Cover IMF Working Papers
Cooperative Banks and Financial Stability
Author: Mr. Martin Cihakhttps://orcid.org/0000-0002-3571-9707 and Mr. Heiko Hesse
Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 002
Language:
English
Publication Date:
01 Jan 2007
DOI:
https://doi.org/10.5089/9781451865660.001
ISBN:
9781451865660
ISSN:
1018-5941
Pages:
36
Keywords:
WP; cooperative bank; commercial bank; break; savings bank
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Cooperative banks are an important, and growing, part of many financial systems. This paper empirically analyzes the role of cooperative banks in financial stability. Contrary to some suggestions in the literature, we find that cooperative banks are more stable than commercial banks. This finding is due to the lower volatility of the cooperative banks' returns, which more than offsets their lower profitability and capitalization. This is most likely due to cooperative banks' ability to use customer surplus as a cushion in weaker periods. We also find that in systems with a high presence of cooperative banks, weak commercial banks are less stable than they would be otherwise. The overall impact of a higher cooperative presence on bank stability is positive on average but insignificant in some specifications.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund