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Document 52014IE4516

Opinion of the European Economic and Social Committee on the role of cooperative and savings banks in territorial cohesion — proposals for an adapted financial regulation framework (own-initiative opinion)

OJ C 251, 31.7.2015, p. 7–12 (BG, ES, CS, DA, DE, ET, EL, EN, FR, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)



Official Journal of the European Union

C 251/7

Opinion of the European Economic and Social Committee on the role of cooperative and savings banks in territorial cohesion — proposals for an adapted financial regulation framework

(own-initiative opinion)

(2015/C 251/02)



On 10 July 2014 the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an own-initiative opinion on

The role of cooperative and savings banks in territorial cohesion — proposals for an adapted financial regulation framework.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee’s work on the subject, adopted its opinion on 3 February 2015.

At its 505th plenary session, held on 18 and 19 February 2015 (meeting of 18 February 2015), the European Economic and Social Committee adopted the following opinion by 153 votes to 2 with 10 abstentions.

1.   Conclusions and recommendations


In the transition to new banking and non-banking business models in the finance sector, the EESC considers it vital to preserve the ‘biodiversity’ of the financial system, without this meaning the arbitrary application of rules (1).


Shareholder-value banks (SHV) must be efficiently complemented by stakeholder-value banks (STV), through their wholesale, retail and investment activities. This is the only way to secure a stable and effective financial ecosystem that makes its full contribution to the development of the real economy.


The EESC strongly supports the efforts made by the European Commission to take the particular nature of cooperative and savings banks into account in the new financial regulation, so as to avoid the undesirable effects of uniform application of prudential rules and possibly an overload of administrative burdens.


However, the main problem remains the proper application of the proportionality principle in the new banking rules (especially regarding the Capital Requirements Directive — CRD IV and the Capital Requirements Regulation — CRR), which the Basel Committee suggested should be applied proportionately in keeping with the EU Treaties. This means that the strictest requirements should apply to global banks, stringent requirements should apply to pan-European banks (of a systemic nature in Europe) and more flexible requirements should apply to national and local banks (guaranteeing a proper level of consumer protection).


This does not mean freely granting privileges to certain segments of the financial sector. The EESC has always been committed to a level playing field, and therefore recommends the use of objective parameters that justify a specific regulation for each business model. Essentially, these are financial and economic performance, contribution to the real economy, risk management, and governance. The EESC proposes that the financial authorities should offer incentives to those actors who best comply with these conditions.


The EESC seeks to highlight the banking model provided by cooperative and savings banks while stressing its condemnation of certain forms of behaviour in the financial sector, including that of some companies in the sector. The EESC calls for stronger ethical standards and codes of good governance across the financial services industry, as these are vital for restoring lost confidence.


The EESC stresses the dramatic impact which continued stagnation and lack of credit for SMEs and households may have on the European Union’s future. It also echoes the recent criticism by the European Parliament of the Basel Committee’s position, which had questioned the specific European instruments for financing SMEs.


If Europe wishes to successfully meet future challenges and be an agent for change (rather than undergoing it passively), it urgently needs to adopt a range of measures in the financial sphere to effectively carry out the Europe 2020 strategy, the Single Market Acts I and II, the Small Business Act, the Cosme programme, the Social Business Initiative, and so on. Strengthening the role of savings and cooperative banks in the European financial system will be crucial to meeting these objectives.

2.   Cooperative and savings banks in the European financial context


Savings and cooperative banks have historically played a key role in developing the economy, especially by supporting agriculture, small industry and trade. They currently account for around 40 % of the EU financial sector (reaching 70 % in France and 60 % in Germany), although their structure varies significantly between countries. The sectoral concentration of savings banks in countries such as Spain and Finland contrasts with the very dispersed situation in Germany and Austria.


Broadly speaking, bank restructuring has produced a smaller, more streamlined but less inclusive picture, as in recent years it has deprived SMEs and households of financing; it has gone hand in hand with a steady reduction in the network of local branches and the loss of many jobs. This trend may worsen if local banks are pushed out of the market.


Taking the business model of a retail bank, cooperative and savings banks offer some highly distinctive features: these include their links with the local production fabric, their firm anchorage in their region, their extensive commercial networks, their closeness to the customer, the financing of specific sectors, their closeness to local interests and social operators, and their solidarity.


Because of the way they are structured, cooperative and savings banks tend to have healthy asset structures, with reasonable risk assumption, gearing their investment and capitalisation processes in line with endogenous territorial development policies.


From a conceptual viewpoint it is useful to establish the features which distinguish cooperative banks from savings banks:

cooperative banks are private bodies which combine two features: they are cooperative societies and credit institutions whose main aim is to provide financial services for their members/owners and customers. Their governance rests on the cooperative principles of democratic decision-taking and participation (one person, one vote), and a significant proportion of their earnings are ploughed into statutory reserve funds and social funds;

savings banks are a private form of foundation, with a dual role which embraces both financial activity and a social purpose. The distinguishing feature of this model is the absence of explicit owners, although other configurations co-exist, such as that of a public company or public limited company. In the foundation form, the governing bodies are decided by a general assembly at which local and regional corporations are represented together with, depending on the country, clients, founding bodies or employees. Profits are ploughed into reserves and social initiatives.


The figures for cooperative banks are very eloquent in periods of crisis: no cooperative bank in the EU has been unable to meet its payment obligations. They hold a roughly 20 % market share of deposits; in countries such as Italy, France, Germany and the Netherlands they finance between 25 % and 45 % of loans to SMEs and have steadily increased their share of deposits in recent years, which is a strong indication of trust in this type of entity.


For their part, savings banks have continued to play a significant role in the EU financial system. Thus in Germany they have garnered a market share of 43 % of deposits and 39 % of credits, while in Spain the respective figures are 41 % and 42 %.


The International Monetary Fund (2) has also highlighted the essential role of cooperative banks. As these bodies are less dependent on shareholder expectations, they provide a reliable and secure answer to the credit needs of SMEs and of many households.


However, there have been exceptions: some cooperative and savings banks have jettisoned their own aims and moved into speculative activities and opted for excessive expansion in other regions, sullying their reputation, prompting certain countries to implement regulatory measures that have to some extent distorted this banking model.


In short, strengthening capital, attaining an appropriate size, preserving their territorial nature and maintaining high levels of consumer protection must go hand in hand with upholding the basic attributes of a distinctive business model. In this process, the EESC calls for recognition and support from the EU institutions.

3.   Challenges facing the development of retail banking


Cooperative and savings banks embody the specific characteristics of a retail bank: closeness to the customer, local roots, cooperation, a social purpose, and so on. However, a number of factors affect the development of their potential (3):

increasing competition has brought a steady reduction in financial intermediation margins;

multi-channel distribution requires heavy investment in technology;

in some cases, excessively small size makes it necessary to forge strategic alliances between bodies or to merge;

concentration is not without risk, and may bring diseconomies of scale; and

local banking is difficult to combine with geographical diversification on international markets.


Notwithstanding the above, cooperative and savings banks continue to play an important role in pursuing the Europe 2020 strategy, through their financial, social and territorial roles, complementing forms of non-bank financing (crowdfunding, risk capital, business angels, etc.) which have emerged as a result of the credit crunch and the high guarantees demanded.


The EESC considers that the economic and monetary authorities should strengthen measures to facilitate SMEs’ access to funds and encourage long-term financing, promoting diverse forms of enterprise (4) and risk-sharing in the financial services sector.

4.   A social role serving local economies


For cooperative and savings banks, financial and social functions are closely intertwined in their commitment to territorial cohesion. Their social commitment and concern for the community are the features that are most visible to the public (5).


The surpluses generated are shared among cultural initiatives, social assistance and healthcare, education and research, historical and artistic heritage, environmental sustainability, and so on, and in the case of savings banks the social dividend amounts to several billions of euros every year.


Given the need to create value for local economies, the ‘stakeholder value’ (STV) approach is becoming increasingly important. In particular, social banking facilitates financial inclusion and territorial cohesion by fostering entrepreneurship and the start-up of crowdfunding and socially responsible investment schemes.


Cooperative and savings banks play a significant role as intermediaries for EU instruments and programmes. The EESC thinks that administrative requirements should be simplified to give smaller cooperative banks easier access to an intermediary role for the financial instruments of the European Investment Bank (EIB) and the European Investment Fund (EIF). Simplification is a key element in implementing the Juncker plan. It is also vital for them to be able to strengthen their role in implementing the Social Business Initiative (SBI).

5.   The effects of restructuring in the social banking sector


Savings banks in Europe have recently undergone major restructuring, in some countries transforming the foundation on which they are based.


Subsequently, as a result of the global financial crisis, there have been rescue and reform processes, mergers and acquisitions, nationalisations and, in the case of Spain’s savings banks, even consolidation into commercial banks.


Corporate governance problems, the increased requirements of the new financial regulation and the need to adapt the size of the sector to a shrinking market have led to a certain amount of concentrations in the banking sector. Whilst it is difficult for these bodies to internationalise in order to gain size, the EESC stresses that risk-taking is usually higher in multinational groups.


At the other end of the spectrum, on the basis of the 2012 report by the Liikanen group and in order to address the problems which banks that are ‘too big to fail’ pose for the taxpayer, the Commission has proposed a regulation on structural measures improving the resilience of EU credit institutions; the EESC opinion on this (6) was adopted with a large majority.


Certain articles of the proposed regulation provide for exceptions concerning capital requirements and voting rights in the case of cooperative and savings banks, in recognition of their very specific ownership and economic structure.


The EESC considers that some of the rules on separating commercial banking from investment banking could undermine the operation of smaller local banks and their day-to-day grassroots role in helping the real economy, and would therefore prove disproportionate.


These changes are not without implications for the European public: they lead to cuts in capacity (branches and staff), which has an impact on employment and financing for private individuals and SMEs.


In short, the EESC considers that without a degree of flexibility in meeting the new regulatory requirements, there is a risk that cooperative and savings banks will turn into commercial banks and thus lose their special nature, thereby depriving society of a major social asset that has been built up over several centuries.

6.   Strategic options for facing future challenges


Cooperative and savings banks have helped to give the European banking system stability, solvency and competence. However, new market requirements lay down the following challenges:

consolidating the model of a local retail bank,

taking further steps in business cooperation,

improving their internal risk management systems,

adapting to new regulatory, supervisory and resilience measures,

increasing the professionalism of their managers,

being run more efficiently,

protecting their capital level in order to avoid insolvency, and

promoting transparency and good corporate governance.


The capital deriving from relations is an intangible asset that is vitally important in banking. Social-economy financial bodies must thus make good use of their networks of contacts and internal support. For their part, the financial authorities must recognise the value of these joint liability funds between cooperative banks when it comes to applying prudential rules.


They must also keep an eye on debt arrears, uncertain situations caused by geopolitical risks and technological innovations (the Digital Agenda), which create a new ecosystem for the financial system, where it will be necessary to watch the future interaction between four players: traditional banks, new digital players, the regulator and consumers.


They need to combine their strength as a model of proximity (their knowledge of their customers and their commitment to community projects) with the use of ITC in order to support new initiatives to help the productive economy recover.


They need to improve their corporate governance, by establishing appropriate training, management and control structures. More specifically, strict codes of conduct will need to be laid down to guarantee the professionalism and ethical integrity of representation on the governing bodies.


The EESC proposes that a new internal supervisory model be established for cooperative and savings banks that includes employees, SME representatives and other stakeholders.


They must tackle the new challenge of competition from outside the banking sector, in order to respond to new demands from the public and be able to grow alongside and forge alliances with crowdfunding and collaborative consumption practices.

7.   Improving the resilience and supervision of Europe’s banks


The EESC calls for the completion of regulatory and financial supervision systems, and for financial institutions to be given sufficient capacity to withstand future financial crises.


In this context the European Commission has adopted a delegated regulation (7) which, on the basis of draft technical standards submitted by the European Banking Authority, regulates aspects relating to own funds, considering the capital instruments of cooperatives and savings banks to be different. Of particular importance here are issues relating to the limitation of redemption of Tier 1 capital instruments in the case of cooperative banks.


Another basic pillar for the completion of a banking union is the single supervisory mechanism and management of the fund set up to finance possible bailouts. The EESC considers that this instrument will strengthen banks’ responses to future crises (8).


Given the need to share risks, the EESC agrees that when determining each institution’s contribution to the future Single Resolution Fund, account should be taken of its risk model. The EESC also draws the Commission’s attention to the need to apply the indicators set by the Directive on the recovery and resolution of credit institutions (9). We are also pleased to note that the advisability of an institutional system of protection has been considered (10).


In this new financial scenario, the EESC calls for a genuine injection of corporate social responsibility, ethics and transparency in financing, and for supervisory bodies to conduct an educational campaign to improve the financial culture (11), especially as regards social economy formulas, as many people are still unfamiliar with these. In this regard, it is essential to give a more active role and higher profile to the networks representing them: the European Association of Cooperative Banks (EACB), the European Federation of Ethical and Alternative Banks (FEBEA) and the European Savings Banks Group (ESBG).


The EESC considers that devising new financial instruments to improve governance is a very positive step, but that the relevant rules must reflect the diversity of the financial actors involved, and ensure their stability while limiting the burden on financial institutions with fewer resources. In short, this means better lawmaking.

8.   Strengthening the socially responsible banking model


Restoring the production fabric, strengthening local economies and tackling social problems should be priorities for the EU. The EESC therefore calls on the institutions to use permanent forums for dialogue to strengthen banking models that root the financial system in the real economy, bringing stability and prosperity to the regions.


The trend towards ever larger banks, as a result of restructuring processes, is a cause for concern because of the systemic risk it entails. The EESC thus calls for a return to traditional business (back to basics) as part of moves to differentiate more clearly between institutions specialising in commercial banking and those that combine developing their business with investment banking. Experience has shown that diversity, and spreading and sharing risks, are good for the European financial system.


The vitality and development of cooperative and savings banks rest on democratic management and the freedom to decide responsibly how to deal with their surpluses. Strengthening financial intermediation to help the real economy is the way to guarantee its future continuation, in keeping with the UN’s 2015 Sustainable Development Goals and with its 2012 declaration on cooperatives.


Cooperative and savings banks therefore deserve specific treatment when applying prudential regulations, as these institutions provide the banking model that the EU public wants, based on responsible, solidarity-based management (12) rooted in the principles and values of the social economy.

Brussels, 18 February 2015.

The President of the European Economic and Social Committee


(1)  OJ C 451, 16.12.2014, p. 45.

(2)  Redesigning the Contours of the Future Financial System, IMF staff position note — 16 August 2010 (SPN/10/10).

(3)  Bank of Spain: Cooperative and Savings Banks in Europe: nature, challenges and perspectives, April 2011; European Association of Cooperative Banks: EACB answer to the Green Paper on territorial cohesion turning territorial diversity into strength, February 2009; WSBI-ESBG: 200 years of savings banks: a strong and lasting business model for responsible, regional retail banking, September 2011; EESC: The social economy in the European Union, 2014.

(4)  OJ C 318, 23.12.2009, p. 22.

(5)  Castelló, E.: El liderazgo social de las cajas de ahorros [The social leadership of savings banks]. FUNCAS, Madrid 2005.

(6)  OJ C 451, 16.12.2014, p. 45.

(7)  Commission delegated Regulation (EU) No 241/2014 of 7 January 2014.

(8)  OJ C 67, 6.3.2014, p. 58.

(9)  See Directive 2014/59/EU.

(10)  Cf. Commission Delegated Regulation (EU) 2015/63.

(11)  OJ C 318, 29.10.2011, p. 24.

(12)  OJ C 100, 30.4.2009, p. 84.