Co-operative banking : a different legal regime

Abstract

Different banking institutions in the financial sector interact and compete with each other, thereby affecting one another’s functioning, profitability and survival. Credit institutions throughout the years have evolved into a variety of business models, ranging from the co-operative banking archetype to the shareholder value model, each characterised by different organisational and ownership structures, economical paradigms and corporate objectives. Although according to the European Economic and Social Committee co-operative banks have approximately 26% deposit market-share and finance 27% of loans to small and medium enterprises in Europe, the legal regime of co-operative banking has never truly materialised in Malta. Notwithstanding, it is essential for the local banking scenario to be aware of such alternative banking model which has been successfully instituted and is well-functioning across a number of Member States of the European Union (“MSs”), thereby affecting the operation of other established banks, competition and financial stability within that same territory, and consequently within the Union. Accordingly, the purpose of this dissertation is to analyse whether it is feasible or otherwise for Malta to push for the development of a local co-operative banking model, and whether a novel local legal framework is necessary for such a banking model to take root. The possibility of having an alternative bank-type,such as co-operative banks, would be beneficial for the local economic and banking scenario, as well as the local co-operative movement. Hence, this dissertation fundamentally explores how instituting a local cooperative bank requires necessary legislative amendments to be made to the current baking legal and regulatory framework in Malta. In conclusion, for a local co-operative bank to be set up the Maltese banking regulatory instruments ought to be amended to allow for a diversified local banking sector ensuring fair competition and financial stability.