Cooperative Banks in Europe—Policy Issues
IMF Working Papers, July 1, 2007
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- Cooperative Banks in Europe—Policy Issues
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Bibliographic details
- Authors: Wim Fonteyne
- Published: July 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451867237.001
Summary
- The paper explains the continuing success of European cooperative banks through evolving comparative advantages.
- A cooperative is described as built around an intergenerational endowment without final owners, creating particular governance challenges.
- Key risks identified include:
- Use of the endowment for purposes other than members' best interest, such as empire-building.
- Attempts at appropriation of the endowment.
- The paper notes mechanisms that reinforce the risk of empire-building:
- Mechanisms that foster capital accumulation.
- Asymmetric opportunities for consolidation.
- Conclusions:
- Some form of independent external oversight of corporate governance is warranted.
- Cooperatives need mechanisms enabling them to better manage their capital.
Risks and Corporate Governance Challenges
- Governance challenge root: intergenerational endowment without final owners.
- Specific risks and reinforcing mechanisms:
- Empire-building driven by internal incentives and capital accumulation mechanisms.
- Appropriation attempts against the endowment.
- Asymmetric consolidation opportunities that can skew incentives and outcomes.
Policy Implications and Recommendations
- Independent external oversight of corporate governance is recommended.
- Cooperatives require mechanisms to improve capital management.
Content in this bundle
- Cooperative Banks in Europe, Policy Issues; Wim Fonteyne; IMF Working Paper 07/159; July 1, 2007