Investigating Diversity in the Banking Sector in Europe : Key Developments, Performance and Role of Cooperative Banks

by Ayadi, Rym; Llewellyn, David T.; Schmidt, Reinhard H.; Arbak, Emrah; De Groen, Willem Pieter

• ISBN13: 9789461380425
• ISBN10: 9461380429
• Format: Paperback
• Copyright: 2011-01-03
• Publisher: Brookings Inst Pr

Summary

This book investigates the merits of a diverse banking system with a special focuson the performance and role of cooperative banks in seven European countries: Austria,Finland, France, Germany, Italy, the Netherlands, and Spain. The authors compare banks that aim to maximize shareholder value with cooperative banks that concentrate onincreasing "stakeholder value" for a larger and more diversified group of subjectsrepresenting varied interests. The theoretical and empirical arguments thatare developed support the view that it is economically beneficial to have bankslooking out for both shareholders and a broader group of stakeholders. This book is the result of a two-year research project designed by the FinancialInstitutions and Prudential Policy unit of CEPS. The project was directed by a scientificcommittee composed of Rym Ayadi, senior research fellow at CEPS; David T.Llewellyn, Loughborough University, CASS Business School and the Vienna University ofEconomics and Business Administration; and Reinhard H. Schmidt, professor at theUniversity of Frankfurt. The research team was composed of the members of the scientific committee and researchers from CEPS; Emrah Arbak, researcher; and WillemPieter De Groen, research assistant.

Table of Contents

Foreword	p. i
Executive Summary	p. v
Introduction	p. 1
Motivations	p. 1
Objectives, main propositions and structure	p. 3
The Economics and Nature of Cooperative Banks	p. 6
The nature of a company	p. 6
Stakeholder v. Shareholder banks	p. 7
The nature of value creation in banks	p. 8
The cooperative banking model in Europe	p. 11
Key Developments of Cooperative Banks in Europe	p. 27
Germany	p. 27
Austria	p. 42
Italy	p. 57
France	p. 66
The Netherlands	p. 76
Spain	p. 86
Finland	p. 94
Overall assessment	p. 101
Economic Performance and Role of Cooperative Banks	p. 104
The main theoretical arguments for cooperative banks	p. 105
Review of the empirical literature	p. 110
Investigating economic performance and role of cooperative banks	p. 118
Main results	p. 126
Conclusions	p. 145
Final Conclusions	p. 148
References	p. 150
Summary of the European Cooperative Society Directive	p. 159
Demutualisation of UK Building Societies	p. 161
Estimating the cost function	p. 167
List of Tables
Extent of mutual support in European cooperative banks	p. 20
Overview of the German banking system; numbers of banks in the three main 'pillars'	p. 29
Tier 1 capital ratios in the German banking sector	p. 40
The Austrian banking system	p. 44
Market shares of Italian cooperative banks	p. 60
Distribution of branches by municipal population in Italy, 2008	p. 60
Lending to Italian firms by loan size, 2008	p. 61
Key capital ratios of Italian banks, as of June 2008	p. 65
Market shares of French cooperative banks	p. 69
Tier 1 capital ratios in French banking sector	p. 71
Distribution of branches by population density in France, 2008	p. 72
Distribution of loans of French credit institutions, by sector	p. 72
Evolution of the structure of cooperative banks in the Netherlands	p. 77
Evolution of Rabobank's selected profile	p. 78
Tier 1 capital ratios in Dutch banking sector	p. 85
Market shares of Spanish banks in the credit market	p. 88
Market shares of Spanish banks for customer deposits	p. 88
Market shares of Spanish banks in regional credit markets	p. 89
Market shares of Spanish banks in regional customer deposits	p. 90
Market shares of OP-Pohjola Group	p. 98
Finnish banking sector in 2008	p. 99
Number of observations by type of bank	p. 119
Return on assets (RoA) in percentage points, unweighted averages	p. 129
Return on equity (RoE) in percentage points, unweighted averages	p. 130
Cost-to-income ratio† in percentage points, unweighted averages	p. 131
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