Leaders discuss new regulations at European Co-operative Banks Convention

14 Dec 2012

The 5th Convention of European Co-operative Banks brought together leaders of co-operative, mutual and banking sectors to address challenges facing co-operative banks, and to discuss an upcoming EU banking regulation.

With the European Council reaching an agreement on 13 December, the presidency will be able to negotiate with the European Parliament with the aim of adopting the legislation over the coming weeks, which is set to create the powers for a single body to oversee all banks in the Euro area, while at the same time reflecting practical realities and subsidiarity aspects.

Co-op bank leaders tried to assess the implications of creating a European banking union with a single European banking supervisor, a common EU deposit-guarantee scheme and a single bank-resolution fund.

Referring to co-op banks, Veronique McCaroll partner at Oliver Wyman and one of the authors of the study analysing the state of co-operative banks across Europe said: “Co-op banks have been doing relatively well, compared to the banking industry probably because the majority of them were not exposed to some of the activities that caused big failures.” She added co-op banks have also shown a more stable earnings profile.

According to Gerhard Hofmann, Vice-President of the European Association of Co-operative Banks, co-operative banks are “too important to be in the footnote when such regulations are drafted".

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

Another deep concern for co-operative banks and mutuals has been the increased capital requirement set up in Basel III agreement, particularly since co-operative banks are unable to raise capital on a level playing field with other banks. During the debate, Neil Esho, Senior Member of the Secretariat, Basel Committee on Banking Supervision said the rules are much more focused on larger banks, rather than on co-ops.

Arnold Kuijpers, Director Corporate Affairs of Rabobank, said co-op banks have concerns over the increase of capital to maintain the level of business. He said: “When new regulation is being drafted by officials that have mainstream banks in mind, they don’t think about co-operative banks.”

Thierry Philipponnat, Secretary General, Finance Watch, also said that the Basel Committee should consider including co-operative banks in its regulations: "The challenge is to face the fact that co-operative banks are very diverse."

Sven Giegold, Green MEP, was another panellist at the 5th Convention. Mr Giegold said it is essential to prevent co-ops from becoming a victim of new regulations proposed by the Basel Committee, the European Commission or the European Parliament.

MEP and Vice-President of the European Parliament, Gianni Pitella, also 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.”

Speaking on behalf of Commissioner Daniel Calleja, who was unable to attend the Convention, Mr Apostolos Ioakimidis said co-operatives that remained faithful to co-op values have faced the crisis better. Principal Administrator in the European Commission, Directorate General, Industry and Enterprises Unit, Mr Ioakimidis added: “Policy makers have neglected co-ops for a long time. Even co-ops neglected themselves. The crisis is a really good starting point for co-ops to start showing their importance.”

Other panellists also highlighted the fact that co-operative banks have been able to face the financial crisis better than commercial banks. Monique Leroux, CEO of Desjardins, said co-operative banks should show less humility and promote themselves more in the context of the financial crisis. “Humility is good, but it needs to be organised humility. It would be fantastic if our members could be more vocal, could be the advocates of what we do,“ added Ms Leroux.

Paul Flowers, Chair of the UK's Co-operative Banking Group said that co-operative banks have a “unique story to tell". Mr Flowers added: “We should be proud of who we are and what we offer and recognise that all of our customers always rate us better in terms of the service we offer.”

Dame Pauline Green agreed with Mr Flowers, she said: “What we are selling when we talk about the co-op brand is a different way of doing business, a way that puts people at the heart of its decision making. We don’t need to be one global brand because our strength is this monolithic structure.”

Asked to say what are the main priorities for the coming year, the panellists spoke of the need to keep up the momentum of 2012 and work together more to ensure the co-op banking sector plays a key role and are regarded as “standards" in terms of banking and not as "exceptions”.

• The 5th Convention on European Banking took place at Solvay Library in Brussels, on 6 December.