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... 3 ... 4 ... 10 D TO ... 13 ... 22 ... 26 ... 28Abstr This non-f Mont gover is m mode produ their profit impac 1 We espec
THE N
ract paper establ for-profit ba tepio Geral rnance criter more similar ernized and t ucts similar t market posi tability of C ct was milde thank the co cially of LicínioNON‐FOR
lishes the m anks operatin – CE-MG). ria, tax regimto a typic transformed to any comm ition in term A was simil er. omments of J Pina.
R‐PROFIT
main differen ng in Portug In particula me, applicatio cal co-opera into modern mercial bank. ms of credit a lar to the im Joaquim GuerT BANKS
SOC
nces between gal (Caixa A ar, we find on of profits ative/mutual n financial g . However, t and deposits. mpact on the rra, Maria deIN PORT
CIAL ROL
n standard co Agrícola – differences and attitude bank than groups offerin this was not. The 2008 f industry ave Fátima Ferre
UGAL: SP
LE AND E
ommercial b CA - and C in the way e towards pro CE-MG. B ng a wide v enough to av financial cris erage, where eiro, an anonPECIFICIT
EVOLUTIO
banks and th Caixa Econ funds are r ofit. Howeve Both banks variety of fin void an eros sis’ impact o eas on CE-M nymous refereTIES,
ON.
1 he two ómica raised, er, CA have nancial ion of on the MG the ee andINTR
Co-op and d from finan stand opera Such banks (CA) transf produ of the that demo profit they o of pr gener better grow on th impac descr Europ orien recen sectoRODUCTI
perative ban deposits of th its specific ncial crisis th dard commer ative bank h behaviour h This artic s operating i, and the par Our stud formed them ucts similar t eir market po We were distinguish ocratic contro ts; they look operate; they rofits to prom ral, CA is m r profitabilit wth CE-MG h he profitabili ct was milde The pape ribed. Section pe. In Secti nted commer nt evolution r and the Eu
ION
king is an im he banking in business m hat began in 2 rcial banks (E has been incl has increased cle´s main p in Portugal, C rticular role t dy indicates mselves into to any comm osition in term also able to them from ol by memb k for contribu y retain a larg mote social more similar ty, efficiency has had a be ity of CA w er on CE-MG er is structure n 2 describes ion 3, we lo rcial banks i of non-for-p ropean co-op mportant real ndustry. Its i model, which 2008, co-ope EACB, 2010 luded in nati d the interest urpose is to Caixa Econó they play in t that, in rec modern fin mercial bank. ms of credit identify that commercial bers; they ma uting to the e ger share of t developmen to a typical y and capita etter perform was similar t G. ed as follows s the distinct ook at the d n the Portug profit banks perative bank lity in the EU importance c h has proved erative bank 0). They had ionalisation on co-operat improve ou ómica Monte the Portugue cent years, nancial grou . However, t and deposits t CA and CE l banks: the aximize mem economic and their profits nt; and they co-operative al indicators mance than C to the impac s. In Section tive characte differences b guese bankin s against the king sector. F U 15, represe comes not on d to be resil s in Europe d lower losse programs or tive banks. ur understand epio Geral (C ese banking s CA and CE ups, offering this was not s. E-MG share s ey are cust mbers/custom d social deve to reinforce are also mo e/mutual ban s. On the ot CA. Also, the ct on the ind n 1 the Portug ristics of co-between non ng system. I e backgroun Finally, Sect nting around nly from the lient to crise had a better es and write-r has been d ding of the t CE-MG) and sector. E-MG have g a wide va enough to av some import omer owned mer value an elopment of capital; they ore business nk than CE-M ther hand, in e 2008 finan dustry’s aver guese non-fo -operative an n-for-profit b In Section 4 nd of the Po tion 5 conclu d 14% of the e numbers bu es. Indeed, performanc -downs and n declared ban two non-for-d Crénon-for-dito Ag e modernized ariety of fin void some er tant characte d entities w nd not exclu the regions y use a larger conservativ MG, and ha in terms of ncial crisis’ i rage, wherea or-profit ban nd mutual ba banks and p 4, we describ ortuguese ba udes. e loans ut also in the e than no co-nkrupt. -profit grícola d and nancial rosion eristics with a usively where r share ve. In as also credit mpact as the nks are nks in profit-be the anking1
As w (CA) 6th b that t (like whos used Assoc propr as nu opera and th Mutu regul their assist Crédi The comp (Caix depar co-op reorg depos sized 2 Thro conso 3 CA i the co1. BRIEF
BANKS
we have just s and Montep bank in terms their prime g is the case w se owner is t to increase ciation who rietor of MG ursing homes CA is a ative banks a he customers MG is a b ual associatio lar contributi associates, u tance or mon We next s dito Agrícola Crédito Agr posed by axas) and spe
rtments (mun peratives. D ganization w sits and mak d financial g oughout this p olidated terms, ncludes also t o-operatives a
DESCRIP
S
seen, there ar pio Geral (M s of assets an goal is not towith all other the State). In
its capital owns it and G uses the rec for the elder co-operative are financial s of their ban bank owned ons assist an ion. In partic using them to netary compe summarize th rícola group, centralized ecialized firm nicípios). Bo During the p whereby a n king loans pr group offerin paper the off , including the the FENACAM nd offers spec
PTION OF
re two non-fo MG). Both ba nd CA is the maximize pr r banks oper n the case o base. On th d the remain ceived profitsrly and healt e bank origi entities that nk. These peo by a mutual nd protect the cular, they m o protect the ensations. he main featu , or in short coordinating ms.3 The lar oth the Caixa past two de etwork of a referentially ng a wide v shore activitie e domestic and (National Fed cialized service
F THE PO
for-profit ban anks are in th e 9th. 2 These rofits with th rating in Port of CA, when he other han nder is likew s to support th facilities. inally orient belong to pe ople are nam l association eir members manage fund eir future - a tures of these t CA, is a m g body (Ca rgest Caixa a Central an ecades, Cré autonomous to the prima variety of fi es of banks a d internationa deration of Co es (Auditory aORTUGUE
nks operating he top ten of e two banks he aim of dis tugal, includ n it does gen nd, MG giv wise used to a range of soted for cred eople who ar med “member n – MG Asso s against sev ds set up by and that of th e two banks. medium size aixa Central comprises nd the local C édito Agríco local Caixa ary sector wa inancial prod
are not consid l markets. o-operative Ag and administra
ESE NON
g in Portugal: f Portuguese are non-for-p stributing the ding Caixa G nerate profits ves most of increase its ocially orien it to the pri re at the sam rs”. ociação Mutu veral risks, up “quotas” and heir family m ed Portugues l), several lonly ten loc
Caixas have ola underwe
as concentra
as transform ducts and se
dered and the gricultural Cred ative services)
N-FOR-PRO
: Crédito Ag banks: MG -profit in the em to their o Geral de Dep s these are m its profits t capital base nted activities imary sector me time the o ualista (MG-upon paymen nd contributio members - th se financial local small cal administ e the legal fo ent a proce ated on rece med into a me ervices, incl e analysis is d dit), who repr to the group.OFIT
grícola is the sense wners pósitos mostly to the e. The s such r. Co-wners -AM). nt of a ons of hrough group banks trative orm of ess of eiving edium luding done is resentsinsura in sup poten Centr econo moni There which regul local Caixa In 20 (Caix fund, make Guara finan chara the m been the fu comm Assoc activi fishin linked input allow 4 Loca Centra integr ance, mutual pplying serv ntiate this, in
ral and loca
omies in term
Caixa Ce
tor and cont e is a system h makes po latory contro Caixas may a Central als 009, the Caix xa Central pl The CA s , for which l e to the simil antee fund h The Créd ncial recovery acterized by merger of ma driven more ulfilment of s Originally munities. To ciate, one ha ities related ng, aquacultu d to the prim ts. Nowaday wing almost e al Caixas who
ral) are subjec rated in the CA l funds and c ices needed n 1998, a unif al Caixas. T ms of market entral is 100%
trol their sup m of mutual ossible that t ol in consoli y not fulfil th so manages t xa Central re
lus local Caix system, comp local Caixas
lar fund man has a better co dito Agrícola y of local C the restructu any of them e by the sear supervision r y, the Caixa o obtain a lo ad to pay a to the prim ure, agro-tou mary sector su
ys, the criter everybody to choose not to ct to the lega A system. consulting se by the Caixa fied compute The existence ting, creating % owned by ply of loans l responsibil the same ca dated terms he legal requ the branches epresented ar xas). posed by Ca have to mak naged by the overage than a deposit gua Caixas. This uring of man . In recent y rch of scale requirements as were creat
oan, one had very small -ary sector, i urism, handic uch as the co ria to becom o become an o belong to the al requiremen ervices. The as, allowing er network w e of the Ca g a unified im y the local C and to repre lity between apital and li (Caixa Cen uirements as s network in round 15% o aixa Central ke larger con e Central Ban n the general arantee fund occurred sp ny local Caix years, the m economies a s. ated to make to be an As - symbolic – including ag craft, extract ommercializa me an Assoc Associate. e integrated s nts individually CA group in for consider was created li aixa Central mage at the n
Caixas. Its rol
esent them in n the Caixa
iquidity lega
ntral plus Ca
s long as the the two larg of the financi
and local Ca ntributions th nk. This ensu fund for com also has the pecially betw xas in financ ergers of ne allowing, for loans to the ssociate of th – amount, na griculture, fo tive industrie ation of agric ciate of a lo system of CA ( y. In practice ncludes comp rable savings inking the w also permit national level le is to work n negotiation Central and al requireme aixas). This group as a gest cities, Li ial margin of aixas, has a d han a comm ures that the mmercial ban e role of offe ween 1991 an cial difficulti ighbouring l r example, sa e agricultura he local Caix amed “quota restry, cattle es, as well as cultural good ocal Caixa a (associated loc e, only four lo mpanies speci s for the grou whole group, ts exploring l. k as their gui ns with regul d the local C ents be subj means that whole does. isbon and O f the overall deposits gua mercial bank e Crédito Ag nks. ering loans f nd 2002, a p ies, which im local Caixas aving resour al sector and xa. To becom a”, and to de e raising, hu s service act ds and agricu are less strin
cal Caixas and ocal Caixas a alized up. To Caixa scale ide, to lators. Caixas ect to some 4 The Oporto. group rantee has to grícola for the period mplied s have rces in d rural me an evelop unting, ivities ultural ngent, d Caixa are not
Since servic non-m So, a type o the fa secto and t and o not to the P Portu strate comp this s Mont Mont Portu prote memb 1974 (PSSI respo socia schem produ produ depen Assoc the ca 5 In fa but un e 2009, the ces that a sta members up lthough cred of loan or oth
Crédito A
act that decis r, more than trust their cu organizations o make depo Portuguese b uguese banks In recent egy to comp panies are th strategy has b tepio Geral tepio Geral ugal since 18 ctions schem bers - mutua , it was reco I) and, as suc onse at the le al security. M The assoc mes, the MG ucts, which a ucts offered nding on the ciates also h apital and m act, the Centr ntil 2009 it wa
local Caixas andard bank to 35% of th dit to the prim
her financial Agrícola’s m sion-making n in any othe ustomers in o s, for their p osits in it. Th anking mark s find it hard years, CA h anies and ho e main targe been more su – Associaçã 840. It is a p mes and heal
al associates gnized by th ch, it pursue evel of solid MG-AM own ciates of MG G-AM offer are essentiall through CE e results of M have access t mathematical ral Caixa has t as only possibl s are allowe is allowed t heir assets (o mary sector i l product to a main strength g is faster, be er sector, kno order to deci part, need to erefore, just ket – becaus to compete w has been tryi
ouseholds in et. Success i uccessful in s ão Mutualis private non-th and socia – which hav he Portugues s mutual aid darity and co s the bank C G-AM have rs, with spec ly saving and E-MG and o MG-AM, as d to loans give reserves of this ability sin e through a c ed to supply to supply. 5 or up to 50% is their main almost any ty is its deep k ecause it is m owledge and ide whether know and tr as big Europ se of matters with CA at th ing to apply n urban cent in this is dif small urban c sta (MG-AM -for-profit en al facilities in ve to make a se governmen d in the intere omplementar Caixa Económ a set of adv cial conditio d retirement other group’ decided by th en by MG-A their own sa nce 1995. The contract with t to their Ass The local Ca % upon autho n vocation, th ype of custom knowledge o made at the l trust are key or not to ma
rust their ban
pean banks f s of knowled he local, rura the same kn tres. Local fa fficult to mea centres. M) is a mutu ntity that see n order to im a regular con nt as a Priva est of its mem rity with the
mica – Monte vantages. At ons in relati products, he firms may he annual Ge AM itself as
aving and ins e local Caixas
he Central Ca
sociates mos
aixas can als
rization of th he local Caix mer. of local rural local level to y factors. Ba ake loans to nk before de find it difficu
dge and trus al, level. nowledge and
amilies, loca asure, but we
ual associati eks the deve mprove the qu tribution to t te Social Sol mbers, devel public syste epio Geral (C the level of on to non-a ealth and life receive an eneral Assem
long as they surance prod also have this
aixa.
st of the fin so supply cre
he Caixa Ce
xas can suppl
l communitie oo. In the ba anks need to them. Indiv eciding whet ult to gain sh st – so do th d proximity-al trade and we hypothesis ion establish elopment of uality of life the associati lidarity Insti loping an eff ems of healt CE-MG). f social prot associates, m e insurance. additional r mbly of assoc y are support ducts. Beside s ability since nancial edit to ntral). ly any es and anking know viduals her or hare in he big -based small se that hed in social e of its ion. In itution fective th and ection mutual These return, ciates. ted by es, the e 1995,
assoc purch indiv disea elderl socia cours facili socia socia progr IAPM servic count stimu Enter initia foster altrui about over with assoc Banc in Eu seme Lisbo basis Mont of th ciates benefi hase and pers
Simultane vidual contrib ase. The asso
ly associates al developme ses, conferen MG-AM ties, exampl al solidarity, al vulnerabili Simultane rammes and MEI, BEI, IE ces, tourism try’s sectoria ulates entrepr MG-AM’ rprises and atives promot ring sustaina ism, humanis MG-AM t eighty priva 90% of the the Associa ciations of th ca Monte dei MG-AM urope, with ster of 2011. In 1844, oa, which be in Portugal tepio Geral ( he MG-AM it from spec sonal credit g eously, there butions, whic ociation also s. There is a ent of empl nces, and com
also has an i es of social a education a ty are identif eously, MG lines agree EFP, REAPN m, energy and al and region reneurship an ’s stake in social econo ting citizens ability and sm, protectio is part of Un ate mutual a total Assets ation Interna he world, in Paschi di Si is the larges over 489.00 . to help furth ecame the fi l. In 1991, (CE-MG), w members an cial conditio given by the e is a commo ch protects th owns nurser also the pro oyees and m mpetitions. important ro aid given by and training fied. G-AM has d upon with N, and others) d infrastructu nal economic nd the creatio partnership omy institut hip, social in integrated d onism, sharin nião das Mu ssociations, r of the mutu ational de l ncluding som iena (in Italy
t mutual asso 00 Associate
her its activi irst and uniq
Caixa Econó hich is fully nd generates ons, namely CE-MG. on Solidarity he members ry homes for motion of in mutual assoc ole towards n y the Associa in cases wh been par h different g ), under whic ures. This a c developmen on of self-em s and agree tions is a p nclusion, inn development ng, solidarity tualidades P representing ual associatio la Mutualité me mutual b y). ociation in th es and €2.8 ities, MG-A que financial ómica de L owned by M s funds whi better inter Fund, const and their fa r the elderly nitiatives co ciates, such non-associate ation are the here a substa rticipating government b ch it has sup aims to creat nt, for job cr mployment fo ements focu proof of the novation and . The value y and fraterni Portuguesas, g about 44% ons in Portug é (AIM), w banks, like he Iberian Pe billion in A AM created th l institution isboa was r MG-AM. CE ich are used
rest rates in ituted throug milies in the and provide ntributing to as the orga es. Regarding donations in antial degree increasingly bodies (such ported inves te the right c reation and, o or the jobless used on Sm e importance d entrepreneu es promoted ity. an associatio of the mutua gal. MG-AM hich represe Credit Mutu eninsula and Assets in the he bank Cai to operate o renamed to C -MG serves d by MG-A n credit for gh small volu e event of de es home supp o the cultura anization of g health and n areas like h e of exclusio y in comm h as the AD stments in ind conditions f on a smaller s. mall and Me e that it len urship as too by MG-AM on that aggre al association M is also affi ents most m
uel (in Franc
d one of the l e end of the ixa Económi on a strict m Caixa Econ the banking AM to devel home untary eath or port to al and trips, social health, on and munity DENE, dustry, for the scale, edium nds to ols for M are egates ns and filiated mutual ce) or largest e first ica de mutual ómica needs op its
activi produ MG-A name other focus of th const subsi finan CE-M mana mode Finib differ mark mutu allow of sav persu MG p AM, MG-A fee; o prom the s disab prom under produ 6 Hist disapp 7 For Notice ities. CE-MG ucts, attracti AM’s memb ely for retirem
Under Po r commercia sing in attrac he twentieth truction cred diaries, evol ncial group, p MG started agement, be ernization pr banco Finan rentiation, th CE-MG i ket and, as f ualism, in sev ws the associa vings, social Secondly uade them, it products. No
but the reve AM must m open a bank a The CE-M motion of the upport of pr bled citizens mote self-emp rstanding wi ucts and spe torically, there
peared mainly consolidation e that the rece
G was create ng retail sav bers. The mu ment, and he ortuguese law al banks. 6 O ting deposits century, C dit market. lved from a p providing fu a portfolio enefiting fro rogram and ncial Group he diversifica is a universa financial arm veral ways. F ation to offer and family r y, MG-AM tr t offers not o ote that anyb erse is not all meet all the fo
account at C MG preferen values of sol rojects that . A good e ployment an ith social eco ecial agreem e were other y due to financ purposes CE ently acquired ed essentiali vings, granti utual produc alth and life w, CE-MG is Originally, th
s and making CE-MG alrea Nevertheles pure and spe ull scale bank o diversifica om the grow
the enlarge in 2010 m ation and the al retail bank m of the MG
Firstly, the C r to associate risks, and cre ries to recrui only its socia body can be lowed. In fac following req E-MG; and s ntial position lidarity that c promote a b example of nd social an onomy institu ments designe r banks with cial problems. E-MG also inc Bank Finibanc ity to serve m ing credit fa cts offered b insurances. s a “Caixa E his type of g housing mo ady had a r ss, over the ecialized mo king produc ation strateg wth of its ement of th may give an competitive k that holds G-AM, is ab CE-MG is th es a large ran edit for the a it CE-MG ba al and health a CE-MG c ct, anyone w quirements: p subscribe at ning in the S characterize better quality that is the nd economi utions. This ed for the sp the legal st cludes the ins
nco does not co
mutualism a acilities and y CE-MG ar Económica”, bank had a ortgage loan remarkable last decade ortgage credi ts and servic gy, aligned branch netw he Montepio n important ability of CE the sixth pla bsolutely ess he fundamen nge of financ acquisition of anking custo h facilities, b customer wit who wants to
pay the initi least one mu Social Econo mutualism. y of life for provision o c inclusion. is translated pecific need atus of Caixa surance compa onsolidate wit aims, offerin offering ba re essentially which make a limited ra s. This justif position in e, CE- MG, t institution, ces to its cli with a bet work, the l o Group. Th contribution E-MG. ace in the Po sential in th ntal piece of cial products f homes and mers as mut ut also speci hout being a become a m al registratio utual banking omy is also Among the b r children, y f microcredi CE-MG ha in the offeri s of Private a Económica, any Lusitania th the CE-MG. ng mutual ba anking servic y saving pro es it different ange of acti fies why at th the housing together wi , into a diver ients. 7 In pa tter focused launch of a he acquisiti n to develo ortuguese ba he proliferati f MG-AM, si s for the prot further educ tual associate ial pricing o a member of mutual associ on; pay a mo g product. important f bank’s priori youth, elderl it, which ai as also a n ing of a vari e Social Soli but they ha owned by M anking ces to oducts, t from vities, he end g and ith its rsified arallel, d risk an IT on of op the anking ion of ince it ection cation. es. To n CE-f MG-iate of onthly for the ities is ly and ms to natural iety of idarity ave all MG-AM.
Instit instan Desp of the mana AM p Some From descr descr and s focus by M the ba struct credit famil (53.9 46.1% 8 Sour tutions - wit nce, product ite this spec e total credit In the co ages to rema provides to it e differences m what was s ribe in more ribe next. Fir
support in a sed on provid Secondly MG-AM itself ank. Thirdly, ture, with loc
Finally, w t to families lies represen 9% for the se % of total cre rce: Bank’s An th specific ts for the m ialized offer of CE-MG a ontext of fie in attractive ts associates s between C aid, it is clea detail in th rstly, MG-AM a broad sens ding a wide r y, CE-MG is f. In the case while CE-M cal autonomo when we loo s, while CA nted 67.4% o ctor, on aver edit for MG, Table 1 Firms Families Mortgag Source: Asso nnual Report. prices and management r, the credit t and 0.25% o erce competi is the above . Caixa Económ ar that CE-M he next Secti M, using the se: human, s range of fina not directly e of Crédito MG is a ban ous Caixas th ok at the loa is more spe of total cred rage). In con CA and the 1 – Compositi es ociação Portugu conditions. of short-ter to non-for-pr f the credit t ition in the e mentioned mica-MG an MG and CA s ion -, but th CE-MG, aim social, finan ancial service y owned by M Agrícola, m nk with a ce hat are heade ans portfolio
ecialized in dit in the ca ntrast, the cre sector, respe ion of credit p CA 49.9 50.1 26.4 uesa de Bancos These tailor rm funding n rofit organiz o firms. 8 banking sec facilities an nd Crédito A share some c ey have also ms to provid ncial, among es and produ MG-AM ind members are b entralized st ed by the Ca , we find th credit to firm se of MG a edit to firms r ectively (Tab portfolio in 2 CE‐MG 32.6 67.4 58.3 s and Banks’ An r-made prod needs or ins ations was in
tor, one rea d special con Agrícola characteristic o some diffe de to their ass others. Inst cts. dividual assoc both owners ructure, CA aixa Central. at MG is m ms. Indeed, and 50.1% in represented 3 ble 1). 009 (%) Secto 46.1 53.9 42.9 nual Reports. ducts includ surance con n 2007 only ason why CE nditions that cs – which w erences, whic sociates assis tead, CA is ciates, but in s and custom A has a pyra more specializ in 2009 cre n the case o 32.6%, 50.1% or 1 9 9 de, for tracts. y 0.1% E-MG t MG-we will ch we stance more nstead mers of amidal zed in edit to of CA % and
2
In thi Befor the di type the di that l volun excha demo on vo comm organ mana Anoth organ applic proce take direct direct chara the X acces unbea group incom of tho2. BRIEF
BANKS
is section, w re entering i ifferences be of organizat ifferences be A co-ope looks for mee ntary insuran ange receive Co-opera ocracy, equal oluntary and munity. A d nization’s act In relatio aging risks, w her differenc nizations that There ar cable legisla ess. With res decisions on tors. In cont tors, compet After co acterize co-o XIX century i ss to financ arably high i ps. On the on me, in which ose banks haCHARAC
S IN EURO
we look at th in the descrip etween a co-o tions share m eing essentia erative is an o eting specifi nces for memagreed bene atives and m lity, equity a open memb istinctive pri tivities. on to objec while co-ope ce is that co t does not oc re other dif ation, regula spect to the n the future trast, in mutu ting to the AG omparing co operative and in Germany ial services interest rates ne hand, som h case tend to
ave been crea
CTERIZAT
OPE
he experience ption of co-o operative and many charact lly on details organization ed common mbers. They efits. mutual organ and solidarity ership, demo inciple of co ctives, mutu ratives are m o-operatives m ccur. fferences be atory author latter, in co e of the org ual associatio GM to elect o-operatives d mutual ban the purpose and to tho . Regarding me banks ha o be more sp ated to proviTION OF
e of mutual operative an d a mutual a teristics and s. n owned and needs. A mu make a regu nizations sh y. In terms o ocratic contro o-operatives ual organizat more concent may distribu etween thos rities, memb o-operatives ganization, wons the decis the board an and mutu nks. When th was to creat ose who we their origins ave been crea pecialized in ide credit to
MUTUAL
banks and C nd mutual ba ssociation, fo seek the mu democratica utual organiz ular contributhare the sam of principles ol by membe is the memb tions are m trated in mee ute a patrona se organizat bers’ represe the Annual which must b sion power i nd define inte ual organiza he first of su te an alterna ere being ex s, these bank ated to provi mortgage cr a particular
L AND CO
Co-operative anking, we d ollowing Dem utual aid of i ally-controlle zation manag tion to the m me values: , both organ ers and share ers’ econom more focused eting specific age dividend tions, name entation and General Me be followed s concentrate ernal statutes ations in g uch organiza tive both to xploited by s can be grou ide credit to redit. On the field of activO-OPERAT
e banks in Eu describe in g mers (2008) its members ed by its me ges democrat mutual fund a mutual self nizations are e a concern f mic participat d on collec c members’ n d, while in m ely regardin d decision-m eeting (AGM d by the boa ted in the bo s and laws. general, nex ations appea those with la usurers cha uped in two people of li e other hand, vity, with thTIVE
urope. eneral . Both s, with mbers tically and in f-help, based for the tion in ctively needs. mutual g the making M) can ard of ard of xt we red in ack of arging broad imited some e goalof de given savin intere other emph which or be from speci have banks signif differ chara both As a the b with maxim institu non-f possi than more opera elect opera gover 9 Som memb veloping it. n mainly to s In the firs ngs by indiv
est rate for d r secure inves Mutual ba hasis on the p h case histor elonging to t serving a r alized in som a strong pre s have declin ficant than co From wha rent. Nowad acteristics, w Firstly, th owners and consequence best possible a long-term mize memb utions’ stabi for-profit ba ble cost. Th commercial cost efficien Secondly ative and mu the board o ative princip rnance schem me co-operativ ber clients ben
Deposits we mall busines st group are i iduals, throu depositors. A stments. anks were bu protection of rically memb the same loc estrict comm me types of c esence in Fra ned in numbe o-operative b at was said, days, despit which we desc hey are custo customers o e, the first ai products an m perspective bers/custome ility, but it is anks, the goa his helps exp
banks. How ntly than com y, co-operativ utual banks of directors. ple of "one me, with an ve banks only nefit from thei
re received m sses and firm
included mai ugh the prot Additionally,
uilt from the f social risks. bers shared s cal commun munity of m credits, to lar ance, Germa er and marke banks. the historica te some sm cribe below ( omer owned f the bank, w im of a co-op nd services to e. While com ers welfare. s not the ma al is to offe plain why co wever, in We mmercial ban ve and mutu are owned a Members u person, on n involveme y operate wit r banking and mainly from ms on that act inly mutual b tection of de they also ma e start to targ . On this reg some interest nity. But now members with rge universa any, Italy an et share in th al origins of c mall differen (EACB, 201 d entities. Co with custome perative ban o its membe mmercial ban Profit is ain goal (Gro er their mem o-operative b estern Europ nks (EACB, ual banks ha and controlle sually have ne vote". Th ent of their th their mem d financial serv members of tivity. banks. Their eposits and t ade mortgag et a broad ra ard they diff ts and charac wadays, co-o h common c l banks. In t nd the Nethe he late 20th ce co-operative nces, both 0; Fonteyne, o-operative a ers having in nk is not to m ers. 9 They fo nks maximiz a necessary oeneveld and mbers high q banks usually pean countrie 2010). ave democra ed by their m equal voting hey are cha members in
bers but mos vices. f the professi r original goa the provision e loans at af ange of the p fer from co-o cteristics like operative ban characteristic the present c rlands. In o entury, becom and mutual type of ba , 2007). and mutual b nfluence over maximise pro ocus on their ze profits, c y condition d Sjauw, 200 quality servi y show a sm es co-operat atic control b members, wh g rights, acc aracterized n decision-m st of them al
ion and cred
al was to stim on of an attr ffordable rate population, w operative ban e trade, profe anks have ev cs, and some co-operative opposition, m ming globall banks are sl anks share bank membe r the manage ofit, but to pr r members’ co-operative to guarante 09). In the c ices at the l maller profita tive banks op by members ho democrat cording to th by a demo making in m
lso admit tha dit was mulate ractive es and with an nks, in fession volved etimes banks mutual ly less lightly many ers are ement. rovide needs banks ee an ase of lowest ability perate s. Co-tically he co-ocratic matters t
non-defin gover hostil the lo organ funds count have This opera finan netwo signif why t opera to me intere orien indiv that a better demo satisf attrac of th emoti perfo –, int the E They 10 In t 11 Not ned by the st rnance of co le takeover b Thirdly, b ocal level, th nization that s to lend to tries, like Fra Fourthly, institutional guarantees t ative banks h ncial stability ork between Fifthly, p ficant part of they are wel ative membe embers eithe est or a divid Sixthly, nted and the viduals, hous allow them to r knowledge ocratic proce faction and cting local de hose instituti ional factors ormance indic tervention at European co-o Finally, c y mainly follo the specific ca tice that this c
tatutes of ea o-operatives by another ba both mutual he local ban acts as a ba local banks ance, there is co-operativ protection s the deposits have a small y, especially local co-ope profit allocati f the yearly p ll capitalized ers, with lega
er through th dend, which i co-operative y are strong eholds and S o be close to e of the loca ess inside t trust of clie eposits. Som ions that are s associated
cators. Proxi the local lev operative and co-operative ow the tradit ase of CE-MG t characteristic i ach bank. A and mutual ank. and co-oper nks control th ank of the lo , sharing ba s an intermed ve banks usu schemes that of members l dimension, y in times of eratives. 11 ion is differe profit is usua d in general. al or statutor he use of th is related to t e and mutua gly attached Small and M o customers. al economy he co-opera ents. Non-fo metimes what e seen as sa with differe imity to cust vel and ability
d mutual ban and mutual tional approa
this does not o
s much more consequenc l association rative banks he various b ocal organiza ack-office fu diary regiona ually have in t amount to s s in case of which may f crisis. How
ent from com ally allocated A part of the ry limitations he co-operati the number o al banks are d to the loca Medium Enter The decision and a faster ative or mut or-profit ban t attracts cus afer than m ent business tomers – incl ty to work wi nking model. banks tend t ach to interm occur. common in co e of the spe ns is that the s tend to hav branches; at ations, offeri unctions, like al level. nternal depo solidarity bet failure of on inspire in cl wever, this mmercial ban d to constitu eir profit can s in most ca ve's product of shares sub e predomina al economie rprises. They n centre is c r decision pr tual associa nks have a stomers is vic market-oriente principles m luding physic ith small pro . to be more c mediation cha o-operative th ecific owners ey are basic ve a pyramid the national ing clearing e a payment sit guarantee tween local i ne local bank lients less co is mitigated nks. In a co-te reserves. T n also be dist ses. Profit is ts and servic bscribed by e antly domes es. Their clie
y have dense loser to the c rocess. This tion contrib strong tradit cinity or the ed banks. B more focused cal branches ofit margins a conservative aracterized by an in mutual b ship structur cally immune dal structure l level, there facilities, po t system. In es schemes. independent k. Some loc onfidence on by the soli -operative b This helps ex stributed to th s usually allo ces, or throu each member stically and
ents are typ e branch net clients, allow together wi butes for a itional positi financial sta But there are d on non-fin
in remote re are key featu
than other b y originate to banks. re and e to a e. 10 At e is an ooling some They banks. cal co-n their idarity ank, a xplain he co-ocated ugh an r. retail pically works wing a th the better ion in ability e also nancial egions ures of banks. o hold,
in de their are se low p Europ despi stabil risk m
3.
GER
CHA
In th banks way After devel The w In sta mone loans (bank of the plus t additi by cu CE-M pyram The C 12 Not marke etriment of th conservatism everal reason pay-out ratio pean countri ite their low lity of the n managementCRÉDIT
RAL
C
ARACTER
is section w s and their i capital and rwards, we ex lopment is al way funds a andard, non ey injected b s obtained by k loans). The e firm, becau the money ge In the cas ional source ustomers, irre MG and CA a midal structu Central Caix te that comme et. he business m is that they ns for this: ( o; (ii) they haies they are wer profitabi ational finan and lower re
TO AGRÍ
COMPARE
RISTICS AN
we look at th mplications funds are ra xamine how lso highlight are raised -financial co y the owners y issuing bon e money rais use it corresp enerated by t se of standar s of funding espective of are not differ ure assigns a xa accepts d ercial banks ca model based y tend to hav(i) they add ave more lim
subject to ti lity, financia ncial sectors eturns volatil
ÍCOLA A
D TO
ND ECONO
he main dim on the bank aised. Then, profits are a ed. ompanies, th s of the comp nds (securitiz sed using theponds to the the activities rd commercia
available: lo whether it is rent from oth special role deposits from an also obtain d on selling e a stronger a larger port mited options tighter legal al co-operat , because of lity (Hesse a
AND CAIX
COM
OMIC PER
mensions whe ks’ economic , we look at allocated. Fin he sources o mpany; (2) ret zed loans); ( e first two of money that s of the comp al banks, alo oans obtained s in current a her banks. It e to the Centr m the local C loans from (o commoditiz capital base tion of profit s to quickly requirement tives make a f their strong and Cihák, 20XA ECON
MERCIAL
RFORMAN
ere CA and c performanc t the banks’ nally, the attiof funds ava tained profits (5) loans obt f these sourc was put in b pany itself. ong with the
d from the c accounts or s is only relev ral Caixa in Caixas and other) banks, v zed credits. A than comme ts to reserve raise capital; ts. It can thu a positive co g capitalizati 007).
NÓMICA
L BAN
NCE
CE-MG dif ce. We start governance itude toward ailable are t s; (3) loans f tained from c ces is called by the owner previous fiv entral bank a avings accou vant to highli the financin deposits fromvia the so-call
Another asp ercial banks. es because of ; (iii) and in us be argued ontribution t ion, more pr
- MONTE
NKS:
M
ffer from sta by looking e and tax re ds profit and the followin from supplie commercial the “capital rs of the com ve 12, there ar and deposits unts. In this r ight that in C ng of local C m clients. O led interbank pect of There f their some d that, to the rudent
EPIO
MAIN
andard at the egime. social g: (1) rs; (4) banks base” mpany re two made regard, CA, its Caixas. On the moneyother (whic local prese strong CA o finan strate finan the fa 3.9% issue owne finan contr throu (whic share profit Depo Se CA CE Avera Se CA CE Avera r hand, the C ch are not ac Caixas with Comparin ent a ratio dep
g position in on average b ncing rate 1.4
In the tur egic asset, sin ncial markets
act that in 20 % (Table 2).
Next, let shares in th ers and by ret Regarding nce the acqui
ribute directl ugh quotas pa Turning n ch have to su es by existin ts). osits /Liabilitie ector’s averag A E‐MG age loans rate ector’s averag A E‐MG age financing Central Caixa ccessible to t h surplus, can ng with stan posits-to-liab n raising fund between 200 4 p.p. lower t rbulent cond nce banks w . Note that C 010 the depos us focus on he stock mark taining profi g CE-MG, p isition of oth ly with capi aid to MG-A now to CA, t ubscribe at l ng members Table es ge e ge g rate a has access
the local Cai n be used to f dard comme bilities consi ds through d 04 and 2010 than the secto ditions of th
ere facing di CA’s deposit sits of CA ha
n the way the ket, they onl ts.
profits are u her financial ital for the b AM and subsc the Caixas ca least €500 of s and by inc e 2 – Average 2004‐07 45.1 93.9 56.5 5.3 5.4 4.5 to interbank ixas). The m finance local ercial banks, iderably larg deposits (Tab 0, had a low or‘s average he market in ifficulties in ts have been ave decrease e non-for-pro ly raise fund used to incre companies. bank. They cription of m an raise capi f capital sha corporating e interest rate k markets an money raised l Caixas with
the two non ger than the s
ble 2). This is wer cost of - Table 2). 2010/11, th obtaining fu under attack ed 1.3% agai ofit banks ra ds through th
ease the cap The MG-AM only have mutual produc
tal through t ares), the sub reserves (ob es and deposi 2008‐10 41.6 86.1 55.5 5.1 4.7 5.0 d financial m in this way a h a deficit of n-for-profit b sector’s avera s one reason obtaining f he strong dep unds in the in k by other ba nst an increa aise capital. he injection o pital base of M individua an indirect i cts at CE-MG he admission bscription of btained esse ts (%) markets in g and received f money. banks under age, showing n why CE-M funds (an av posits base nterbank and anks, as show ase in the sec
Since they d of money by f the bank a al members d impact on c G. n of new me f additional c entially from 2004‐10 43.6 90.6 56.1 5.2 5.1 4.7 eneral d from study g their G and verage was a d other wn by ctor of do not y their and to do not capital mbers capital m past
Se CA CE Depo Se CA CE Note: liabilit Rega the T not h One r grow Gove We ju funds and l intere where and C comm banks mitig The s reduc Tax r After applie and t 13 The Banks ector’s averag A E‐MG osits growth ra ector’s averag A E‐MG Average loans ties. Source: au
arding the num Tier 1-Capita
have a strong reason why wth.
ernance crit
ust saw how s is closely c local presenc est all activi
e shareholde CA the own mercial bank s the moral h gated since s same author ced by the ne regime r raising and ed to CA an tax exemptio e capital ratio s’ annual repor ge ate ge rate = Interest uthors’ calculati mbers, CA h al ratio was 1 ger capital b CE-MG’s ca eria w funds are r controlled by ce. Transpar ities the ban ers are more nership of t k sometimes hazard proble sometimes th rs suggest th etwork of lin d applying fu nd CE-MG a ons it benefit is the ratio of rt and Banco d 3.9 2.0 2.7 2005‐07 8.6 6.5 3.7 ts received / Fin on from data of has a much st 11.6% for C
ase than oth apital ratio w raised in CA y the associat rency is requ k is involve distant from the bank is there is a m ems between hey are the hat the asym
kages betwe unds, profits are different. ted from in t f capital-to-ass de Portugal (2 nancial Assets, f Associação Po tronger capit CA and 7% f
her banks: its was smaller A and CE-MG tes, namely i uired by the ed in. In this m the everyda dispersed t more concent n owners and same person mmetry of in een members are generate On the one the past. Thi
sets weighted 2010) 3.9 1.9 3.4 2008‐10 5.3 2.8 6.1 Average finan ortuguesa de B
tal ratio than for the sector s Tier 1 Cap than CA is r G. The way in the Caixas e associates s, these bank ay manageme through man rated owners d depositors, n, according nformation i /borrowers. ed and taxes e hand, CA l is occurred i by risk. The s
ncing rate = Inte ancos. n the sector’s r. 13 By contr pital ratio wa related with the managem s, due to thei who follow ks differ from ent decisions ny small ow ship structur and owners with Coco n the lendin have to be p ost most of in parallel w sources of Tie 3.8 1.9 3.0 2005‐10 6.9 4.6 4.9 terests paid / Fi s average: in rast, CE-MG as 6.92% in its stronger ment applies ir small dime w closely and m standard s. Also, in CE wners, where re. In co-ope and borrowe and Ferri (2 ng process i paid. Tax re the fiscal be with the proc
er 1 capital rat inancial 2007, G does 2007. credit these ension d with banks E-MG eas in erative ers are 2009). s also egimes enefits ess of tio are:
being finan banks Econ regim exem law ( Septe the te comp organ The w In ac predo typica remu earnin called an am that i Execu memb least prom some streng distri 14 Acc neglig g allowed to ncial product s. In contras nomy and the me of tax ex mption in the article 8 of th ember 14th; a ensions betw petition. In nizations (IM way profits ccordance w ominantly to al of MG tha unerate memb The Statu ngs must be d “legal reser mount which s the sole ow Specific utive Board bers. This as the previous As alread mote several etimes non-m We can th gthen the ban Turning n bution of pr cording to the gible amounts. o develop a s. Nowaday st, CE-MG’s e Third Secto xemption. As payment of he Decree-L and article 10 ween CE-MG the current MF, UE and E are allocate with their co o increase th an of CA). O bers’ capital utes of Mont e used to inc rves” and at h will tend to wner of the b proposals r of the bank ssembly incl s two years (e dy mentione activities w members of th hus say that t nk itself but now to CA, rofits to mem Statutes, the . growing ran ys, CA fiscal s social role i or is recogni s a result, C some taxes, aw 119/83, d 0 of the Corp G and the ot context of ECB), there a ed o-operative a heir capital b Only very rec
shares.
tepio Geral
rease the cap least 5% in t be close to ank.
egarding the k and must ludes all who each membe ed, the Asso which are so
he Associatio the end goal also used to after the legi mbers, but o
e bank can als
nge of activi l framework in the develo zed by the P CE-MG has included the dated Februa porate Incom ther Portugu f fiscal cons are some risk
and mutual base and pro cently, did CA clearly state pital base of the form of “ 75% of net e e allocation be approve o have been er has one vo ociation use ocially orien on. of CE-MG i support and islative chan only after com
so build reserv
ities and sup k is almost si opment and t Portuguese g benefited fr e Income Tax ary 25th; arti me Tax Code) uese banks, solidation, i ks that these principles, omote social A start to use e – in article f the bank (a “special rese earnings - is of profits ed by the M n active mem te). es the mone nted in natu is to generate promote soc nge of 1995, mpensating ves for other
pply an incr imilar to stan the consolida overnment, w rom an exce x, according cle 1 of the L ). This situati who claim t mposed by benefits cou CE-MG and l activities ( e a (small) p 36 - that at at least 20% rves” 14). Th transferred t are made e MG-AM Gen mbers of the A y received re and bene e profits that cial activities the Caixas’ eventual neg purposes, but reasing numb ndard comm ation of the S who grants t eptional regim g to the Portu Law 151/99, ion has inten this creates
the interna uld end soon.
d CA use p (the latter is part of its pro
t least 25% in the form he remainder to the Assoc each year b neral Assemb Association from its ba efit member t are partly u s. statutes allo gative past r t this tends to ber of mercial Social to it a me of uguese dated nsified unfair ational profits more ofits to of net m of so – i.e., ciation by the bly of for at ank to rs and used to ow the results o be in
and th value does bank’ each capita Caixa avera practi profit losses institu aroun may reinfo “core Attitu We h banks unlik fulfill in it; They and b risky capita marg that t 15 Ow 16 The memb he constituti e of members money get o ’s capital. Since 200 member was al shares. So as have raise age, 3.9% of ice of remun Regarding ts to its capi s linked to ca After stre utions and th nd €12.5 mil summarize b orce the capi e tier 1” capit ude towards have seen ab s. But the di ke commerci lment comes and contribu y work for th businesses - approaches al base (whe ins. The fact t the two fina n calculations e number 93% bers and 3.2% on of compu s’ capital sha out from the
07, in order t s raised to €5 ometimes th ed capital se f the profits nerating the m g the Caixa ital owners, apital injecti engthening th he developm llion (3.2% o by saying th ital base. 16 D tal ratio of ar s profit and bove that CA ifferences be ial banks, d s from streng uting to the e e community not for the to the banki enever neces that CA and ancial institu based on CA’ % comes from % to social inst ulsory reserv ares or incre Caixas. Prof to attract mo 500, a large n he capital rem elling capita were distrib members’ cap Central, ev the local Ca ons in some heir capital b ment of the lo of total profi hat, in CA a Due to this, C round 12%, w social devel A and CE-M etween them do not have gthening the economic and y - for their o markets. T ing business. ssary or adv CE-MG foll utions are mo ’s Annual Repo
the fact that, titutions.
es. The distr easing their d
fits not distrib
ore members number of C muneration a al shares pay buted to mem pital. 15 ven though aixas, becaus problematic base, CA al ocal econom its) to social around 93% CA is a very well above th lopment MG apply pr m are even de e as prime bank itself; d social deve own employ Therefore, the . The only p visable). Thi
low a less ris ore specializ orts. , between 200 ribution of pr deposits. Not buted to mem and because Caixas has di assumes the ying interest. mbers, and b it is legally se all profits c local Caixas so uses a pa my. For exam institutions, of profits h y well capita he legal requ ofits in a di eeper, since objective t securing the elopment of t yees and for t ey do not ne rofits they n is allows the sky business zed in retail 07 and 2009, 3 rofits is done tice that only mbers are use
e the minimu stributed pro form of int Between 20 before 2007 possible, it have been u s.
art of its pro mple, CA gro , between 20 have in the p alized bank, h uirement. fferent way the two non to maximize e jobs of the the regions w the consume eed to pursu need are thos em to work s model can b banking, es 3.9% of profit e by increasin y in the latte ed to reinfor um capital sh ofits to remun terest, since 007 and 200 there was n never distri used to cove ofits to help oup has distri 006 and 200 past been us having curre from comm n-for-profit b e profit. In people who where they op ers and small ue speculativ se to increase with small be seen in th specially CE ts was distribu ng the er case rce the hare of nerate some 09, on not the ibuted er past social ibuted 9. We sed to ently a mercial banks, nstead, o work perate. l trade ve and e their profit he fact E-MG. uted to
Indee activi tradin sheet Credi Se CA CE Sour Incid comp Indee been secto differ have CA h local netwo 5.1% depos branc fact opera Caste 5). W propo perce than
ed, they have ity is relative ng activities ts than in stan it / Assets ector’s averag A E‐MG rce: authors’ ca dentally, a les petitors – be ed, when we slightly sma r (Table 2). rences in cre Despite th differences i has an advan Caixas hav ork, CA has % respectively sit share: in ch network i that CA ha ational efficie In additio elo Branco, É When we loo ortion of br entage points the average e a ratio cre ely more imp
and the fina ndard comm ge alculation from ss aggressive ecause it allo look at the a aller than the
Please note dit composit he fact that in their regio ntage in serv ve autonomy a branch sh y (Graph 1 a 2010 it was s much wide as a much l ency, as we w on, CA tend Évora, Guar ok at the dis anches in in s (p.p.) large (on average dit-to-assets portant for th ancial assets ercial banks. Table 3 – 2004‐07 62.5 71.7 87.2 data of Associa e attitude tow ows them to average loans e sector’s av that this is a tion across b both banks t onal presence ving local ec y of decision hare around t and Table 4). 5.3% and 5 er, i.e., much larger branc will see belo ds to locate i rda, Portaleg stribution of nland region er), while CE e minus 0.5 larger than hem (Table 3 own until m . – Credit-to-a ação Portugues wards profit o charge low s rate of the verage: 4.7% a rough comp anks. tend to work e. Compared conomies, b n. Regarding two times its . By contrast 5.1% respect h closer to th ch network ow. its branches gre, Vila Re banks’ bran ns larger tha E-MG has sli
p.p.). In 250 the sector’s 3). In other w maturity are l assets (%) 2008‐10 60.8 67.6 86.4 sa de Bancos. gives CE-M wer prices f non-for-prof % for MG, 5 parison since k closely wit d with CE-M ecause it is g the geogra s deposit sha t, CE-MG ha tively. It can he customers than CE-MG more in inl
eal and Viseu
nches across an the secto ightly less re 0 small villa average, im words, the as less importan MG and CA a for the servi fit banks in th .1% for CA e it does not th local com MG or other c a decentrali aphic covera are: in 2010 as a branch s n then be con s than CE-M G does not and regions u) than the o regions, CA or’s average epresentation ages, a CA b mplying that ssets associa nt in their ba 2004‐10 61.1 70.0 86.9 an advantage ices they pr he last years and 5.2% f t take into ac mmunities, th commercial b ized group, age of the b it was 11.1% share similar ncluded that MG’s network imply a sm (Beja, Brag other banks ( A tends to h e (on averag n on those re branch is the credit ated to alance e over ovide. it has for the ccount he two banks, where branch % and r to its CA’s k. The maller gança, (Table have a ge 2.4 egions e only
conta CA i activi savin Number Secto CA CE‐M Branches CA CE‐M Sour It ma does banks fact memb defau advan non-f perfo secto decre qualit econo transl chara regio notice non-p 17 Sou
act that popu in inland re ities. Finally ng rates than of branches or’s average G s market shar G rce: authors’ ca ay be asked i translate int s like CA ha that borrow bers/borrowe ult. In order ntage, we lo for-profit ban ormance on t r has increas ease of 0.2 p
ty, but has b omic crisis. late into be acteristic of ns), or the co e that in CE performing lo urce: CA’s web
ulations have gions is als y, the fact th the average, re (%) alculation from if the close c to a better ca ave an advan wers are ofte ers, which f r to confirm oked at the r nks have a r this respect sed 1.5 p.p. a p.p. This sh been able to m Overall, the etter credit the local ec omposition o -MG, Social oans: 0.9% t b site.
e with the fin o related w hat CA is ov facilitates th Table 4 2004 5312 616 297 11.6 5.6 data of Associa connection a apacity to ma ntage in deal en also mem facilitates th m if these th ratio of non-ratio higher (Table 6). B and CE-MG’ hows that str manage cred e closer conn risk’s indic conomies in of its credit p l Institutions hat compare nancial syste with its deep
ver-represen he attraction 4 – Banks’ Br 2007 5977 644 300 10.8 5.0 ação Portugues and knowledg anage credit ling with asy mbers and t he cross mon heoretical ar
-performing than the sec But while fro ’s ratio increa ructurally C dit risk in a m nnection of C cators, prob which CA portfolio (cre s were in 200 es with 2.7% em.17 Natura genetic con nted in inland of deposits. ranches 7 7 4 0 8 sa de Bancos. ge of the loc risk. It migh ymmetric inf there is a n nitoring and rguments do loans to tota ctor’s averag om 2006 to ased 1.4 p.p. CA has a wo more efficien CA to local ably due to is located (m edit to more r 07 the group for private f
lly, the over nnection wit d regions, w 2009 6186 682 326 11.0 5.3 cal economy ht be argued formation th network of d creates a s effectively al loans and ge, with CA 2009 the av , CA’s ratio orse position nt way durin economies o other fact more econom risky firms). p of clients w firms (Montep r-representat th primary which have h 20 62 69 32 11 5 y possessed b d that co-ope hat arises fro linkages be stigma in ca translate in observed th having the verage ratio registered a n regarding ng the last ye does not se tors such a mically depr It is interest with lower ra epio Geral, 2 ion of sector higher 010 240 91 29 1.1 .3 by CA erative om the etween ase of nto an hat the worse of the slight credit ears of em to as the ressed ting to atio of 2007).
Inland Br Br Ca Év Gu Po Vil Vis Av Sourc Note: Banco Apart orien them Econ When the a expec of the (13.8 The l 18 ROE 19 Sinc d Regions raga ragança astelo Branco vora uarda ortalegre la Real seu verage e: authors’ calc Sector’s aver CA CE‐MG it includes the o de Portugal. t from been nted, having more vulner nomic and fi n the financi above asserti
cted, the non e sector. But %), the prof lower profita E is the ratio o ce CE-MG is e Table Regional CA 4.3 3.7 3.1 5.1 3.8 4.0 3.8 6.5 ‐ culation from da Tabl 20 rage 1 4 2 credit to firms more conne an internati rable to a neg inancial perf ial position o ions are con n-for-profit b t while the pr fitability of C ability of CE of profits-to-ca xempt of taxe 5 – Regional distribution o CE‐MG 0.3 0.9 2.8 2.1 1.2 0.6 0.6 2.1 ‐ ata of Associaç le 6 – Ratio o 006 20 .7 1 4.7 3 .3 2 and families. S ected to the onal presenc gative evolut formance of CA and C nfirmed, but banks have a rofitability o CE-MG is thr E-MG and CA apital base. es, the profit b
distribution of branches ( Secto 1.5 1.4 1.9 1.9 1.6 1.3 2.0 3.3 ‐ ção Portuguesa of non-perfor 007 2008 .6 2.2 .9 4.3 .3 2.8 Source: Banks’ local econom ce smaller t tion of the Po CE-MG for th t there is so a ROE (Retu of CA (12.6% hree times sm A is associa before taxes is of branches %) Diffe or de Bancos. ming loans (i 8 2009 3.2 4.6 3.8 ’ annual reports mies, they ar than other P ortuguese ec he period 20 ome specific urn-on-Equit %) is only sli maller than th ted with a lo s used to comp in 2009 erence toward CA 2.8 2.2 1.2 3.2 2.2 2.7 1.8 3.2 2.4 in %) 2006/09 +1.5 p.p. ‐0.2 +1.4 s and Boletim E re also more ortuguese b conomy. 004-2010 is a city in each ty) 18 smaller ghtly smalle he average (6 ower standar
pute the ROA
ds the sector MG 1.2 0.5 0.9 0.2 ‐0.4 ‐0.7 ‐1.4 ‐1.1 ‐0.5 9 2008/ +1.0 p. +0.3 +1.1 Estatístico of th e domestic m anks. This m analyzed, ma bank. First r than the av er than the av 6.8%) (Table rd deviation and ROE. (p.p.) /09 p. he market makes any of tly, as verage verage e 7). 19 of the
ROE that n ROE Se CA CE ROA Se CA CE Capit Se CA CE Cost‐ Se CA CE Note: Ratio calcula The p prese secto in its positi In ge than secto secto for-pr 20 RO : 5.6%, 2.2% non-for-profi ector’s averag A E‐MG ector’s averag A E‐MG tal Ratio ector’s averag A E‐MG ‐to‐income ector’s averag A E‐MG 1 – standard de is not the regu ation from data
picture is sli enting a ROA r’s average. Annual Rep ion on the in eneral, the re the sector c r’s ratio. Bu r, since its ca Regarding rofit banks i OA is the ratio % and 7.1% it banks have T ge ge ge ge eviation in brack ulatory capital a of Associação ightly differ A below the However, in port by the d nterbank mar eason why C can be found ut the same r apital ratio is g operationa s larger than of profits-to-t
for CA, CE-e a lCE-ess risky Table 7 – Ma 2004‐07 17.2 15.9 8.5 0.7 1.3 0.4 5.6 7.9 4.8 58.3 56.5 62.6 kets. To compu ratio. Cost-to-i Portuguesa de
ent for the R average, bu n 2009 there decrease in t rket, the decr CA has a RO d in the fact reason does s below the s al efficiency, n the average total assets. -MG and the y business mo ain financial i
ute the ROE and income = Ope e Bancos. ROA (Retur ut CA has a was a sharp the Euribor. rease in the OA larger tha t that its cap
not explain sector’s aver we found th e of commer e sector, resp odel. indicators (% 2008‐10 9.3 8.1 4.6 0.4 0.7 0.2 5.5 8.2 5.4 54.1 60.7 58.7 d ROA we used rational costs / rn-on-Assets) ratio more t decrease in Given that C Euribor mea an the sector pital ratio is why CE-MG age.
hat the cost-to rcial banks, w
pectively. Th
%)
d the results bef / Banking Prod
)20 (Table 7 than two tim CA’s ROA, CA has tradi ant a strong d ’s average b s considerabl G has a ROE o-income rat with CE-MG his is an ind 2004‐10 13.8 (7.1) 1 12.6 (5.6) 6.8 (2.2) 0.5 1 0.3 5.5 8.0 5.0 56.5 58.3 60.9 fore taxes. The duct. Source: a
7). CE-MG i mes larger tha
, which is jus itionally a le decline in re but a ROE sm ly larger tha E smaller tha
tio of the two G presenting dicator e capital authors’ is still an the stified ending eturns. maller an the an the o non-lower
effici and f both hand, ROA an u perfo profit ineffi regar to co Firstl which econo proce local their
4.
MAR
Given mark for-pr decre opera 2007 10.2% the ev iency than C for CE-MG 6 From the are non-for-p , CA present A and capital under-perform ormance than In sum, in t banks indic icient and co To finaliz rding some fi onjecture som ly, it is locate h allow him omy and so ess, and is se customers a credit risk.EVOLU
RKET POS
n the distinc ket position’s rofit banks r eased 1 p.p. ative banks w (EACB, 201 In turn, t %, being the volution in t CA. Between 60.9% (Table e previous da profit banks, ts some dime ratio, being mer on the n CA in term n line with O cates, especi ondemn to di ze, above it w inancial indic me reasons ed in locals w m to have a ociety, is clo een as a safe and earn theUTION OF
SITION
ctive characte s evolved ove represented, from 2004 was in 2007 10). the deposit m co-operative the EU 15, t 2004-2010, e 7). ata, it can b , have a very ensions wher only slightly three aspec s of credit gr Ory et al. (20 ally regardin sappear. was observed cators, name why that no where there large deposi oser to custo institution. T eir trust, andF THE N
eristics of C er time in a c in 2007, 8. to 2010 (Gr around 13.5 market share e banking EU the tendencythe ratio for
be inferred th y different po re it is better y less efficien cts presente rowth (Table 06) for Fran ng the CA, th d that CA ha ely concernin on-for-profit is less comp it base. Seco omers, has This allows d at the same
NON-FOR-P
E-MG and C context of inc .6% of the l raph 1). In t 5%, and has e of the Port U-15 average y in Portugal r the sector w hat CE-MG osition in rel r than standa nt. On the ot ed. However e 9).ce, our analy hat co-opera as a better po ng the ROA a bank has s petition and i ondly, CA i a decentrali CA to better e time devel
PROFIT P
CA, it is inte creasing com loans marke the EU 15, t been roughl tuguese non-e around 14% l was for a d was 56.5%, f and CA, de ation to the s ard commerc her hand, CE r, CE-MG h ysis of the Po ative and mutosition than c and capital ra such a finan
t exist a larg s strongly ro ized and dem r respond to lops a better
PORTUGU
eresting to as mpetition. In t, and their the loans ma ly constant b -for-profit ba % (EACB, 2 decline of th for CA was 5espite the fac sector. On th cial banks, su E-MG seems has had a ortuguese no utual banks a commercial ratio. It is po ncial perform ge pool of sa ooted in the mocratic de the preferen r understandi
