“Co-ops banks too important to be footnote” in European Banking Union

The first round table of the EACB’s Convention on co-operative banks focused on how banking legislation proposals within the EU would impact on co-operative banks.

The first round table of the EACB’s Convention on co-operative banks focused on how banking legislation proposals within the EU would impact on co-operative banks.  

The panel, gathering high-level representatives of EU institutions, and co-operative banks  assessed the new plans to create a European banking union with: a single European banking supervisor, a common EU deposit-guarantee scheme and a single bank-resolution fund.

The discussion underlined how co-operative banks will be affected by these new regulations, and also whether they will continue to play a key role in financing the local economy.

Michael Taggart, Financial Attaché, Permanent Representation of Ireland to the EU said he believes an agreement will be reached next week when the European Council will discuss on the Single Supervising Regulatory (SSR). He added the Single Resolution mechanism and the Single Deposit Guarantee Scheme (SDGS) are priorities during Ireland’s presidency of the EU Council, beginning on 1 January 2013.

Fatima Pires, Deputy Head of Financial Services Division, European Central Bank, spoke of the benefits of a single supervising mechanism (SSM), adding co-op banks are special.

Neil Esho, Senior Member of the Secretariat, Basel Committee on Banking Supervision said the Basel Committee is mainly focusing on regulations. He said: “The rules are in place but it is critical that they are implemented right”. He added rules are much more focused on larger banks, rather than on co-ops.

Referring to the Basel III Accord, a global regulatory standard on bank capital adequacy, Gerhard Hofmann said that co-op banks are too important to be put in a footnote.

Thierry Philipponnat, Secretary General, Finance Watch, said the Basel Committee should consider including co-operatives in its regulations: "The challenge is to face the fact that co-operative banks are very diverse." He explained there were 4,000 co-operative banks in Europe, which made up 50 per cent of the number of banks within the EU. This includes many small local banks, as well global financial giants.

Gerhard Hofmann, Vice-President of the European Association of Co-operative Banks (EACB) also highlighted that co-operative banks are not taken into account when such regulations are drafted. “For most co-ops banks… nobody would care if they fail”. He said that is why it is important for co-op banks to help themselves.

He added: “We have to make sure co-operative banks will not be collateral damage in these new regulations”.

Konrad Szelag, Policy Coordinator, European Commission, said diversity contributes to the overall stability of the sector and the general rules are for all banks, but they should also recognise the special character of co-op banks. Neil Esho added that diversity is good for the banking sector, but a consistent rulebook for all banks is also necessary.

MEP and Vice-President of the European Parliament, Gianni Pitella, said co-operative banks have an ethical dimension: “We have to turn philosophy into practice and this specific role of credit co-operative banks has to be taken into account.”

Mr Philipponnat also added: “One thing that has been agreed on is the need for diversity. There is a distortion of competition within the banking system, in favour of the banks. The debate is subtler than yes or no." He said we need to recognise that competition might go against diversity.

Panellists also addressed the issue of trust. Michael Taggart said: “In Ireland trust in the banking sector has not recovered.” He added that although credit unions enjoy a higher level of trust, people still fear.

Ms Pires said: “We need to have a consistent and effective framework.” She added complementing existent regulations is also essential and that this should be done in a way that would not increase fragmentation.

Priorities for 2013

Asked what his priorities were for the coming year Gerhard Hoffman said: “ We don’t set priorities, we just accept priorities by others.

“I have two priorities. The first is better regulation, co-operative banks don’t ask for any advantage, but to have our special character taken into account. Please don’t regulate our diversity”.

Mr Hofmann added that handing things into the ECB itself would not necessarily mean there would be better results.

“Supervising failure has happened before,” he added.

Neil Soho said the priority for the Basel Committee is to solve the crisis while Fatima Pires said the priority for the European central Bank is to finalise the resolution on the European banking union.

Michael Taggart said Ireland's priorities as it holds the presidency of the EU Council are stability, job creation and growth. He added co-op banks have a role to play in making this happen.

On the other hand, Gianni Pitella said priority has to be given to political Europe because “we are not getting anywhere if together with the banking union we do not have a political union.”

The 5th Convention on European Banking took place at Solvay Library in Brussels, on 6 December and brought together high-level representatives from co-operative, financial and political sectors to discuss the future of co-operative banks.

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