Cooperative Financial Institutions

Cuevas, Carlos E.; Fische, Klaus P.

doi:10.1596/978-0-8213-6684-4

Cited by 58 publications

(17 citation statements)

References 26 publications

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“…Cooperative banks are defined as banks with a cooperative ownership structure that are mainly active in retail banking. According to Cuevas and Fisher (), cooperative banks are one of the diverse member‐owned financial intermediaries, such as credit unions, savings unions, and credit cooperatives. Their institutional governance, legal and regulatory status, and scale and service portfolios vary widely across regions and between developed and developing countries.…”

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confidence: 99%

Are Cooperative Banks a Lever for Promoting Bank Stability? Evidence from the Recent Financial Crisis in OECD Countries

Chiaramonte

Poli

Oriani

2013

Euro Fin Management

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Based on a sample of cooperative, savings, and commercial banks from OECD countries, this paper examines whether and to what extent cooperative banks affected average bank soundness during 2001-2010. To account for the impact of the recent financial crisis, we analyse separately the pre-crisis period (2001)(2002)(2003)(2004)(2005)(2006) and crisis years (2007)(2008)(2009)(2010). Unlike published claims that blame the fragility of banking systems on the presence of non-profit-maximising entities, our main finding is that cooperative banks have explanatory power for stabilisation during the crisis years, but only above a certain market share threshold.Source: BankScope database, authors' calculations. 1 In 2010, the CB share in Canada and Japan was equal to 3.49% and to 15.72%, respectively. The market share is calculated as the ratio of the sum of total assets of all cooperative banks in the country to the total assets of all bankscooperatives, savings and commercialin the same country. The values of CB total assets were collected by the European Association of Cooperative Banks (EACB), while the values on the total assets of all banks were collected by the Organisation for Economic Co-operation and Development (OECD). maintain that CBs tend to increase the fragility of their respective financial system. To our knowledge, no empirical work published so far has explored the role of CBs in financial stability while taking into account the recent financial crisis. Moreover, only a limited number of studies focus on an international sample of banks.Given the mixed empirical results in the related literature and consequent stimulus to further investigate the contribution of CBs to bank stability, especially after the onset of the financial crisis, this paper aims to shed some light on the role of CBs, based on a sample of OECD banks over a period that includes the recent financial crisis (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010). Building upon the work of Hesse and Č ihák (2007), we first examine the idiosyncratic stability of the business and governance models adopted by banks, distinguishing between commercial banks, savings banks, and CBs. We successively analyse whether and to what extent CBs impact on average bank soundness, and especially on large banks. Bank stability is proxied by the z-score, a widespread accounting measure Graham, 1986, 1988;Boyd and Runkle, 1993;Maechler et al., 2005; Laeven, 2006, Demirgüç-Kunt andHuizinga, 2010;Beck et al., 2012). To evaluate whether the impact of CBs on banking system resilience changes with varying macroeconomic and financial conditions, the empirical analysis was carried out in both the pre-crisis and crisis periods. The empirical analysis uses a generalised method of moments (GMM) estimator and focuses on bank-specific factors, including a set of dummy variables accounting for the business models adopted by banks, and on a number of country-specific variables.This paper contributes to the literature in several ways. First, to the best of our know...

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confidence: 99%

Are Cooperative Banks a Lever for Promoting Bank Stability? Evidence from the Recent Financial Crisis in OECD Countries

Chiaramonte

Poli

Oriani

2013

Euro Fin Management

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“…Despite not being the dominant model in the banking sector, not-for-profit financial institutions, like credit unions, play an important role in many countries (Canning, Jefferson, & Spencer, 2003). However, literature on credit unions is little when compared to other financial institutions (Cuevas & Fischer, 2006).…”

Section: Theoretical Basismentioning

confidence: 99%

Estimating credit and profit scoring of a Brazilian credit union with logistic regression and machine-learning techniques

Paula

Artes

Ayres

et al. 2019

RAUSP

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Purpose Although credit unions are nonprofit organizations, their objectives depend on the efficient management of their resources and credit risk aligned with the principles of the cooperative doctrine. This paper aims to propose the combined use of credit scoring and profit scoring to increase the effectiveness of the loan-granting process in credit unions. Design/methodology/approach This sample is composed by the data of personal loans transactions of a Brazilian credit union. Findings The analysis reveals that the use of statistical methods improves significantly the predictability of default when compared to the use of subjective techniques and the superiority of the random forests model in estimating credit scoring and profit scoring when compared to logit and ordinary least squares method (OLS) regression. The study also illustrates how both analyses can be used jointly for more effective decision-making. Originality/value Replacing subjective analysis with objective credit analysis using deterministic models will benefit Brazilian credit unions. The credit decision will be based on the input variables and on clear criteria, turning the decision-making process impartial. The joint use of credit scoring and profit scoring allows granting credit for the clients with the highest potential to pay debt obligation and, at the same time, to certify that the transaction profitability meets the goals of the organization: to be sustainable and to provide loans and investment opportunities at attractive rates to members.

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“…This variety of organizational forms may be explained by both government regulation and other forms of protection or by the specific market failures (asymmetric information) that are successfully addressed by these different organizational forms. In this way, the recent economic literature has argued that ownership structures and organizational forms are indeed an endogenous result of the rational choices made by agents facing market failures (Boscia and Di Salvo , Cabo , Cuevas and Fisher ). Cuevas and Fischer () identified three complementary theories to understand how institutional features deal with market failures: the agency theory, the property rights theory and the transaction costs theory.…”

Section: Credit Institutions' Ownership and Lending And Investment Bementioning

confidence: 99%

“…In this way, the recent economic literature has argued that ownership structures and organizational forms are indeed an endogenous result of the rational choices made by agents facing market failures (Boscia and Di Salvo , Cabo , Cuevas and Fisher ). Cuevas and Fischer () identified three complementary theories to understand how institutional features deal with market failures: the agency theory, the property rights theory and the transaction costs theory. The agency theory suggests that a cooperative or mutual bank experiences lower agency costs mainly due to the ‘peer‐monitoring’ mechanism, which reduces asymmetric information and monitoring costs, and to the alignment of members’ and management risk behaviour, as a consequence of the banks’ mutuality feature.…”

Section: Credit Institutions' Ownership and Lending And Investment Bementioning

confidence: 99%

Differences in Portuguese Credit Institutions' Lending and Investment Behaviour in a Time of Slump

Cabo

Rebelo

2015

Annals of Public and Cooperative Economics

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The purpose of this paper is to investigate the influence of the different property rights models of credit institutions (public, private, cooperative or mutual) in their credit policy and investment behaviour and in response to the current crisis and regulatory framework adjustments. Taking Portuguese credit institutions as the object, it concludes that overall banks’ business models are qualitatively identical and their lending and investment behaviours are similar, except for the saver profile of cooperative banks and the deeper focus on loans to customers to the detriment of financial investments of the mutual savings banks. Moreover, the reactions to the crisis were equivalent, except for the state‐owned banks, which presented the most favourable reaction, albeit not deep enough to be significant.

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Cooperative Financial Institutions

Cited by 58 publications

References 26 publications

Are Cooperative Banks a Lever for Promoting Bank Stability? Evidence from the Recent Financial Crisis in OECD Countries

Are Cooperative Banks a Lever for Promoting Bank Stability? Evidence from the Recent Financial Crisis in OECD Countries

Estimating credit and profit scoring of a Brazilian credit union with logistic regression and machine-learning techniques

Differences in Portuguese Credit Institutions' Lending and Investment Behaviour in a Time of Slump

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