Cooperative Banking and Ethics: Past, Present and Future

Cooperative banks trace their origins and success to their ability to achieve an economically efficient solution to moral problems. While the importance of these 19th century moral problems has diminished, the widespread and enduring success of the cooperative banking model suggests that it continues to offer relevant and effective solutions to problems of opportunistic behaviour and attendant financial stability risks. However, the model is not without its specific challenges. Many cooperative banking groups have sought to become more like commercial banks, in part to overcome these challenges. As they seek to adapt to the fundamental changes that the crisis has caused in the global financial system, cooperative banks may want to revisit the arguments in favour of such 'commercialization'. A more successful future might lie in re-inventing and developing the cooperative model so that it offers effective solutions to today's moral problems in financial relationships.