The Effects of the Financial Crisis on Cooperative Banks in Europe – A Critical Comparison

Third party funded individual grant


Start date : 01.01.2016

End date : 30.06.2017


Project details

Short description

The financial crisis has highlighted the necessity of discussions on the adequacy of banking
regulation and accounting standard-setting for financial institutions. We compare the development of
several variables in this context between commercial banks, cooperative banks and savings banks
from 2005 through 2013, in order to investigate whether smaller banks such as cooperative banks or
savings banks tended to be more robust to the financial crisis. We find that the volume of lending (loan
loss provisioning) remained stable or increased (decreased) for smaller financial institutions. Furthermore,
there is no significant increase in loss avoidance behavior specifically for cooperative banks.
Cooperative banks are also the group of banks that showed the least pro-cyclical effects and the most
income smoothing behavior. Our results suggest that cooperative banks were the group of banks
being most stable during the years surrounding the financial crisis in 2007/2008. This demonstrates
the importance that policy makers consider the broad range of financial institutions for discussions on
policy adjustments.

Scientific Abstract

The financial crisis has highlighted the necessity of discussions on the adequacy of banking
regulation and accounting standard-setting for financial institutions. We compare the development of
several variables in this context between commercial banks, cooperative banks and savings banks
from 2005 through 2013, in order to investigate whether smaller banks such as cooperative banks or
savings banks tended to be more robust to the financial crisis. We find that the volume of lending (loan
loss provisioning) remained stable or increased (decreased) for smaller financial institutions. Furthermore,
there is no significant increase in loss avoidance behavior specifically for cooperative banks.
Cooperative banks are also the group of banks that showed the least pro-cyclical effects and the most
income smoothing behavior. Our results suggest that cooperative banks were the group of banks
being most stable during the years surrounding the financial crisis in 2007/2008. This demonstrates
the importance that policy makers consider the broad range of financial institutions for discussions on
policy adjustments.

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