With economic growth slowing, low interest rates and a changing political framework, 2016 proved a difficult year for co-operative banks but, says EACB president Gerhard Hofmann, they continued to perform well.
But he said financial markets could still feel the effects of Brexit and the changing technology bringing new entrants to the market. And a new package of reforms proposed by the Basel Committee could pose additional burdens.
This makes regulation a key concern for EACB, particularly with an increasing role played by European supervisory authorities to improve the functioning of the internal market via harmonised European regulation and supervision.
EACB’s focus is in reminding regulators of the diversity of the European banking industry and, over the past year, has been actively engaging with the EU on the issue.
It says future guidelines should contain specific provisions adapted to and protective of the co-operative model and its specificities. EACB supports the EU’s efforts to introduce subsidiarity and proportionality into the legislation.
In the annual report, EACB general manager Hervé Guider said co-operative banks were the main pillar of diversity in the European banking sector. They account for 20% of the market of EU bank deposits and loans and serve 210m customers.
EACB includes 28 member institutions and co-operative backs from 23 countries. It acts as a voice for over 4,000 small, regional and large member banks at European and international levels.
Throughout its engagement with EU institutions, EACB highlighted the need for subsidiary, necessity and proportionality – looking at the lack of a viable alternative instrument and assessing whether the benefits outweigh the costs.
The report also explores the challenges of digitisation, which changes the way in which co-operative banks are operating, from face-to-face exchanges to mobile technology-based interaction. The EACB has responded to these with Co-operative Bank Digital Day workshops.
In addition, in 2016 the EU announced an agenda for sustainable finance and EACB was involved in various discussions and initiatives at both EU and international level.
Lending to SMEs is another important issue for co-operative banks. Last November, the EACB held the seventh European Forum on Co-operative Banks and SMEs in Brussels, which analysed the role of co-operatives banks in financing SMEs.
The year also marked the launch of a new product by the European Investment Bank – the Group Risk Enhancement Mandate Co-operative Banks and Smaller Institutions (EREM CBSI), which targets co-op banks and smaller institutions with a particular focus on SMEs and start-ups. EREM CBSI allocated an initial €125m for the instrument, aimed at encouraging the institutions to lend even more to SMEs.
The EACB report shows the strength of the European co-operative banking sector, with a total value of the assets of European co-operative banks reaching €6.95tn at the end of 2015, and with deposits totalling €3.49tn and loans given to members at €3.933tn.