Co-op banks look to maximise their co-operative difference

The European Association of Co-operative Banks (EACB) was in upbeat mood at the Quebec summit on Tuesday, at the promotion of a report from Oliver Wyman which gives a generally positive report on the state of co-operative banking in much of mainland Europe.

Leaving aside the particular issues of Britain’s Co-operative Bank, the co-operative banking sector has been turning in some encouraging results.

As Oliver Wyman’s Bruno de Saint-Florent pointed out in introducing his firm’s study, co-operative banks have seen their client base increase by 6% a year in the period since the financial crisis. Co-operative banks have also been continuing to support the small business sector, he said, in contrast to commercial competitors who have increasingly withdrawn from small business lending.

Nevertheless, Bruno de Saint-Florent also warned co-op banks not to become complacent. There was, he said, a demographic challenge, with co-op banks particularly located in rural and low-growth areas where populations are static or declining. The reputational advantage of co-op banks is potentially under threat from shareholder banks, and the reliance on branch networks could turn into a competitive disadvantage as banking increasingly becomes a digitised business. Finally, co-op banks face regulatory challenges and difficulties, with regulators not necessarily understanding the co-operative business model.

“Co-operative banks cannot be static.  There’s a need to find ways of raising the bar,” de Saint-Florent said.

The Oliver Wyman study focuses on data from eight European banks in Finland, France, Germany, Italy, the Netherlands and Switzerland.  Research included interviews with senior managers at the banks, academics and policymakers. Among banks participating were the Dutch giant Rabobank, Crédit Agricole and Crédit Mutuel in France and Raiffeisen Switzerland.

The study is entitled Cooperative Banking, Leveraging the Cooperative Difference to adapt to a new Environment, and it suggests that as part of this process co-operatives need to look to their roots. “Co-operative banks need to remind consumers of what makes them special: namely, that they are owned by their members and are dedicated to their communities,” the report argues.  The advantages of membership could be given increased and members encouraged to play a more active part in how business principles and practices are established.  Membership could also be promoted more strongly among non-members and potential clients, the report suggests.

For Bruno de Saint-Florent, technology can be harnessed as part of this process of leveraging the co-operative difference. “Banks can use technology to rejuvenate the co-operative relationship,” he told his audience at Quebec.

Only a part of those listening in Quebec were delegates from the EACB’s 29 member organisations. Although Oliver Wyman’s work is focused specifically on banks, arguably the recommendations have a wider relevance for co-operatives in other sectors looking to maximise the benefits that can come from rediscovering their co-operative difference.

• The report is available at the Oliver Wyman website.

• For more updates from the 2014 International Summit of Cooperatives, click here