More attention to cooperative and local banks is essential to Europe’s economic recovery
PRESS RELEASE
Venice, March 16 2012
An appeal presented in Venice during an international conference on cooperatives asks the European Union to focus on funding the real economy in order to overcome the economic crisis
Carlo Borzaga, the president of Euricse, launched an appeal on behalf of the community of experts from the cooperative world yesterday in Venice, during the international conference on cooperatives “Promoting the understanding of cooperatives for a better world”. He asked all the European Union heads of state and government, the EU’s governing bodies and the European banking authorities to pay more attention “to the role of cooperative banks in Europe’s economic recovery.”
His hope, shared by almost all of the international speakers at the conference, is that European banking policies learn to take into consideration the specific nature of cooperative banks, and local banks in general, in order to support Europe’s economic recovery.
The appeal is contained in a document which tackles the new regulations for the financial system in the EU, and was discussed today by Carlo Borzaga, former Italian Prime Minister and expresident of the European Commission Romano Prodi, University of Cambridge and London School of Economics professor Sir Partha Dasgupta and Alessandro Azzi, the president of Federcasse, the Italian federation of cooperative banks.
Romano Prodi pointed out that the problem lay in the capacity of institutions to grasp the conference’s message. “The problem is not in the voice of those launching the appeal, but in the ears of those who should be listening to it.” According to the politician and economist, this means that bottom-up initiatives can be shared, but “attention to the role of the State and institutions is essential because it offers a guarantee in the face of changes to society.”
According to economist Sir Partha Dasgupta, what first needs to be overcome is “a feeling, corroborated by us economists, that alternatives to the capitalist system are unstable” and that they can be “wiped out by competition.” This fear would vanish if we looked more closely at the different systems already present and highly functional within society. An example? The family, “a non-profit company which is still able to operate, prosper and survive.”
“Our way of banking supports the real economy and not the speculative one,” said Alessandro Azzi of Federcasse. “Supporting cooperative banks therefore means supporting small local enterprises.” He warned that “standardized regulations applied in such a heterogeneous way risk creating problems.” The danger is that “those who have actually supported the real economy in these years of crisis will not manage to adapt to new regulations.” He said it was important to “raise our voice” and that an appeal could function as a driving force for change.
His worry is echoed in the text of the appeal, which reads: “It is a source of great concern to see the formulation of a new regulatory framework for financial institutions that jeopardizes the possibility of survival for cooperative and local banks” as its “undifferentiated approach in reality penalizes the banks who have contributed the least to the development of the crisis and who have proved the best in mitigating its consequences.”
The main reference is thus to local and cooperative banks, who have no connection to the high-risk financial activities that caused the crisis. “On the contrary, they have continued to concentrate their activities on the real economy, giving credit to families and to small and medium enterprises even when other banks had stopped doing so.” They play a structurally important role in local communities, driving local development, and this role is “increasingly recognized and appreciated by both policy-makers and consumers.”
Indifferent to their distinctive nature, “the new directives bring costs that will weigh much heavier, proportionally, on local and cooperative banks, because of their demanding requirements. The effect will be to reduce the availability of credit and at the same time increase its cost.” These measures are not necessary, as shown by the fact that in the United States, where these undesirable effects have been analysed, “local banks have been exempted from new banking regulations.”
The signatories of the appeal are therefore asking European policy-makers and legislators to recognize the specific qualities that distinguish local and cooperative banks and to meet the following demands:
1) adopt an effective principle of proportionality for these new standards;
2) exempt cooperative banks from the requirements that do not conform to their business model;
3) before the introduction of a measure, evaluate its impact on different types of banks and enterprises;
4) revise the timing of the introduction of the new directives, keeping in consideration their effect on different industrial structures at a national level and the consequences on the process of recovery from the economic crisis.
After its inauguration yesterday morning, the conference will continue today, Friday 16 March.
The complete programme and list of speakers can be found on the conference website (http://conference2012.euricse.d.gummyindustries.com), and live updates will be available on Twitter in English, Spanish and Italian via the hashtag #venice2012 and the account @confvenice2012. Videos will be uploaded to http://www.broadcaster.it/cooperazionetrentina.
For more information, interviews and materials:
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Aleksandra Bobic – EURICSE – +39 346 8830052
Erika Gardumi – RIZOMA – +39 339 5084596