A comparative analysis of the US and EU retail banking markets - Wsbi

Hermann Schulze-Delitzsch and Friedrich Wilhelm
Raiffeisen created the first true credit unions in
Germany in 1852 and 1864. In 1849, Raiffeisen
founded a credit society in Flammersfeld, but it
depended on the charity of wealthy men for its
support. In 1864, Raiffeisen organised a new
cooperative credit society along principles still
fundamental today. Germany's credit societies and
similar institutions that Luigi Luzzatti founded in Italy
were the forerunners of today's large cooperative
banks in Europe.
Cooperative banks account for about 8% of the
total banking market assets in Germany 98 , 16% in
Finland 99 , 19% in France 100 and 4% in Spain 101 .
3.2.2.2.4.2 Ownership structure
In general, a cooperative bank can adopt any other
legal form which can be adapted to the above
definition and characteristics. Accordingly, cooperatives
can be incorporated under general company law
and can take several company forms in a number of
European countries like Denmark, Germany or
Luxembourg, but in the majority of states in the EU
cooperative banks are not only subject to the general
law that applies to all credit institutions but also to
laws governing cooperatives in general 102 . In several
of those laws, there is a special legal form of company
foreseen for cooperatives 103 .
3.2.2.2.4.3 Activities
According to the universal banking principle in Europe,
cooperative banks in general offer a full range of
banking services just as commercial banks and savings
banks do. Cooperative banks are in this respect often
subject to the same legislation as other financial
institutions. But as already mentioned above, a
considerable number of cooperative banks in Europe
are also subject to laws governing cooperatives in
general or even special sector-based legislation
for cooperatives 104 . Both kinds of laws may restrict
the activities of cooperatives, mainly due to their
mutual nature: historically, cooperatives were only
allowed to carry out business with their members.
However, in eight countries, where laws on
cooperatives have been adopted recently (France,
Italy, Spain, Belgium, Portugal, Denmark, Finland,
Sweden), third parties who are not members of a
cooperative have been authorised to invest in it.
When the exclusivity principle (under which cooperatives
may have business relations only with their members)
is enshrined in the legislation, it is usually couched in
terms allowing for some flexibility. For example, many
countries authorise transactions with third parties
that are not members of the cooperative provided
that these transactions remain ancillary in nature and
do not jeopardise members’ interests. In several
countries trade with non-members is tolerated, even if
it runs contrary to the definition of a cooperative
under national law. Certain Member States do not
allow non-user (investor) members to benefit from
surpluses resulting from trade with non-members.
Cooperative banks have traditionally focussed on
supplying financial services to rural communities and
also to small and medium-sized enterprises.
Many cooperative banks also act in a socially responsible
manner. First of all, their corporate structure is defined
by the principles of democratic participation, the fair
distribution of surpluses and solidarity. In addition,
cooperative banks may also integrate other stakeholder
interests and engage in respective projects, for
example in the communities they are located in.
3.2.2.2.4.4 Taxation
In Austria, Germany, Greece, Ireland, the Netherlands
and Luxembourg, cooperatives are subject to the same
provisions and rates as other companies. However, in
many EU Member States there are special tax regimes
for cooperatives which grant them certain benefits.
One common beneficial rule is a tax exemption /
reduction for trade with members, but there are also
other specific provisions like withholding tax reductions
of 25% for the first 125 Euros per annum invested
per member, reduced rates of corporate tax for
approved cooperatives (Belgium) or exemption from
stamp duty on certain books and documents
(Portugal). Those tax benefits basically result from
the mutual nature of cooperatives.
98 ESBG calculation on the basis of information from Deutsche Bundesbank.
99 ESBG calculation on the basis of data from the OECD publication “Bank profitability” for 2003.
100 ESBG calculation on the basis of data from the OECD publication “Bank profitability” for 2003. Note: In France savings banks have been organised as
cooperatives since 1999. They are not however included in this calculation of market share.
101 ESBG calculation on the basis of information from Banco de España (Boletín Estadístico).
102 Exemptions are Denmark and Luxembourg.
103 E.g. in Austria, Belgium, Italy, Ireland, the Netherlands and Germany.
104 E.g. Austria, France, Ireland (credit unions), Spain, Sweden, UK (credit unions and building societies).
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