Financial Deregulation and Economic Distress: Is There a Future for Financial Co-Operatives?

20 Pages Posted: 8 Jun 2010

See all articles by Yiorgos Alexopoulos

Yiorgos Alexopoulos

Agricultural University of Athens - Department of Agricultural Economics and Rural Development

Silvio Goglio

University of Trento - Department of Economics and Management

Date Written: December 2009

Abstract

The last years have witnessed a wide reshaping of the banking scene. According to researchers and authorities, the aftermath of these developments include an increased risk of demarketing of the conventional banking system towards certain customer segmentations and marginal areas and activities. Recently the banking scene has deteriorated, especially at the local level, as the financial crisis increased the scarcity of readily available, sufficient and reliable services. Behind the current crisis seems to be the influential corporate governance of dominant financial institutions, which introduced innovative products that resulted in less transparency and created uncertainty and a lack of trust toward and within the financial system.

The present paper argues that this new reality can be thought of as giving new opportunities for financial co-operatives to increase their importance among the market and areas that they historically serve. The paper bases its analysis on the development pattern of the financial co-operatives of Italy and Greece and outlines the critical path that the financial co-operatives should follow in order to provide efficient (and crucial for local development banking) services and products. It is argued that these changes can be exploited only if the financial co-operatives would be able to transform without losing their basic values. Further, this route goes through the development of new strategies and in certain cases of the modernization of their services. The authors also stress and define the risk of failing that might hinder the co-operative movement, as the huge potential of co-operative endeavors are rarely “translated” to gains automatically.

Keywords: Credit cooperatives, local banks, Greece and Italian financial co-operatives, financial systems, financial crisis

JEL Classification: D23, D53, G21, P13

Suggested Citation

Alexopoulos, Yiorgos and Goglio, Silvio, Financial Deregulation and Economic Distress: Is There a Future for Financial Co-Operatives? (December 2009). Euricse Working Papers No. 001/09, Available at SSRN: https://ssrn.com/abstract=1622151 or http://dx.doi.org/10.2139/ssrn.1622151

Yiorgos Alexopoulos

Agricultural University of Athens - Department of Agricultural Economics and Rural Development ( email )

Athens
Greece

Silvio Goglio (Contact Author)

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

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