A Venice conference has called on all European Union heads of state to recognise the role that co-operative banks played in the continent's economic recovery.
At the 'Promoting the understanding of co-operatives for a better world' conference, which has brought together academics for two days, Carlo Borzaga, the President of the event's organiser Euricse, launched the appeal, which also include the EU’s governing bodies and the European banking authorities.
Mr Borzaga said his hope is that European banking policies learn to take into consideration the specific nature of co-operative banks, and local banks in general, in order to support Europe’s economic recovery.
The appeal is contained in a document which tackles the new regulations for the financial system in the EU, and was discussed by Mr Borzaga with Romano Prodi, former Italian Prime Minister and ex-president of the European Commission; Sir Partha Dasgupta, University of Cambridge and London School of Economics professor; and Alessandro Azzi, the president of Federcasse, the Italian federation of co-operative banks.
Romano Prodi pointed out that the problem lay in the capacity of institutions to grasp the conference’s message. He said: “The problem is not in the voice of those launching the appeal, but in the ears of those who should be listening to it.”
According to the politician and economist, this means that bottom-up initiatives can be shared, but “attention to the role of the State and institutions is essential because it offers a guarantee in the face of changes to society.”
Economist Sir Partha Dasgupta said that what first needs to be overcome is “a feeling, corroborated by us economists, that alternatives to the capitalist system are unstable” and that they can be “wiped out by competition.” This fear would vanish if we looked more closely at the different systems already present and highly functional within society. An example? The family, “a non-profit company which is still able to operate, prosper and survive.”
“Our way of banking supports the real economy and not the speculative one,” said Alessandro Azzi of Federcasse. “Supporting co-operative banks therefore means supporting small local enterprises.” He warned that “standardized regulations applied in such a heterogeneous way risk creating problems.” The danger is that “those who have actually supported the real economy in these years of crisis will not manage to adapt to new regulations.” He said it was important to “raise our voice” and that an appeal could function as a driving force for change.
His worry is echoed in the text of the appeal, which reads: “It is a source of great concern to see the formulation of a new regulatory framework for financial institutions that jeopardizes the possibility of survival for co-operative and local banks,” as its “undifferentiated approach in reality penalizes the banks who have contributed the least to the development of the crisis and who have proved the best in mitigating its consequences.”
The main reference is thus to local and co-operative banks, who have no connection to the high-risk financial activities that caused the crisis. “On the contrary, they have continued to concentrate their activities on the real economy, giving credit to families and to small and medium enterprises even when other banks had stopped doing so.” They play a structurally important role in local communities, driving local development, and this role is “increasingly recognized and appreciated by both policy-makers and consumers.”
Indifferent to their distinctive nature, “the new directives bring costs that will weigh much heavier, proportionally, on local and co-operative banks, because of their demanding requirements. The effect will be to reduce the availability of credit and at the same time increase its cost.” These measures are not necessary, as shown by the fact that in the United States, where these undesirable effects have been analysed, “local banks have been exempted from new banking regulations.”
The signatories of the appeal are therefore asking European policy-makers and legislators to recognize the specific qualities that distinguish local and co-operative banks and to meet the following demands:
1) adopt an effective principle of proportionality for these new standards
2) exempt co-operative banks from the requirements that do not conform to their business model
3) before the introduction of a measure, evaluate its impact on different types of banks and enterprises
4) revise the timing of the introduction of the new directives, keeping in consideration their effect on different industrial structures at a national level and the consequences on the process of recovery from the economic crisis
• The full document is available below. To find out more about the conference visit, http://conference2012.euricse.eu
In this article
- Alessandro Azzi
- Carlo Borzaga
- Contact Details
- Cooperative banking
- European Commission
- European Union
- London School of Economics
- Partha Dasgupta
- Person Career
- Prime Minister
- Romano Prodi
- Social Issues
- Social systems
- University of Cambridge