Institutional Diversity in Banking: Small Country, Small Bank Perspectives (Palgrave Macmillan Studies in Banking and Financial Institutions)

This book offers a comparative analysis of how post-crisis restructuring has affected the evolution and prospects of small, locally-oriented banks. The discussion focuses specifically on “small” European countries; that is, countries with diversified banking systems, with a strong presence of cooperative and other forms of local banks. Such countries include highly developed economies like Italy and emerging European economies, such as Poland. The authors stress the unique importance of local banks in generating credit for both households and firms, and hence in contributing to overall economic growth. Chapters cohere around the argument that although smaller banks fared better than their larger counterparts the recent financial crisis, they have been directly and indirectly discriminated against in post-crisis restructuring schemes, and, as such, face many operational and strategic challenges today. The contributors are a distinguished group of researchers with expert knowledge of the competitive positions of and opportunities for locally oriented banks, who combine theoretical and empirical perspectives on these topics. Contents 6 Acknowledgements 8 Notes on Contributors 9 List of Figures 13 List of Tables 16 Diversity in Banking: Introductory Remarks 18 1: The Evolution of Banking Regulation in the Post-Crisis Period: Cooperative and Savings Banks’ Perspective 29 1 Introduction 29 2 The Lessons from the Two Financial Crisis Waves 31 3 How Regulatory Reactions Failed to Embrace a New Paradigm 37 4 Regulatory Disfavor of Cooperative and Savings Banks and Its Consequences 44 Conclusion 51 References 53 2: The Role of Stakeholder Banks in the European Banking Sector 60 1 The Origins of Stakeholder Banks 60 2 Historical Cooperative Banks 63 3 Cooperative and Savings Banks Today 65 4 The Role of Networks in Cooperative and Savings Banks 66 5 Operational Differences Between Stakeholder Banks and Shareholder Banks 70 6 Differences in the Performance of Savings and Cooperative Banks 72 7 Conclusions: External and Internal Diversity 73 References 75 3: Banks’ Business Models in Europe: Are Cooperative Banks Different? 78 1 Introduction 78 2 Identifying Business Models in European Banking 79 3 Business Model of Cooperative Banks 85 4 Performance of Business Models in European Banking 88 4.1 Risks of Business Models in European Banking 93 Conclusions 97 References 98 4: Cooperative Banks: Is Demutualization an Answer? The Experience of Building Societies in the UK 100 1 Introduction 100 2 Strategic Significance of the Cooperative Banking Sector in Europe 102 2.1 Economic Significance 105 2.2 Significance for Financial System Stability 106 2.3 Significance for Banking Market Diversity and Efficiency 106 3 Restructuring Strategies for Cooperative Banks 108 4 Building Societies: Market Share, Importance and Efficiency 111 5 Demutualization of Building Societies 118 6 Impact of Demutualization 121 Conclusions 125 References 126 5: Community Banks and Lending Technologies: Evidence from the Italian Retail Market 128 1 Introduction 128 2 The Main Trends in the Italian Banking Market 131 3 Empirical Analysis 132 3.1 Database Description 132 3.2 Empirical Model 133 3.3 Results 135 Conclusions 143 References 145 6: The Competitive Threats and Strategic Challenges to Polish Cooperative Banks: A Post Crisis Perspective 147 1 Introduction 147 2 The Competitive Framework in the Polish Banking Sector 149 3 The Competitive Position of Polish Cooperative Banks 152 4 Performance of Polish Cooperative Banks: Multi-Level Performance Score 159 5 The Strategic Challenges to Cooperative Model: The Results of Bank Surveys 163 6 Conclusions 166 7 Appendix: Cooperative Bank Survey: Selected Answers, in %, 2016 and 2013 (when applicable) 168 References 170 7: Does Banking Sector Structure Affect Bank Lending and Its Sensitivity to Capital Ratio? A Cross-country Study 173 1 Introduction 173 2 Literature Review and Hypotheses Development 176 2.1 Banking-Sector Structure and Lending 176 2.2 Bank Concentration, Competition and Risk-­taking and the Link Between Lending and Capital Ratio: A Review of Theoretical and Empirical Studies 177 2.3 Determinants of Loan Growth in a Wider Theoretical Perspective 182 3 Model Specification and Data Description 189 3.1 The Model Specification 189 3.2 Data Description 192 4 Research Results 194 4.1 Robustness Analysis 206 5 Conclusions 206 References 208 8: The Role of Competitive Framework for Sound Banking Sector in the EU-15 and the EU-12 214 1 Introduction 214 2 The Problem of the Optimum Size of the Banking Sector 215 3 The Role of Competitive Framework 220 4 Regression Results Concerning Competitive Framework for Sound Banking Sector in the EU 228 Conclusion 237 References 238 9: Banking Diversity and Trust in Banking Services 244 1 Introduction 244 2 Trust in the Theoretical Aspect 245 3 Core Factors of the Social Trust in Banks in Poland in the SEM Model, 2006–2016 250 3.1 The Trust in Banks in 2006–2008 255 3.2 Trust in Banks in 2008–2013 257 3.3 Trust in Banks in 2014–2015 259 4 The Causative Determinants of Trust in Banks in the Concept of Touchpoints and the Moments of Truth 261 5 Trust in Banks from the Perspective of the Banks’ Reputation and Customers’ Calculation of Profits and Losses 265 6 Key Risks of Losing Trust in Banks 267 7 Diversification of Trust in Banks 272 Conclusions 276 References 278 10: The Role of Market and Cultural Diversification in the Evolution of the Polish Banking Sector 282 1 Introduction 282 2 Evolution of the Banking Sector in Poland After 1989 283 3 The Role of Foreign Capital in the Diversification of the Banking Sector 289 4 Main Determinants of the Development of Banks in Poland: Post-crisis Experience 296 Conclusions 304 References 305 Index 308 Front Matter....Pages i-xxix The Evolution of Banking Regulation in the Post-Crisis Period: Cooperative and Savings Banks’ Perspective....Pages 1-31 The Role of Stakeholder Banks in the European Banking Sector....Pages 33-50 Banks’ Business Models in Europe: Are Cooperative Banks Different?....Pages 51-72 Cooperative Banks: Is Demutualization an Answer? The Experience of Building Societies in the UK....Pages 73-100 Community Banks and Lending Technologies: Evidence from the Italian Retail Market....Pages 101-119 The Competitive Threats and Strategic Challenges to Polish Cooperative Banks: A Post Crisis Perspective....Pages 121-146 Does Banking Sector Structure Affect Bank Lending and Its Sensitivity to Capital Ratio? A Cross-country Study....Pages 147-187 The Role of Competitive Framework for Sound Banking Sector in the EU-15 and the EU-12....Pages 189-218 Banking Diversity and Trust in Banking Services....Pages 219-256 The Role of Market and Cultural Diversification in the Evolution of the Polish Banking Sector....Pages 257-282 Back Matter....Pages 283-285