De Jong: different rules needed for cooperative banks under Basel III

31 May 2011

De Jong: different rules needed for cooperative banks under Basel III

‘Banking with reduced risk demands a different kind of rule to the strict regulations needed for the speculative and risky behaviour of ordinary banks,’ representatives of the banking sector and SP Euro-MP Dennis de Jong agreed at a joint meeting held today in the European Parliament.

Dennis de JongThe well-attended meeting at the European Parliament was intended to bring proposals to the attention of the European Commission and MEPs regarding new bank regulations. These regulations, known as Capital Requirements Directive 4 (CRD IV), form part of the Basel III agreement on international banking. The Director-General of the Commission’s Internal Market division gave assurances that the special nature of cooperative banks would be taken into account in applying the rules. Until 2018 they will not be expected to comply with leverage limits, which specify what multiple of a bank’s capital may be lent out. Particularly for low-risk loans, of which cooperative enterprises hold many, this is important. The Commission will also assess the implications of the new measures for the entire cooperative sector.

Cooperative enterprises are membership organisations for which profits are a means to an end rather than an end in themselves. It is noticeable how well such organisations have performed during the financial crisis. Dutch cooperative bank Rabobank, for example, has survived the crisis without any state aid and saw customer confidence increase in 2009 from 40% to 50%. “Cooperative enterprises are important to the creation of a stable economy,” says De Jong. “Reason enough to sing the praises of the cooperative model.”

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