Cooperative and popular banks: local engines

for global growth

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The Confédération Internationale des Banques Populaires (CIBP) is an international non-governmental organisation founded in 1950 and based in Brussels. It represents banking and financial institutions specifically set up to support the development of small and medium-sized enterprises (SMEs) and individual customers. CIBP is an international learning forum and a business network that serves as a basis for the enhancement of cooperation among members and their business development.

Most of its member institutions have a cooperative statute, implying solidarity and guarantee mechanisms. They have a decentralised structure with one or more federal bodies in charge of representation, monitoring and financial support.

This decentralised nature means that they benefit from a network of regional banks closely involved in local life and the real economy. CIBP members are particularly attentive to their customers’ and shareholders’ needs and therefore able to provide the right solutions. CIBP has members in Africa and Europe, as well as in South and North America.

© CIBP 2014

www.cibp.eu

Contents

Foreword 3

How we define ourselves 4

1. Cooperative and popular banks are different 6

2. We are trendsetters 8

3. We weathered the recent economic crisis 14

4. We support our communities 18

5. We foster innovation 24

6. We can make you go global 28

7. Our market share is growing 30

Cooperative and popular banks in the world

> Kenya> South Africa> Tanzania

North Africa and Middle East

> Australia> Bengladesh> India> Japan> Malaysia> New Zeeland> Pakistan> Philippines> South Korea> Sri Lanka> Thailand

North America > Canada> USA

Central and South America > Argentina> Bolivia> Brazil> Chile> Colombia> Costa Rica> Dominican Republic> El Salvador> Honduras> Mexico> Paraguay> Puerto Rico> Uruguay

> Algeria> Israel> Morocco> Syria> Tunisia

Americas

AfricaAsia-Pacific

Europe> Austria> Belgium> Bulgaria> Cyprus> Denmark> France> Finland> Germany> Greece> Hungary> Republic of Ireland> Italy> Luxembourg> Netherlands> Norway> Poland> Portugal> Romania> Slovenia> Spain> Sweden> Turkey> Ukraine> United Kingdom

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ForewordThe relevance of an economic model can be measured by the values it transmits, the wealth it creates for the

community, and its ability to evolve and to withstand shocks, however extreme.

Seen from these angles, the popular and cooperative banks’ model is an example of success as its values are

strong and topical, its contribution to the growth of economies around the world is palpable, and its adaptability

and resilience have been demonstrated throughout the latest global economic and financial crisis.

Thus, the values we have pledged in our Charter and which were behind the creation of our model, now

join the universal principles that communities are striving towards, such as sustainable and responsible

development, participatory governance, sharing and proximity. Our commitment to these values and the

efficiency of our business model were highlighted by the international community when the United Nations

invited our Confederation to present our model on the occasion of the International Year of Cooperatives in

2012.

As regards creating wealth for our various communities, our model

— which was originally drawn up by economic actors who did not

have access to banking products and services, including small

and very small businesses, artisans, etc. — has remained strongly

tied to financing the real economy, the promotion of SMEs and the

fight against financial exclusion. Meanwhile, this model injects its

actions with both local and regional dimensions in line with the

growing concern for a sustained and sustainable development.

This link with the real economy, coupled with the fragmentation

of risk and a distribution system which assure the continual strengthening of our capital, have allowed our

model to cope with the latest international economic and financial crisis. Not only has the restructuring of

our banks cost nations and taxpayers comparatively little, but our banks have continued to pursue their

mission of financing the economy while enjoying the confidence of their customers and members when

elsewhere this confidence has been significantly undermined.

If, today, the family of popular and cooperative banks can pride itself on its model, it is also responsible for

ensuring its durability by facing challenges both in the tightening of banking regulations and the evolution of

banking activity itself. Where the virtual mixes with reality, we must remain committed to our values in order

to enhance our contribution to the common interest.

Mohamed Benchaaboun

President of the Confédération Internationale des Banques Populaires (CIBP)

The popular and cooperative banks’ model is an example of success as its values are strong and topical, its contribution to the growth of economies around the world is palpable, and its adaptability and resilience have been demonstrated

“

How we define ourselves“If you had to convince someone of the added value of cooperative and popular banks in one sentence, what would you say?”

“A cooperative bank reconciles democracy and efficiency at the service of its members and the community.”Carlos Heller, President, Banco Credicoop - Argentina

“Cooperative and popular banks prioritise funding for the real economy which creates values and jobs and ensures, at the same time, long-term profitability for the banks.”

Hassan El Basri, General Manager, Banque Centrale Populaire - Morocco

“In 2013 the cooperative financial network was the most profitable banking group in Germany with profit before taxes of € 9.6 billion. Our business success is reflected in a stable benchmark rating by Standard & Poor‘s (AA-).”Wolfgang Kirsch, Chairman of the Board of Management, DZ BANK AG - Germany

“Our speciality is banking, but our aim is to do it for the benefit of our customers who are also our share members.”Bernard Huberdeau, General Secretary, Confédération Internationale des Banques Populaires (CIBP)

4 I

“We approach our customers holistically – meaning we are not trying to sell them certain products, but to help them exactly the way they need in their specific situation.”Thomas Jorberg, Chief Executive Officer, GLS Bank - Germany

“A cooperative bank is a place where clients are shareholders and as such take advantage of the added value created by their company!”

Alain Declerq, President of the Board of Management, CPH Banque - Belgium

“Customer focus, respect for people, responsible behaviour in the supply chain, and commitment to society are the core principles deeply rooted in the culture of Banco Popular Group. A culture integrated in a differentiated and unique business model in the Spanish and European banking industry, strongly linked to SMEs. Banco Popular Group’s mission is to create sustainable and long-term value for our shareholders through a responsible business model.”Roberto Higuera, Vice Chairman, Banco Popular Español (BPE) - Spain

“The ‘added value’ of popular and cooperative banks is represented by their special relationship with their clients/members. Being banks with people at the centre of their business and linked to the territories where they operate, popular and cooperative banks are able to develop the relations of mutual support between credit, business and civil society: an essential condition for building the economic recovery.”Giovanni De Censi, President, Istituto Centrale delle Banche Popolari Italiane (ICBPI) - Italy

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6 I

Cooperative and popular banks are

different

We really listen to what our customers say because our member clients participate in our governance and strategic decision-making. We work hard to understand our customers needs and we know every customer has individual and unique requirements.

We are, and always have been, closer to our customers. We are deeply involved in investing in the tangible ‘real world’ economy and helping to grow both people and profit for our customers: creating truly sustain-able value that we share with our customers.

Customers and ownersIn most cases, our customers are also the owners of our banks. This notion of member clients is a radically different concept to shareholder-controlled banks. Supported by professional management, our member customers act as real decision-makers and receive a portion of the profit – their dividend.

Desjardins Group in Canada has a typical dividend policy. There are two types of member dividends: individual ones are paid to each individual or business member in proportion to their use of their cooperative’s products and services, while collective member dividends are paid into a fund that supports local community projects. In total, the Group returns 1 million Canadian dollars (US$ 0.93 million) a day to its members and communities.

Our governance structures – including member customers’ participa-tion in the management of banks – are strong yet flexible and ensure that our services and sponsorship are targeted for best effect in the communities we serve.

The involvement of customer members in corporate decision-making ensures long-term stability and the gen-eration of shared value in a highly professional business environment. Those who engage with the governance structure are well trained and supported in all areas of financial, legal and banking so that they can fully meet their responsibilities. And, of course, the professional management of our banks is of the very highest quality.

Serving the real economyThe approach of the Banques Populaires and Caisses d’Epargne Group in France is representative of a suc-cessful cooperative and popular bank. With some 36 million customers, the Group is committed to serving the real economy and engages with the business community on a regional basis. In France, it is the leading source of loans to create new businesses, with all decisions devolved to the regional level and the majority

secured at the local agency level. Its latest results (Q1 2014 – see figure, p.8) show continued commitment to driving the real economy.

Our banks are devoted to servicing the financial needs of both enterprise and families. We are deeply involved in supporting the communities we serve. Our ethics and values stem directly from this deeply embedded sense of social responsibility and solidarity.

These are the foundations of our business model. This is what makes us different.

Cooperative and popular banks differ from other banks in terms of their ownership, governance, approach to business and enterprise, and engagement with society as a whole. We provide tailor-made and flexible services in the interest of all stakeholders.

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We know every customer has individual and unique requirements“

Our ethics and values stem directly from this deeply embedded sense of social responsibility and solidarity.

“

8 I8 I

The cooperative differenceHassan El Basri, General Manager of the Banque Centrale Populaire in Morocco and Marco Aurélio Almada, CEO of the Cooperative Bank of Brazil SA (Bancoob) explain what makes our cooperative approach different.

> What makes the cooperative and popular bank model different?

El Basri: The main difference is based on their origins. Cooperative banks were initiated by skilled working people – SMEs, artisans and craftsmen – who did not have access to banking services. These people created their own bank, were the owners of its capital, and actively participated in managing their bank. Other values differentiate cooperative banks, such as local and regional roots, the predominance of financing for the real economy, and facilitating easy access to banking services.

Almada: One of the fundamental differences between a cooperative bank, or credit unions in the case of Brazil, and a conventional bank is that with the former the roles of the owner and the customer are consolidated in the same figure, which significantly changes the institution’s paradigms of direction. In a conventional bank, the primary goal of the business is to extract the greatest possible profitability from customer relationships. This manner of doing business only provides a return to the shareholder. A cooperative bank, on the other hand, seeks to strike a balance in that relationship.

> How does the customer benefit? 

El Basri: First, through participation, the customer is involved in developing the bank’s strategy and can represent either their own or professions’ economic concerns. Secondly, because of the bank’s proximity to the customer, he or she benefits from a close relationship, rapid and targeted support, better pricing, and a dividend from the bank’s profits.

Almada: The member/customer has the advantage of knowing that any financial surplus generated in a consumer relationship, with his or her cooperative, will benefit him/her. In this way, we believe it is possible to build a more transparent and, thus, robust and durable relationship.

Results for BPCE Groupe (Q1, 2014) showing its engagement with the real economy

26%Corporates

7%Professionals

29%Individual

customers

2%Equities

2%Securisation

18%Sovereigns

10%Local

government market

6%Financial institutions

€1,009bn

Administ

ratio

n

Techno

logy

Serv

ice to

loca

l aut

horit

ies

Communica

tions

Staple in

dustri

es

Tourism

– Hote

ls – C

aterin

g

Intern

atiol C

ommodities

Electro

nic a

nd m

ec. co

nstru

ction

Consum

er goods

Trans

portatio

n

Food indus

tries

Pharm

a – Health

Distrib

ution –

Tra

de

Constru

ction &

pub

lic w

orks

Serv

ices

Holding co

mpanies &

dive

rsifie

d

Energ

y

Real e

state

Financ

e insu

ranc

e

Real e

state

rent

al

0.3%

1.3% 1.5%2.1%

2.6%3.1% 3.1% 3.6% 3.6% 4.0%4.2% 4.3% 4.6%

5.7% 5.8%6.7% 6.7%

7.8%

12.7%

16.4%

Breakdown of commitment by counterparty Breakdown of commitments to corporates

and professionals by industrial sector

I 9

CASE STUDY

Sweet SME success“When I decided to start my business, I had to knock on the doors of many local banks,” says Mustapha Sebbar, founder of the Finetti company based in Casablanca. “It was a real struggle because no financial institution responded positively. But when I talked to Banque Populaire Morocco, to my delight they swiftly agreed to my request.”

The Banque Populaire Morocco (BPM) offered Mr Sebbar a credit line of 3 million dirham (DH), equivalent to approximately US$ 360 000. Despite the prevailing difficult economic environment, thanks to this backing Finetti was founded in 2010 and was able to start producing its range of biscuits, confectionery and chocolate.

Today, the company enjoys the sweet taste of success with a turnover in 2013 of 200 million DH (US$ 24 million)! “The 2014 fiscal year promises to be just as good with an estimated turnover of 350 million DH,” says Mr Sebbar. “We owe this success very much to the Banque Populaire which continues to support us and our growth strategy, both financially and in terms of strategic advice.” Finetti has already begun its international expansion, particularly in sub-Saharan Africa.

Mustapha Sebbar Founder of the Finetti company, Casablanca

Roland Reichl: Member governanceDr Roland Reichl, a member of Volksbank Salzburg, Austria who has had significant involvement in the bank’s governance, describes his experience.

> How did you first get involved with the governance of the bank?

My involvement with the governance of the Volksbank Salzburg began in 2006 as a member of the cooperative council. Before that I was working as a lawyer for about 16 years for different banks, cooperative banks as well as those organised as public limited companies.

> How did your involvement develop?

My involvement started in the cooperative council in the forum where the interests and views of the members of the cooperative are brought together, in contrast to the board which concentrates on the governance of the bank. Being a lawyer, I was especially interested in the handling of loans as well as treasury aspects, which was relatively new to me.

> Why is membership involvement in governance important?

In my view, membership involvement in governance of the cooperative and popular banking model gives the board of directors extra professional input as the members normally work in different jobs, very often as entrepreneurs, know their specific market and can thus widen the knowledge of the bank’s directors in these markets.

In my view, membership involvement in governance of the cooperative and popular banking model gives the board of directors extra professional input

“

10 I

We are trendsetters

I 11

It is true that many cooperative and popular banks have been around for a long time. But there are very good reasons for that: we offer stability, resilience, reassurance and a set of values based on social responsibility and a mutual trust between our banks and their customers. We find our roots in timeless values, strongly anchored even in modern society.

The first-ever financial cooperative was set up by Henry Duncan who established a ‘parish bank’ in 1810 in south-west Scotland. It was an idea that spread rapidly throughout the UK before being further developed in Europe with Raiffeisen and Schulze-Delitzsch and beyond.

For example, the origins of the German and Austrian Volksbanken date from 1850, when Hermann Schulze-Delitzsch founded his first credit-coop in Delitsch. In South America, Banco Credicoop Cooperativo Limitado in Argentina, created in 1979, was the result of the merger of 44 existing Credit Unions – some with a history dating back over 90 years.

Clearly, our way of banking represents a sustainable business model that has nurtured local communities and regions for over 200 years. And we have constantly adapted to our customers’ changing needs.

At the forefront of consumer innovationCooperative and popular banks are always at the forefront of consumer innovation. At the Banque Populaire Morocco, for instance, a novel and exclusive service for customers has been introduced that allows the transfer of cash to friends or family 24 hours a day, seven days a week. Even if the recipient has no bank account or credit card!

Cash withdrawal is via automatic teller machines (ATMs) and the customer must hold a Banque Populaire cash card or subscribe to the bank’s mobile banking app: Pocket Bank. The system uses reference and withdrawal codes that can be used by the recipient to access the cash at any ATM without the need for a card. This innovative system is convenient and secure and allows the transfer of funds to anyone, anywhere in the country.

Caring bank for caring consumersWe believe that the cooperative model is better because it enables individuals to participate in the governance of the bank through ownership. This concept makes our banks inherently more engaging, more productive and, we believe, more useful and more relevant in modern society.

The cooperative ethos creates better business models because our model provides greater economic, social and environmental sustainability. A focus on social inclusion, supporting diversity and clear corporate social responsibility – concepts that conventional banking institutions have only started to embrace relatively recently – have always been at the heart of cooperative and popular banks’ values.

We are flexible and responsive to our customers’ needs. Our financial model is well suited to the requirements of today’s economic and social environment and has proved itself able to adapt to future trends.

The cooperative ethos creates better business models “

12 I

This philosophy is perfectly adapted for today’s consumer society. Our customers want easy access to information on products and services; they want to know that we share their concerns for the environment; they want to know that we will be able to act quickly when they need decisions on loans and savings; and they need assurance that when they need to speak to someone about financial matters we will be available to talk ‘face-to-face’.

Our banking model offers the best solutions for consumers, whether they bank with CPH Banque in southern Belgium – with a modest 32 branches, but an impressive recent growth rate of more than 10% – or a financial giant like Grupo Banco Popular in Spain.

Thomas Jorberg: an ethical, sustainable approachThe German GLS Bank has taken a truly sustainable view on banking. CEO Thomas Jorberg explains its approach.

> How is the GLS Bank different to other banks?

The GLS Bank is a social and ecological bank that works mainly in Germany. We focus on cultural, social and ecological projects such as independent schools and kindergartens, organic farms or communal living projects. Our business is committed to the triple bottom line for sustainability: people, planet and profit.

All our investments and financed projects are rated according to these principles. We believe in transparency: all our customers are strongly interested in sustainability. To show our customers how their money is used we publish openly all the loans we grant, and customers can choose which line of business they want to support with their savings when they open their bank account at GLS Bank.

> How do you see this investment strategy evolving?

Since the financial crisis in 2008, many people are becoming increasingly aware of the impact their money can have on the world. We are convinced that the ethical investment sector will continue to grow. To increase public discussions about sustainability in the financial and banking business we are organised into global networks, such as the Global Alliance for Banking on Values (GABV), where we are working towards a culture change in the banking and financial sector.

> But how does the bank deal with bad debts and other issues?

Since we audit loans very thoroughly before they are arranged we have a very low loan default rate. We approach our customers holistically – meaning we are not trying to sell them certain products, but to help them exactly in the way they need in their specific individual situation. We believe that money is there to nurture society and be used by the people – thus we do not speculate and invest only in the real economy.

Our business is committed to the triple bottom line for sustainability: people, planet and profit

“

I 13

We provide modern innovative web technologies for our customers who want online, secure and mobile access to information and transactions with the reassurance of the ‘proximity’ of extensive local networks of branches. We offer the technological approach that today’s customers expect with the essentially human approach that they want.

The cooperative and popular banks’ approach is the truly sustainable, modern approach to banking and investment for our consumer society – now and for the future.

Hans Hofinger: cooperative is bestOriginally established in the 1850s, the Carinthian Volksbank became a stock-traded company in 1991 but reverted to a cooperative status in 2013. Hans Hofinger, CEO of VolksBank, explains what motivated this choice.

> What were the primary drivers for the Carinthian Bank to return to a cooperative model?

In the context of the global economic situation, the bank’s owners were looking primarily for security and reliability. To strengthen their direct influence and control, they returned to a direct cooperative corporation, which means direct participation [of clients] within a cooperative general assembly. They wanted to be able to ensure that their bank developed their own enterprises, the regional economy and provided finance for local households. The bank was not interested in gambling on international financial markets. Within a conventional shareholding capital structure this direct influence would not be possible and other shareholders – who are only interested in short-term financial benefits – could weaken the bank’s longer-term cooperative goals.

> What are the advantages of the cooperative bank model?

People have more trust in the cooperative banking model than the shareholder-owned one. Why? Because as members of the banks people have a vote, they are engaged in setting guiding principles and business practices. Money saved in a region is invested in that region, for example in local small and medium-sized enterprises, or in community or tourism projects like schools, nurseries or ski-lifts. This is what people can see. They do not want to invest in distant risky projects that they do not understand. The money in the cooperative model is circulated to enrich the local economy.

> How adaptable to change is the cooperative banking model?

The cooperative banking model is the most adaptable model I know. In the future, the status of the bank will depend on the will of the bank’s members. But I am sure that if our Volksbank is able to meet our members’ needs, the cooperative will perform well for another hundred years.

The cooperative banking model is the most adaptable model I know“

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We weathered the recent

economic crisis

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Throughout our long history, as cooperative and popular banks, we have sailed through many periods of stormy economic weather. Cooperative banks originated in the 19th century and many were borne out of adverse economic circumstances. Back then, we provided capital to ordinary people, skilled craftspeople and new enterprises which were unable to raise money from conventional banks – just as we do today.

Since their humble origins, our banks have become significant players in global finance, representing some 20% of global bank deposits.

While cooperative and popular banks are not immune to global economic turbulence, we have not been hit as severely by the direct effects of the crisis compared to private and investment banks. Our losses and write-downs have been relatively moderate. In fact, an International Labour Organisation study found that between 2007 and 2010 assets held by European cooperative banks grew by 10%, market share in loans and deposits remained stable, while customer numbers grew by 14%.

No cooperative bank has ever fallen under a nationalisation programme or been declared bankrupt.

The most recent economic crisis saw the failure of over 40 financial institutions in Europe and elsewhere. However, those institutions that failed were commercial banks and public banks, or former cooperative groups that had chosen to demutualise. Our focus on real-world economic investment – largely avoiding speculative financial instruments – and a crystal clear understanding of the risk in our loans portfolio helped to ensure a steady course.

Globally, more than 95% of write-downs registered during the crisis were credited to commercial and public banks. In contrast, cooperative banks have had little responsibility for the direct costs of the crisis.

Studies (see figure, p.16) show the low contribution (less than 3%) from cooperative and popular banks to losses suffered during the economic crisis.

Houda Laaraj, Head of the Communication Department of Banque Populaire Morocco comments: “The best indicators of the perfect resilience of our banks during the recent crisis remain our financial results and our assets which, year after year (from 2008 to date), are progressing positively and at all levels.”

We are mainly orientated towards domestic and retail business and are well-capitalised, ‘solid’ institutions. For example, retail banking represents 82% of Spanish Grupo Banco Popular’s business. Our close relationship with members and customers allows a long-term perspective that takes us, together, through good and bad times. We have built-in anti-cyclical behaviour and internal deposit guarantee schemes, as well as tight bottom-up control mechanisms – including our democratic governance scheme, involving our members in decisions. This keeps us in tune with the real world economy.

Popular and cooperative banks are more resilient than capital-based banks. The majority of them weathered the recent economic storm in excellent financial health without having to seek any form of state aid.

No cooperative bank has ever fallen under a nationalisation programme or been declared bankrupt.

“

Houda Laaraj, Banque Populaire Morocco:

The best indicators of the perfect resilience of our banks during the recent crisis remain our financial results and our assets which, year after year (from 2008 to date), are progressing positively and at all levels.

“

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CASE STUDY

A spider’s web of resilienceBancoob, a cooperative bank of Brazil, sees its business model as a spider’s web. The metaphor illustrates the equal importance of each part to support the cooperative business network as a whole in favour of its members. And it also stands for resilience, flexibility and strength.

Bancoob has over 2 million member clients and operates through more than 550 banking outlets. Its performance throughout the economic crisis demonstrates typical resilience. From 2008 to 2012, its financial cooperatives grew by 116% in terms of loans issued. As regards deposits, increased confidence in the cooperative financial institutions saw 147% growth in this period compared to a national average of 39% for all financial institutions.

Bancoob CEO, Marco Aurélio Almada believes these positive figures are the result of the maturation of the industry. “Bancoob itself has increased its deposits by 489% in recent years. The institution jumped 23 positions in the ranking of banks operating in Brazil, from 38th in December 2008 to 15th in December 2012, ensuring the highest percentage growth in the period,” he says. In the same period, Bancoob grew 207% in terms of loans.

Marco Aurélio Almada

Banccob CEO

Global cost of the economic crisis (2009)Source: Bloomberg 2009

0 20 40 60 80 100 US$ billionCommercial banks

Cooperative banks

Top 10:

54%

Top 25:

78%

Coop banks:

2.7%

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100% protected The National Association of German Cooperative Banks (BVR) institutional protection scheme is the world’s oldest 100% privately financed banking protection system. For decades, this system has ensured that no customer of a cooperative bank in its network has ever lost a single cent on deposits. The scheme makes sure that each bank is able to meet its obligations at all times. Bank failures and paying out on depositor insurance claims are unknown to the Cooperative Banking Network.

This proven, established scheme is reliable, efficient and more effective than deposit guarantee schemes, which do not afford complete failure protection to member institutions under a shared liability arrangement.

Wolfgang Kirsch: safe passage in difficult times Cooperative and popular banks have managed to ride out the recent economic crisis better than other financial institutions. Wolfgang Kirsch, CEO of DZ BANK AG in Germany, outlines the reasons why.

> What fundamental strengths have helped cooperative banks during the economic crisis?

Proximity to the customers, deep roots in the real economy and a strong commitment to responsible entrepreneurship: these are the main reasons why cooperative banks are such a stable and strong partner of the real economy. The first cooperative banks were set up as institutions of self-help for small and medium-sized companies and private individuals in order to provide basic services for saving and lending. And the core of their self-conception and their stability can still be understood from that heritage: their devotion to a strong and independent “Mittelstand” is unchanged. Today, the business model of cooperative banking is more than 150 years old and the German cooperative banks have more members than ever before: 17.7 million members in total.

> Are there any specific actions that demonstrate the resilience of cooperative banks?

One crucial aspect for the resilience of cooperative banks is the ability and willingness to close ranks in challenging times – the buzzword is “cohesion”. An important example of this cohesion is the protection scheme of the German Cooperative Financial Network. ‘Corporate governance’ is an additional element: since the local cooperative banks are customers as well as owners of their central institution DZ BANK AG, they significantly shape our strategy and positioning in the market. The idea is that we as a central institution will only be successful if the local banks are successful. So, cohesion also means alignment of interest – instead of questionable incentive structures.

> What opportunities and threats are there in the post-crisis era?

Cooperative banks are facing the challenges ahead from a strong position: We have a very favourable reputation that is derived from a high degree of trust in our business model. Periodical surveys show that private and corporate clients are content with our services. Today, we already finance the success of many small and medium-sized companies which are the backbone of the real economy. Our task will be to fully tap this potential while increasing cost efficiency which remains a key challenge. We are continuously improving the efficiency of our business processes while, at the same time, experiencing steadily growing pressure from new regulation.

Furthermore, we have to cope with the implications of digitalisation – with respect to our clients as well as the banking industry – and the upturn of new competitors. But you can be sure that we will adapt to the new landscape to the benefit of our clients.

We do not follow trends in banking, but are trendsetters“

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We support our

communities

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Our Charter commits our member banks “to invest in local projects, finance cultural events as [an] intangible dividend”.

This is particularly relevant at a time when customer trust in many financial institutions is low and a ‘them and us’ attitude pervades many people’s perceptions of ’them’. We know you, and we serve your interests, which in turn means that we have retained a high level of trust despite the recent banking crisis.

Historically, we are committed to maintain-ing a local presence. For example, in Europe there are some 4,200 cooperative banks with around 60,000 local branches.

The real thingWe have a natural bias towards the needs of the ‘real economy’ (see figure below, compared to conventional banks) and therefore towards ‘real people’ in ‘real communities’. This strong and clear customer relationship and understanding enables our banks to take a longer-term view on relationships with customers.

Cooperative Banks’ focus on retail revenues

Cooperative and popular banks devote more of their resources to supporting the ‘real’ retail economy than other banks

Customer trust in cooperative banks (2012)

Surveys show cooperative and popular banks retained customer trust during the financial crisis

1

2

3

5

100%

90%

80%

70%

60%

40%

2007 2008 2010 2011

50%

2009

Cooperatives

Shareholders banks

Cooperatives

Financial industry

Cooperative and popular banks are part of the community. It is there-fore only natural that we support local initiatives, for example, to boost smaller businesses or cultivate young talents. We make it our business to know our customers better so they can support local communities better.

Num

ber

of b

ank

resp

onse

s

Significantly decreased trust

Decreased trust

Remained the same

Increased trust

Significantly increased trust

Ave

rage

ret

ail r

even

ur in

%

Source: Oliver Wyman

Source: Company annual reports, Oliver Wyman analysis

Compared to other financial institutions, we have a greater commitment to financing the local economy, individual entrepreneurs and to supporting our communities. For example, Argentina’s Credicoop devotes some 60% of its resources to financing SME businesses.

In fact, cooperative and popular banks have a tendency to fund projects and concepts that might be turned down by traditional banks as being too risky. We excel at nurturing genuine local talent!

On targetAs part of the community, we literally ‘speak the same language’ and can reinforce our position by participating in local social networks and supporting community activities that often go well beyond our banking and financial functions.

As a feature of this long-term and sustained social commitment, a proportion of cooperative and popular banks’ earnings are dedicated to promoting local economic and social initiatives.

Dominique Martinie: supporting talentsDominique Martinie, President of the Fédération Nationale des Banques Populaires (FNBP) in France, explains how the organisation dedicated some €26 million to local economic and social initiatives in 2013. This includes the work of the Foundation Banques Populaires that supports individual life projects in the fields of music, disability and craftsmanship. To date, more than 590 inspiring and remarkable talents have been helped.

> What can you tell us about the impact of your support on communities and individuals?

Our foundation supports only individual projects and aims to have a significant impact on the career of its laureates. Each laureate receives a grant of between €5,000 (US$ 6,800) and €15,000 (US$ 20,400), and our support can be extended from one to three years depending on the project and its success. We have a strong impact in our activities in classical music and for disabled people because we have been involved in these areas for 21 years. For example, in music, to be a laureate of the Foundation Banque Populaire is equivalent to winning an international prize for our young instrumentalists and composers.

> How does this translate in reality ?

Due to the support of the foundation, instrumentalists can afford to perform in famous master classes around the world, they can apply to international exams, and be helped at the beginning of their promising career. For our laureates in the arts and crafts, they can afford to buy new machines or tools, go abroad to improve their talents or to organise an exhibition or establish their own workshop. Disabled laureates can realise their life projects, including competing at the Paralympics Games, creating their own enterprise, or pursing their studies. Each year, the foundation has the pleasure of following around 50 incredible and amazingly talented people!

Monique Leroux, CEO Desjardins Group:

The problem is that culturally, we [society] often see social needs as separate from – and sometimes in opposition to – economic needs. The cooperative model can help link the two.

“

To be a laureate of the Foundation Banque Populaire is equivalent to winning an international prize

“

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Many of our social projects are relatively small-scale local initiatives – often taken on by individual bank members. Not only do we support these projects financially, but they are also supported through access to our networks – including education and training services – and through the commitment and often unpaid work of our employees.

In Germany, for instance, DZ BANK AG helps its employees to engage in community work, such as ‘So-cial Days’, and provides financial support for their voluntary activities. In 2012, the bank set up an alliance with the JOBLINGE project. With support from personalities in the worlds of business, government and society, this programme helps young people who have difficulties starting a career because they lack formal qualifications. Since 2013, DZ BANK AG employees have been helping young people participating in this project by acting as voluntary mentors.

Creating young entrepreneursCanadian cooperative and popular banks in the Desjardins Group created the ‘Créavenir programme’, a socially inspired product for young business people (18 to 35 years old) with bright ideas but no ac-cess to capital. Since 2007, the programme has financed 364 projects of young entrepreneurs, for a total investment of 3.8 million Canadian dollars (US$ 3.5 million). It is part of their portfolio of socially responsible products and services.

The scheme does not require the usual payments or financial collateral guarantees. Budding entrepre-neurs can use the programme either to create working capital or to acquire a five-year interest-free loan (repayable from the second year). In addition, they may be awarded a grant depending on an evaluation of their business needs.

To participate in the programme, the young entrepreneurs must already be – or must become – a member of a participating bank office, agree to be mentored by a local or regional development centre, and have a sound business plan.

The Santa Claus difference!The Credito Valtellinese (Creval) banking group works to combine economic growth with social responsibility. Its ‘Santa Claus’ initiative was started in 2008 to help sick children to stay connected to the rest of the world by providing well-equipped computer classrooms in hospitals. The project started with the sale of a Christmas CD and has since seen the participation of more than 100 well-known Italian national and international artists.

So far, three CDs have been produced generating around 100,000 sales, and a book has been published, too. The vast majority of sales were achieved through Creval’s network of over 540 branches and have resulted in the establishment of 70 hospital classrooms across Italy.

22 I

Tiziana Colombera: helping vulnerable populationsThe Fondazione Gruppo Credito Valtellinese (Creval) in Italy operates in three areas: social solidarity, training, and art and culture. In recent years, the organisation has distributed around €2 million annually. Tiziana Colombera, who leads the Fondazione, tells us more about its local impact.

> What kind of projects do you support?

In the context of social solidarity, we support projects and initiatives focused on helping the most vulnerable part of the population or on the promotion, protection and enrichment of artistic, historical and environmental heritage.

> Could you give us an example?

Our most recent project – called ‘Job Match’ – is a professional inclusion project aimed primarily at people between 18 and 30 years and companies in the district of Sondrio. Job Match provides young people with opportunities for professional experience in order to obtain a better understanding of the world of work and for the companies to meet and evaluate new talents. The project is based on the idea that the best premise to create a perfect match between a potential labour force and employment availability is a good mutual understanding between young people and companies.

Arts, movies, music and laughter Cooperative and popular banks are also very active in supporting their creative communities. For example, Banque CPH in southern Belgium supported the production of the Belgium-French movie Tango Libre in 2012, while in sport it sponsors Charleroi’s basketball team. The bank also backs the Liège International Comedy Festival, the Mons International Love Movie Festival, and the Classical Music festival.

Likewise, with a market share of approximately 60-70%, DZ BANK AG is Germany’s market leader in the sector of financing film production and TV projects. Annually, the bank provides around €500 million for

film and TV productions.

One of the largest German film projects in recent years, financed by DZ BANK AG with a budget of €10 million, was the film Der Teufelsgeiger based on the life of the popular Italian virtuoso violinist Niccolò Paganini with David Garrett in the lead role.

Tango Libre

We support projects and initiatives focused on helping the most vulnerable part of the population.

“

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Gruppo Creval’s activities in art and culture were awarded the ‘Premio Guggenheim - Business and Cul-ture’ in 2000 and extend in two major areas. “The first one is represented by the art exposition at our art galleries in Milan, Sondrio, Acireale and Fano. The second is oriented to the editorial side and concerns art consulting for foundations, museums, public and private authorities, or co-branding initiatives,” ex-plains Tiziana Colombera.

SME and community prioritiesArgentina’s Banco Credicoop pursues the financial development of all Argentineans. Some 60% of its resources are devoted to financing small and medium-sized enterprises.

The Fundación Banco Credicoop also provides services to over 1500 SMEs, such as business training programmes in collaboration with universities.

(1) Loans to Individuals, Residential Mortgage Loans, Credit Cards.

(2) Enterprises holding highest commercial debts according to the Ranking of Commercial Debtors by BCCL.

(3) Enterprises exceeding those margins established by MiSMEs (not included in 100 Main Debtors).

(4) Enterprises classified as MiSMEs as per Com. “A” 5419 BCRA.

21.5 % Consumption Loans AR$ 3,419 (1)

14 % 100 Main Debtors AR$ 2,205 (2)

6 % Remaining Commercial Portfolio AR$ 952 (3)

58.5 % Loans to SMEs Portfolio AR$ 9,271 (4)

The majority of retail loans made by Credicoop in Argentina support growth in small and medium-sized enterprises.

An example of Banco Credicoop’s social activities is its work with the Universidad Nacional del Litoral on a Nutritious Food Manufacturing Plant. The facility was built in 2007 under the Social Interest Food Programme. The partnership between the university and the bank is based on a shared vision of developing a new out-of-the-box strategy to approach unmet food needs, leveraging the university’s academic experience and relating it to the social presence of the cooperative bank.

Today, annual production amounts to around 900,000 meals, which are delivered to government agencies, the Church, community organisations as well as canteens in three universities. The joint programme aims to produce food with a high nutritional value at a very low cost; implement a food education plan that includes citizen information and training courses for operators of food programme facilities (for example, on nutrition and food quality, food hygiene and safety, etc.); and generate community solidarity through food donations that help to expand the programme’s network and enhance its visibility.

6 %

14 %58.50 %

21 .5%

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We foster innovation

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We foster innovation

And innovation is not just about new technology. Innovation is about new ideas and ways of working. We are always open to new concepts and creative thinking – much more than other financial institutions.

We are ready to support innovation among our business customers and entrepreneurs. Better customer knowledge leads to a clearer understanding of your ideas, a quicker response and reliable long-term support.

To quote Monique Leroux, CEO of Desjardins Group in a 2012 report by McKinsey & Co: “Cooperatives are often well positioned to leverage their understanding of local issues to identify and tap unmet needs …we provide a ground-level perspective that allows us to fill different niches when it comes to innovation.”

Boosting eco-innovationOur attitude to our social responsibilities and shared values also means that we are keen to support and lead innovation that improves sustainability in the wider community, for example by financing renewable energy projects.

More than ten years ago, DZ BANK AG declared the renewable energies sector would be one of its key growth areas sector. By the end of 2013, the bank had lent around €2 billion to projects in this area sec-tor. DZ BANK AG expects this growth to continue and its market share to increase.

DZ BANK AG is helping to provide loans in Germany to support the installation of better insulation, more efficient heating technology, and other advances that help to cut greenhouse gas emissions.

Today, the cooperative model has proved its worth in both the rolling out of renewable energies and improved energy efficiency. Cooperative banks in Germany play a leading role in financing renewable energies.

Supporting manufacturers from all sectors Our support for high-tech SMEs and family businesses show that the cooperative model helps skilled and innovative people in all industry sectors: both new and traditional.

Organised by the Fédération Nationale des Banques Populaires and the French Chambers of Trades and Crafts, the annual ‘Stars & Metiers’ (Stars and Crafts) prizes recognise and reward the leaders of artisan or craft enterprises for their expertise and success in technological innovation, managerial, commercial or strategic areas. In 2013, more than 2000 candidates from across France participated in the prize.

Benoît Eyraud of VS Technology SA was a winner in 2011. His company, which is based close to Lyon in France, manufactures precision glass products for scientific and technical applications. This is a highly skilled art and the key skill – glass-blowing – is an endangered profession. To combat this trend,

Our proximity to and understanding of our customers and their needs means we often play a leading role in financial innovation, supporting their innovative market opportunities for new products and services.

Innovation is about new ideas and ways of working.“

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Benoît has adopted a strategy to recruit young skilled workers and to ensure that the older generation’s knowledge is passed on. “No machine can replace the human in VS Technologies,” he says. This human resources policy has enabled the company to continue its significant export success.

Likewise, BG Engineering, founded in 1999 in Châteaubourg, is a pioneering manufacturer of customised smart cards. Now run by two brothers, Joël and Nicolas Besnier, the family business has created a new series of machines for testing smart cards and opened up a brand new market. Today, BG Engineering is a world leader in test machines for biometric passports and the development and manufacture of bespoke smart badges and cards.

To meet the needs of their customers, the Besnier brothers have designed a novel test machine for radio-frequency identification (RFID) cards that are used in contactless payment. This revolutionary robot device was self-funded, designed in-house and can test multiple payment devices, including contactless cards, smart phones, tablet computers, e-passports and transport passes. With the continuing support of BPCE Group member, Banque Populaire de l’Ouest, this traditional family craft business is succeeding in the highly competitive world of high-tech innovation.

The technologies may change but the support of the cooperative and popular bank model for family firms and innovative individuals engaged in sustainable innovation continues: our ‘old’ community values are the ‘new’ global society values. Whatever the future holds, we will be there for you.

CASE STUDY

Pandamania!The Paira Daiza tourist attraction in Belgium has a great tradition of innovation with new features opening at the start of each tourist season. The park currently attracts over 1.2 million visitors a year and for 2014 has premiered what is potentially its biggest attraction to date: two Giant Pandas called Hao Hao and Xing Hui.

The park garden covers 55 acres nestling at the foot of the ruins of the Cistercian Abbey of Cambron and protected from the outside world by a wall three kilometres long. It is home to many old trees, beautiful flowers and plants from around the world, and more than 5,000 animals. Today, it is one of only 13 zoos around the world that have been chosen to participate in the Chinese Giant Panda breeding programme.

Pairi Daiza is a great tourism success story and has relied since the beginning on the support and guidance of Belgian cooperative and popular bank CPH. Now, as the park celebrates its 20th anniversary, CPH is continuing to support its innovation and development.

Hao Hao, one of the two pandas that recently joined the Pairi Daiza family.

Italian innovation on the cardsSince 1985, CartaSi, part of the Gruppo Instituto Centrale delle Banche Popolari Italiane (ICBPI Group), has been the leading credit-card operator in Italy, providing hundreds of Italian banks with an end-to-end management of the card issuing and acquiring process. To date, CartaSi manages over 2 billion transactions, 13 million cards and 29 million debit cards each year and serves over 600,000 Italian merchants.

CartaSi is focused on research and innovation, creating new products and services in the payments area such as e-commerce, contactless transactions, NFC, e-wallet, Mobile Point-of-Sale (POS) and new mobile payments solutions. Laura Cioli, CEO of CartaSi sets out the enterprise’s future objectives.

> What are CartaSi’s future goals for payment technologies?

We want to spread innovative payments, which are more efficient than cash for transparency, security and costs. We think that current cash costs – accounting for 3% of GDP – are too onerous for a developed country like Italy. Our target for the end of 2015 is to get the percentage of cash payments down to 80% from the current 87% to align Italy with the major European countries, moving digital payments from 15% today to 30%.

> What about future developments?

We are investing in innovation, for both consumers and merchants, developing new products and services and new engagement tools. CartaSi is currently working on the launch of payments by smart phone, via a digital wallet and by mobile POS.

> What are the advantages for customers?

Banks, our main customers, have the advantage of working with a partner able to provide increasingly innovative, turnkey services and capable of providing economies of scale. Our investments in innovation lead to an offer that is being continually updated.

I 27

We are investing in innovation, for both consumers and merchants, developing new products and services and new engagement tools.

“

“

Equens: a contagious successSimilarly, in September 2008, ICBPI Group and Equens SE set up a joint company, Equens Italia. It has become the largest pan-European payment processor, leading the market for future-proof payments and card-processing solutions. Alessandro Baroni, Member of the Equens Board of Directors and Country Representative for Italy describes this innovative payments venture.

> What is Equens? What have been its main innovations?

Besides further developing our traditional services to be ‘state of the art’, Equens acknowledges the dramatic change currently under way in the payments eco-system, driven largely by the growth of e- and mobile commerce. The dominant paradigms in this virtual world of payments will be: convenience, ease of use and a secure and reliable environment. Such features require rethinking how payments services are orchestrated, how agile and flexible their deployment is, and what added-value features for the customers can be built in to enhance their experience. Equens refers to this new world as ‘Payments 3.0’.

To achieve this goal, the company is defining a new set of services to tackle these requirements and sustain its competitiveness. To support such challenges, Equens is developing its business and organisational platform and making the appropriate investments to ensure success and future sustainability.

The dominant paradigms in this virtual world of payments will be: convenience, ease of use and a secure and reliable environment.

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We can make you go global

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Over the last 100 years or so, cooperative and popular banks have been established in all continents and in most countries. Our core principles of proximity, solidarity and democracy clearly resonate with human values around the world.

Although our core business has been built with our members and by developing our local and regional communities, we are also able and willing to support international ventures and expansion. This can often be achieved through cooperation between two or more cooperative financial institutions.

Enabling international expansionFor example, in recent years, international expansion has become one of Desjardin’s corporate strategies. The Group has maintained a presence in North America and Europe and deals with a large number of international banking correspondents on a global scale, including the Groupe BPCE and many other popular banks.

Desjardins helps Canadian companies to do business internationally and international firms to operate in Canada. It offers a comprehensive package that includes financing, investments, insurance, payroll and human-resources services, venture capital, custody services, and banking services.

Clients include the world-famous Cirque du Soleil entertainment company which relies on Desjardins to handle payroll in local currencies for 5,000 employees worldwide.

When Quebec-based InnovMetric Software, a leading provider of universal 3D metrology solutions, opened a new subsidiary in Japan in 2013, Desjardins worked with its banking partners in Japan to finance InnovMetric’s activities there, and to set up all of its banking arrangements.

In 2012, Desjardins opened a European Office in Paris to provide a gateway for Canadian companies into Europe, and for European companies doing business in Canada. Business is booming and Lucia Baldino, director of Desjardins’ European Office, expects that the Canadian-European Union Comprehensive Economic and Trade Agreement (CETA), signed in 2013, will lead to even more activity, and that the cooperative movement will play a key role in the dynamics of CETA.

Connecting and supporting businessesA network of international branches and affiliates is often the key to success, as Roberto Higuera Montejo, Vice-chairman of Banco Popular Español explains: “Banco Popular Español has developed a network of affiliate banks and offices abroad. We established closed international relationships focused on delivering to our customers the high-quality service that is our recognised trademark in Spain. This devotion to clients, together with Banco Popular Español’s international experience and links, are conditions for delivering the best support to the international needs of our enterprises. Currently, we have one of the best growth rates in international business of all Spanish banks, thanks to our banks in Portugal, the US and Mexico, and to experienced operational offices in many countries as well as international agreements with leading international financial institutions.”

Spanish Grupo Banco Popular describes itself as the ‘Bank of SMEs’ and these companies and professionals form the core of its business model. Aware that ensuring the success of small and medium-sized enterprises in international markets is challenging, Grupo Banco Popular offers its clients its own wide experience in this field. In addition to the physical presence of representative offices in more than 20 countries, Grupo

Cooperative and popular banks are established and thriving all around the world. And both individually and in global collaboration we work together for a common cause.

Our core principles of proximity, solidarity and democracy clearly resonate with human values around the world

“

30 I

Banco Popular offers tools and products to facilitate international transactions, including the opening of accounts abroad, managing transfers and cheques or remittances, and confirming international letters of credit.

One of its latest products, the documentary credit note helps with import and export procedures. This is effectively a means of guaranteed payment for the customer that is issued by the bank confirming compliance with the conditions of the transaction and management of the payment or collection. ‘Confirming International’ allows more control and less risk for payments to foreign suppliers and shippers. Grupo Banco Popular offers specific software working via the customer’s internet banking service.

For customers using accounts abroad, besides the usual account operations, the bank offers additional risk coverage that makes financing or leasing by overseas subsidiaries easier. Finally, Grupo Banco Popular provides easy delivery services and document collection, as well as sending files for electronic fee collection purposes.

The Confédération Internationale des Banques Populaires (CIBP) went even further in this direction by developing the CIBP International Desks, an international network of regional banks. Not only does this network help customers in their international business ventures, but everywhere they go they will benefit from the same level of services they experienced in their own regional bank.

CASE STUDY

Working together in MoroccoFor domestic customers, the French BPCE Group and Banque Centrale Populaire Morocco have developed a common banking offer for Moroccan citizens residing in France and customers of the two groups’ networks. These two groups have strong historical and cultural links and have worked to develop industrial and commercial synergies for mutual benefit. This agreement fits into their development strategies which focus on co-operation in the market for migrant customers, including the establishment of a dual banking offer in France and Morocco and the deployment of a new money transfer to Morocco from the Banques Populaires and Caisses d’Epargne in France. Other benefits include the establishment of mortgage facilities to help customers purchase property in Morocco, which can be financed in either euros or dirhams, according to customer needs.

Similarly, but with a business focus, Italian Banco Popolare SC and Banque Centrale Populaire Morocco formalised an agreement to provide banking support for Italian and Moroccan entrepreneurs brought together during a major trade fair in Casablanca in November 2013. Morocco is an increasingly important economic market and a critical bridgehead to the entire African continent. Morocco also benefits from a free trade agreement with the European Union. “With this initiative”, explained Domenico De Angelis, CEO of Banco Popolare, “we responded to the requests made by our entrepreneur customers who have specifically asked for professional and financial support in this country which has great strategic importance for economic exchanges and trade relations with Italy.”

Banque Populaire in Morocco

International expertiseJean-Marc Perez, responsible for the international supply chain at the BPCE Group, describes how his company helps local companies go international.

> How can ‘local’ cooperative and popular banks help enterprises to grow internationally?

Banques Populaires can rely on local international experts and the expertise of BPCE Group’s subsidiaries, such as Pramex International (see case study), to offer a complete range of products and services tailored to companies’ needs. Accompanying its corporate customers’ international development represents a major challenge for BPCE, and the objective of the 2014-2017 Strategic Plan is to expand our international presence through our subsidiaries and our banking partnership networks to help Banques Populaires’ clients to grow internationally.

How does support for international business development differ from other financial institutions?

One of our main advantages is that, as a cooperative and popular bank, corporate clients can rely on local experts dedicated to international business and middle- office/back-office teams who process their requests locally, combining both proximity and reactivity. Banques Populaires have also created dedicated partnerships to support international business development – for example, CONNECTOR, a banking club that allows Banques Populaires to connect customers with partner banks in 15 countries, and networks like the CIBP International Desks Network. Through these partnerships, Banques Populaires facilitate banking procedures for their clients abroad, such as opening accounts or setting up cash management solutions at negotiated terms.

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CASE STUDY

Pramex: leading international development Pramex International is BPCE Group’s wholly owned subsidiary and the leading French consulting firm for international development and transactions. It is dedicated to medium- and intermediate-sized companies and accompanies Banques Populaires’ customers for each phase of international expansion, from definition of the strategy through to its operational implementation.

In 2013, Barrisol, an SME from Alsace, specialising in the manufacture of stretch ceilings, decided to open a subsidiary in Spain. Jean-Marc Scherrer, Barrisol’s CEO, discussed this project with Banque Populaire d’Alsace which has supported the company’s development for 40 years, and the bank introduced him to Pramex.

Pramex recommended the establishment of a representative office in Spain as a solution to Barrisol’s strategic requirements. Pramex then handled all legal, fiscal, administrative and notarial aspects. An expert from Pramex International accompanied Barrisol ‘in the field’ during all the necessary administrative tasks and completed a truly turnkey solution for the company.

Banques Populaires can rely on local international experts and the expertise of BPCE Group’s subsidiaries

“

Pramex International focuses on international development and transactions

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Our market share is growing

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Cooperative and popular banks are not only ‘popular’ in name, but also in the market and with financial customers the world over. And in a world that is seeking sustainable economic growth and reliable finance for the real economy, the cooperative and popular banking model is growing in popularity.

In the EU today, the 20% market share for cooperative and popular banks reflects a steady share of the deposit market, whereas our market share in loans increased substantially from 14% in 2006 to 19% in 2010. This underlines the banks’ support for the real economy as it recovers from the economic crisis, and is helping to deliver stable revenue growth.

Major consultancy organisations seem to agree that cooperative and popular bank principles offer a bright economic alternative for the future.

Solutions and stabilityA recent Ernst and Young report, ‘Enlightening cooperative governance: balancing performance with broader principles in cooperatives and mutuals’, advances the opinion that, having proven successful even in times of financial crisis and through ever-shifting conditions, the cooperative movement is poised to play an even-more important role in the global economy. With our distinctive approach to balancing conventional profit goals with broader principles, the cooperative business model has tremendous potential to offer new solutions to economic challenges.

‘McKinsey on Cooperatives’, published by the global management consultancy in 2012 to coincide with the United Nations International Year of Cooperatives, noted that cooperatives represent approximately 3 to 5% of the world’s GDP. Further, McKinsey considered that this already significant footprint in the modern economy is poised to expand due to growing dissatisfaction with the short-term vision of stock-traded companies. In contrast, our unique member-ownership structure and democratic governance model of cooperative and popular organisations aligns our mission and strategy to focus on long-term stability.

This study – the first by McKinsey on the cooperative business model – found that, contrary to popular belief, cooperative companies grow at similar rates to stock-traded public companies but often via different routes. And the cooperative model tends to be more prone to organic growth through increased market share.

In fact, in an article for Harvard Business Review published in 2011, Dominic Barton, global managing director of McKinsey and Co, called for public companies to make changes that share similarities with the way cooperative and popular banks operate. He urged executives to focus on the long term over the short term, to serve all stakeholders in a company, not just the shareholders, and to adopt behaviours that have proved successful in the cooperative business model. He hoped public companies would be inspired by the example of our sustainable success.

In many national markets, cooperative and popular banks represent the largest market share in the banking sector! In the EU, cooperative banks hold around one-fifth of all bank deposits and loans. Collectively, we are a significant – and growing – element of the global banking sector.

Major consultancy organisations seem to agree that coop-erative and popular bank principles offer a bright economic alternative for the future

“

Cooperative and popular banks clearly have a great future built on a safe and secure past. A future where our customers can rely on our support and understanding – in the good times and the bad – to ensure their own growth is sustainable and to help foster a global society that can benefit all citizens on a global scale.

0

5

10

15

20

2545 million

2550 million

40 million

35 million

30 million

25 million

20 million

15 million

10 million

5 million

0

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Germany France UK24%

40%

36%

55%

45%82%

18%

Market share for cooperative and popular banks varies from country to countrySource: World Bank (2011)

Commercial banks

Cooperatives, credit unions and mutuals

State financial institutions

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Members of EU-6 cooperative banks (left scale)

Member to population ratio of EU-6 cooperative

banks (right scale)

Membership of European cooperative banksSource: The value of European cooperative banks for the future finan-cial system, Hans Groeneveld

MEMBERS OF EU-6

AUSTRIA FINLAND FRANCE GERMANY ITALY The NETHERLANDS

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Financial cooperatives: a global market snapshot> According to data from 2010 provided in the International Labour Organisation’s 2013 report

’Resilience in a downturn: the Power of Financial Cooperatives’, 20 European countries have between them 24 networks of local cooperative and popular banks.

> There are 3,874 local cooperative and popular banks in Europe with 181 million customers, 50 million of whom are members.

> European cooperative and popular banks look after over €5.600 billion (US$ 7.600 billion) in assets, €3.100 billion (US$ 4.200 billion) in deposits and just over €3.300 billion (US$ 4.500 billion) in loans.

> Market share varies from country to country, but in France, cooperative and popular banks have a market share of 45% in terms of deposits. In the Netherlands, the market share is 40%.

> Credit unions operate in 100 countries worldwide with over 51,000 unions involving almost 200 million members. These credit unions manage US$ 1.564 billion in assets, US$ 1.223 billion in deposits and US$ 1.016 billion in loans.

> Cooperative and popular banks and credit unions are able to reach the poorest people around the world and are making a substantial economic impact on their lives.

Helping developmentCooperative banks are here to help both at home and abroad – and they also reach out to assist business and individuals in developing countries. An example is the DZ BANK microfinance fund, which was established by bank employees in 2000 to provide financial assistance to microfinance institutions in African countries.

In 2012, the fund – which is managed on a voluntary basis – worked with four microfinance institutions in Tanzania, Togo, Algeria, and Namibia. These bodies lend small amounts, accept savings deposits, and transfer funds for their customers. During the United Nations’ International Year of Cooperatives in 2012, the DZ BANK microfinance fund was established as a cooperative. Support from this microfinance initiative for those living in unstable conditions with no access to conventional sources of credit can be truly life changing.

French cooperatives boomingOf course, the cooperative business model is applied to many business areas from agriculture to high-tech. In France, the cooperative sector is flourishing. In a recent assessment by Coop FR, the combined turnover of France’s 23,000 cooperative businesses was estimated at almost €300 billion (US$ 409 billion) and employed more than 1 million people.

The cooperative world: a democratic and economic powerhouseThe cooperative business model is active in many other sectors outside of banking. For the 2012 International Year of Cooperatives, an extensive study on the global socio-economic impact of cooperatives was undertaken by Sherbrooke University in Canada.

Cooperative banks are here to help both at home and abroad – and they also reach out to assist business and individuals in developing countries

“

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The study found that the world’s 300 largest cooperative businesses (‘Global 300’) involved around 725 million people who were owner/users and that some 3.9 million people have their jobs secured by those businesses.

The top five sectors for cooperative businesses are: agriculture, insurance, food, financial and power.

Total annual revenues of the Global 300 amounted to US$ 1.926 billion. If these cooperative businesses were a country they would rank ninth in the list of the world’s largest economies.

An impressive US$ 66.4 billion is given back annually to members of the Global 300.

Cooperatives also encourage democratic values, inclusion and diversity. The 725 million members participating in decision-making on an annual basis makes the movement one of the largest (dispersed) democracies in the world. The cooperative movement is a great school for both democracy and entrepreneurship across the world.

A cooperative future?In France, cooperative and popular banks have a very large market share. Michel Roux, Director of Develop-ment at BPCE, outlines the fundamental reasons for the success of popular banks in his country and beyond.

> What is the secret of your success in France?

All our customers, including individuals, professionals and entrepreneurs, have expressed a growing attraction to the cooperative model. They recognise and appreciate two factors in particular. First, the reassuring model of cooperative and popular banks that means the banks’ capital belongs to their shareholder members and is controlled by them; secondly, our regional and relationship-oriented model, which is centred on the relationship with our customers. Solid links are established at the local level enabling a better assessment of the individual borrower’s solvency and thus allowing our banks to lend more (with less risk) to our customers than our competitors. It is through the banks’ regional roots and their proximity that they can distinguish themselves from the capitalistic type of banks – rather than through differentiation of our products.

> Have customer perceptions changed? What was the effect of the economic crisis?

All surveys demonstrate that the positive perception and image that customers have today of cooperative and popular banks has radically increased compared to the past. Although this trend is not new, we must recognise that the effect of the crisis did not diminish this phenomenon but, in fact, amplified it.

> What does the future hold for cooperative and popular banks? What are the opportunities?

As an example, at Banque Populaire, we have established relationships with around one in two enterprises in France. However, we believe that it is not enough just to stand by entrepreneurs – we must support them positively in their daily activities. This is how we affirm our commitment to leading the real economy.

In reality, by championing these values and being fully committed to our communities is not contradicting the modern approach. On the contrary, cooperative and popular banks are able to offer customers the best of both the physical and digital worlds and provide them with the best banking solutions that meet their expectations in terms of expertise and solid support. Together, I believe the future is ours!

An impressive US$ 66.4 billion is given back annually to members of the Global 300

“

It is through the banks’ regional roots and their proximity that they can distinguish themselves from the capitalistic type of banks

“

Cooperative and popular banks commitments and values

Charter brochure

Tel: +32 (0)2 209 16 80

Fax: +32 (0)2 209 16 89

Avenue des Arts 3-4-5

B – 1210 Bruxelles

E-mail: info@cibp.eu

Web: http://www.cibp.eu

Confédération Internationale des Banques Populaires General Secretariat