Efficiency and Hybridization in Cooperative Banking: The French Case*

Abstract

This paper analyzes how French cooperative banking groups adapted their organization, status and model to develop and grow, until the current financial crisis. It explores how they benefitted from evolutions in cooperative law that lowered financing constraints and increased the scope of their activities, becoming large banking groups, and identifies how these groups tried to develop a model of governance, characterized by internal control, which was partly dedicated to the members, but biased more and more towards the top of the organizational pyramid and to stockholders (the new stakeholders coming from the existence of listed vehicles). While the developing business model for cooperative banks appeared to confer a comparative advantage and was synonymous with efficiency before the financial crisis, it seems that the hybridization of the cooperative model has also been a source of conflict of interest, weakness in strategy and an incentive to increase risk. The third part of the article examines how French cooperative banking groups have been hurt by the recent crisis and whether different organizational and strategic features or choices may explain different levels of resilience to financial turmoil. Eficiencia e hibridación en los bancos cooperativos. El caso francésEste artículo analiza la forma en que los bancos cooperativos franceses han modificado su estatuto, su estructura organizativa y su modelo, para desarrollarse, hasta la reciente crisis financiera. Se pone de manifiesto, entre otras cosas, como esta banca ha sabido aprovechar la evolución del derecho cooperativo para disminuir sus restricciones de financiación, extender y diversificar su campo de actividad, llegando a convertirse *

Comparative Efficiency Between Cooperative, Savings and Commercial Banks in Europe Using the Frontier Approach

“…In some cases, the center performs certain public services, such as auditing of member banks or operating a deposit insurance scheme . These apex organizations for these tightly structured networks also monitor the local banks (Desrochers and Fischer , Ory and Lemzeri ). Since individual cooperative banks in the network secure many services from the same center, this can be expected to reduce the dispersion in efficiency among cooperative banks.…”

La gouvernance des organisations de l’Economie Sociale et Solidaire à l’épreuve dynamique de leurs « Grandeurs »

“…L'exemple le plus immédiat est celui des groupes coopératifs engagés dans une course à la taille, en particulier dans les secteurs de la finance, de l'assurance et de l'agroalimentaire. Cette logique de concentration comporte le risque manifeste d'un « retournement coopératif » et d'un délitement des valeurs démocratiques originelles, qui procéderait d'un renversement de la pyramide décisionnelle (Richez‐Battesti et Malo , Ory et Lemzeri , Cornée ). Faute de formation, de temps et de compétences en la matière, les administrateurs élus par la base sociétaire ne sont plus en capacité d'infléchir des décisions managériales, marquées par une complexité et une technicité croissantes.…”

Soft Information and Default Prediction in Cooperative and Social Banks

“…Hybridisation has led to various cooperatives abandoning the explicit goal of facilitating access to credit to non-bankable, by evolving over time into full-service universal banks or by entering into activities that were not inherently entrenched, such as corporate and investment banking (Ayadi et al, 2010;Ory and Lemzeri, 2012). Nonetheless, the vast majority of cooperative banks remain firmly anchored to their business basics since they have preserved a unique ability in serving small borrowing firms characterised by informational opacity, such as SMEs.…”

“…Cooperative banks still exhibit more decentralised and complex organisational architecture than do their commercial counterparts in spite of the dramatic consolidation and integration they have undergone (Ory and Lemzeri, 2012). Abdesselam et al (2002) carry out a comparative analysis of the role played by loan officers in both cooperative and mainstream major French banks.…”