaftbank German Central Cooperative Bank |
Owned by three quarters of all Volksbank and Raiffeisenbank (cooperative banks) in Germany and Austria | ||
| Caisse d'Epargne Groupe Caisse d'Epargne Groupe Caisse d'Epargne is a French semi-cooperative banking group, founded in 1818, with around 4700 branches in the country. The group is active in retail and private banking, as well as holding a significant stake in the publicly traded investment bank Natixis.-Operations:The group's most... |
France | literally “savings bank” | Credit union federation | |||
| Rabobank Rabobank Rabobank is a financial services provider with offices worldwide. Their main location is in the Netherlands. They are a global leader in Food and Agri financing and in sustainability-oriented banking... |
Netherlands | 1,500,000+ | Credit union federation | |||
| Nationwide Building Society Nationwide Building Society Nationwide Building Society is a British building society, and is the largest in the world. It has its headquarters in Swindon, England, and maintains significant administration centres in Bournemouth and Northampton... |
UK | Building society | World's largest building society | |||
| Groupe Banque Populaire Groupe Banque Populaire Groupe Banque Populaire is a French group of cooperative banks. It is controlled by 18 regional banks, the CASDEN Banque Populaire and the Crédit Coopératif.... |
France | 3,400,000 | ||||
| Desjardins Group | Canada | 5,795,277 | Credit union federation | Leading bank in Quebec | ||
| Raiffeisen Zentralbank | Austria | Bank | RZB Österreich | Credit union federation | ||
| Nonghyup Nonghyup The National Agricultural Cooperative Federation is a federation of agricultural cooperatives in South Korea.It delivers supply, processing, marketing, and banking services through more than 4000 branches... |
South Korea | Banking division of agricultural cooperative | National Agricultural Cooperative Federation (NACF) | Approx US$230 billion in loans | ||
| Raiffeisen Landesbank Südtirol Raiffeisen Landesbank Südtirol – Cassa Centrale Raiffeisen dell'Alto Adige The Raiffeisen Landesbank Südtirol – Cassa Centrale Raiffeisen dell'Alto Adige is an Italian cooperative bank headquartered in Bolzano. Established in 1889 in Val Badia, after the end of World War II the bank has englobed some minor local cooperative banks, expanding its operations throughout South... |
Italy | Bank | Cassa Centrale Raiffeisen dell'Alto Adige | |||
| OP-Pohjola Group and Pohjola Bank OP-Pohjola Group OP-Pohjola Group comprises 229 independent member co-operative banks and the Group's statutory central institution, OP Bank Group Central Co-operative.The subsidiaries of the OP Bank Group Central Co-operative and their products include:... |
Finland | 31% share of Finnish credit market, and 32% share of savings and deposit market | ||||
| Bank Persatuan Bank Persatuan Koperasi Bank Persatuan Malaysia Berhad which is simply known as Bank Persatuan , is a cooperative banking entity based in Penang, Malaysia. Currently, Bank Persatuan has over 13 branches located mainly in Malaysian Peninsular with a branch opened in Kuala Lumpur which commenced its operation on... |
Malaysia | 46,135 | 86,375,542.97 | Bank | Koperasi Bank Persatuan Malaysia Berhad | 2nd national cooperative bank in Malaysia |
| Co-operative Bank Co-operative Bank The Co-operative Bank plc is a commercial bank in the United Kingdom and Guernsey, with its headquarters in Manchester.The bank markets itself as an ethical bank, and refuses to invest in companies involved in the arms trade, global climate change, genetic engineering, animal testing and use of... |
UK | Not applicable | Bank | Subsidiary of consumer cooperative | ||
| Navy Federal Credit Union Navy Federal Credit Union Navy Federal Credit Union is a credit union headquartered in Vienna, Virginia, chartered and regulated under the authority of the National Credit Union Administration of the U.S. federal government. Navy Federal is the largest natural member credit union in the world, both in asset size and in... |
US | 3,004,352 | 33012 | Credit union | ||
| Shared Interest Shared Interest Shared Interest Society Limited is a fair trade financial co-operative based in the United Kingdom formed in 1990. Today it provides credit and financial services to fair trade producers, retailers, importers and exporters throughout the world. Shared Interest works with both Fairtrade Labelling... |
UK | Cooperative lending society | Finance for fair trade Fair trade Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards... |
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See also
- Building societyBuilding societyA building society is a financial institution owned by its members as a mutual organization. Building societies offer banking and related financial services, especially mortgage lending. These institutions are found in the United Kingdom and several other countries.The term "building society"...
- Credit unionCredit unionA credit union is a cooperative financial institution that is owned and controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members...
- Savings and loan associationSavings and loan associationA savings and loan association , also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans...
- Mutual savings bankMutual savings bankA mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, that is owned by its members who subscribe to a common fund. From this fund claims, loans, etc., are paid. Profits after deductions are shared between the members...