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Concept
Cooperative banking
Summary
Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world.
Cooperative banking, as discussed here, includes retail banking carried out by credit unions, mutual savings banks, building societies and cooperatives, as well as commercial banking services provided by mutual organizations (such as cooperative federations) to cooperative businesses.
A 2013 report by ILO concluded that cooperative banks outperformed their competitors during the financial crisis of 2007–2008. The cooperative banking sector had 20% market share of the European banking sector, but accounted for only 7% of all the write-downs and losses between the third quarter of 2007 and first quarter of 2011. Cooperative banks were also over-represented in lending to small and medium-sized businesses in all of the 10 countries included in the report.
Credit unions in the US had five times lower failure rate than other banks during the crisis and more than doubled lending to small businesses between 2008 and 2016, from 60 billion, while lending to small businesses overall during the same period declined by around $100 billion. Public trust in credit unions stands at 60%, compared to 30% for big banks and small businesses are 80% less likely to be dissatisfied with a credit union than with a big bank.
Cooperative banks are owned by their customers and follow the cooperative principle of one person, one vote. Co-operative banks are often regulated under both banking and cooperative legislation. They provide services such as savings and loans to non-members as well as to members, and some participate in the wholesale markets for bonds, money and even equities. Many cooperative banks are traded on public stock markets, with the result that they are partly owned by non-members.
Member control can be diluted by these outside stakes, so they may be regarded as semi-cooperative.
Cooperative banking systems are also usually more integrated than credit union systems.
Official source
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