The European Association of Cooperative Banks (EACB) has published research by Professor Hans Groeneveld of Tilburg University that assesses the performance of cooperative banks across Europe relative to their competitors.

Link to research

The assessment is based on 2019 data, so prior to the Covid pandemic, and looks at 18 groups of cooperative banks across 13 countries, one of which is the UK building society sector.

Cooperative banking groups across Europe differ in important respects, such as capital structure, membership policies and legal basis. However, they are generally converging in terms of organisational structures and governance, which may be being driven by external factors such as uniform regulation and the economic environment.

The number of people across Europe that were members of these cooperative banks grew by 1.1 million to 86 million in 2019. European cooperative banks averaged market shares of 23% in loans and 22% in deposits, while their share of branches was much greater, at 33%.

In advance of the Covid pandemic, cooperative banking groups across Europe had strong capital positions, averaging a Tier 1 capital ratio of 15.9%, similar to the 15.6% across the all other banks. Measures of profitability and efficiency had converged between cooperative banks and other banks in Europe in recent years. Return on equity averaged 6.1% for cooperative banks in 2019, and 5.7% for the entire banking sector, while the cost to income ratio for cooperative banks declined to 64.3% in 2019 and increased to 62.1% for other banks.

During the launch event, much of the discussion related to how their overall solid financial performance might enable cooperative banks to differentiate themselves from shareholder-owned banks.

Social capital - as encompassed by member relationships, democratic participation and regional links -  is the distinguishing feature of cooperative banks. Members are sources of innovation, information, loyalty and communication. Other banks don’t have these same relationships. This social capital needs to be nurtured, including virtually, and the Covid pandemic has highlighted the need for this even more. There was a belief that many banks of all types had added to their social capital through their actions in the Covid pandemic, but longer term, pressure to generate returns for investors could erode this at shareholder-owned banks.