Two studies by the International Cooperative Banking Association

14 Sep 2020

The International Cooperative Banking Association, an ICA’s Sectoral Organisations recently completed and is sharing the results of two studies:

Sustainable Development Goals & Objectives: Contribution of Cooperative Banks

This study’s objective was to identify the contribution of cooperative banks to the UN Sustainable Development Goals (SDGs). Carried out within the framework of a wider ICA project focusing on the UN SDGs, the study proposes to build specific indicators for cooperative banks in order to measure their contribution to the SDGs during the next decade. The SDGs address the global developmental challenges, including those related to poverty, inequality, climate change, environmental degradation, peace and justice. The 17 SDG Goals are all interconnected and must go hand in hand with strategies that build economic growth and address a range of social and environmental needs. This study is not intended to cover all SDGs but to identify the prioritized ones for this cooperative sector.

Regulation and Sustainability of Cooperative Banks-A Cross Country Study

This study gathers information regarding the constitution, regulation, role, market share, contribution and importance of cooperative banks and cooperative financial institutions (CFIs) in Africa, Asia-Pacific, North America and Europe.

Cooperative banks and CFIs play an important role in the banking sectors of these countries and their market share in banking ranges from 5 to 40 percent. Regulation of these banks vary, where cooperative banks are more closely regulated than credit unions. Within this general picture, regulation varies from country to country, and it appears that proportional regulation is derived from the regulations applicable for commercial banks and systemically important banks.

The study shows the lack of understanding by regulators regarding the need for appropriate norms for cooperative banks, and the fact that almost all regulators seem to nudge the cooperative banks towards consolidation and move towards a “too big to fail” model. This has resulted in de-mutualisation of big cooperatives and distancing member from their cooperatives.

Cooperative banks in many countries feel strained from these regulations as they are not playing on a level playing field. They are under pressure from having to meet margins and the increasing cost of compliance. The study argues that, instead of ‘one size fit all’, norms could be linked to market share, business mix, deposit insurance, bank size, contribution to financial inclusion, performance in some key areas of risk management and future plans. To help the very small cooperative banks, the study also finds that these institutions could be kept outside the ambit of regulation till they reach a threshold business level. It also underlines the need for strong cooperative banks for financial stability and for the adoption of the principle of proportionality in the regulation of cooperative banks.