Publication detail

Cost Efficiency of European Cooperative Banks

Author(s): Mgr. Matěj Kuc ,
Type: IES Working Papers
Year: 2018
Number: 21
ISSN / ISBN:
Published in: IES Working Papers 21/2018
Publishing place: Prague
Keywords: cooperative banking, efficiency, EU, Stochastic Frontier Analysis
JEL codes: D24, D61, E23, G21
Suggested Citation: Kuc M. (2018): "Cost Efficiency of European Cooperative Banks" IES Working Papers 21/2018. IES FSV. Charles University.
Grants: GAUK No. 488317 - Performance of cooperative banking in the Czech Republic and other EU member states
Abstract: This paper investigates the size–efficiency relation of European cooperative banks during the 2006-2015 period. We employ the Stochastic Frontier Analysis in order to obtain inefficiency estimates and its determinants on the set of 183 cooperative banks from 12 European countries. This work extends the existing literature by focusing on shape of size-efficiency relationship and examining also the post-crisis period after the fall of Lehman Brothers in 2008. Our results show that smaller European cooperative banks are significantly more cost efficient than their bigger peers and that the size-efficiency relation is linear. Interestingly, inefficiency remained roughly stable during the whole observation period without any substantial changes, not even on sub-samples of individual countries. These results imply that no significant consolidation of European cooperative banks can be expected in the near future. We conclude that for cooperatives, it is more efficient to remain small in size rather than to expand. From a policy perspective, we recommend regulators to reflect special nature of cooperative banks and allow them to operate at a small scale enabling their efficiency. As a result, we believe that one-size-fits-all regulation is harmful for efficient operations of cooperative banks in Europe.
Downloadable: wp_2018_21_kuc

Partners

Deloitte
McKinsey & Company
Moneta Money Bank

Sponsors

CRIF
ČSOB