The case for cooperative banks

The banking and financial services sector should not be simply synonymous with mammoth, impersonal multinationals. It must also give space to smaller organisations with a local or regional profile.

The cooperative banking model fits perfectly into most economic systems. It has a more social orientation and caters for business models and niches that do not attract the interest of multinationals.

Over the past two years I have built a good relationship with the European Association of Cooperative Banks. Last week they invited me to address their convention in Brussels.

Cooperative banks are present in 23 European Union member states. They have 60 million members (rather than shareholders), with 720,000 employees in over 60,000 business points to cater for 140 million customers. Cooperative banks hold a significant 20 per cent market share in the EU.

The cooperative model can help the European and our own economy face the challenges of globalisation, population ageing, gender equality, training, health and safety at work.

A recent study showed that more than four billion people live on less than $10 a day. They have no access to credit and no financial institution targets this sector of world population. Cooperative banks have taken steps to come to the aid of populations weakened by economic disaster. Furthermore, their specific method of governance, in particular its principle of "one person, one vote", should provide part of the solution.

I have been responsible for penning a European Parliament report on the consolidation of the banking industry in Europe. In this report I emphasise that "the strength of the European banking and financial sector lies in its diversity. It caters for different needs and different markets. We need to build on this strength".

It is true that Europe needs to put its banking and financial services on the equivalent of the "Champions League". But it also needs the crucial players at national, regional and local levels, without which, I submit, the "Champions League" would not exist.

Our banking model must not be expressed in terms of a few major actors: It is not desirable for competition, it is not desirable for financial stability, and, definitely not desirable for the consumer.

It is true all actors must respect the same rules when they provide the same service. In this context, cooperative banks have a real place in financing local and regional economies. This is a business model that has proved successful for more than a century and its continued success is beyond doubt.

I am strongly convinced about this and this is why I am personally encouraging the setting up of a cooperative bank in Malta. Although the road ahead for the realisation of this project is a long one, I would urge existing and future cooperatives to seriously think about this idea.

The European Association of Cooperative Banks pledged its assistance to those interested in starting such an innovative venture.

Mr Muscat is a Labour member of the European Parliament and vice president of the Economic and Monetary Affairs Committee.

www.josephmuscat.com