josef bonnici : an alternative model for banking in malta – a case for setting up a cooperative bank in maltese economic realities address by professor josef bonnici, governor of the central bank of malta, at the seminar on “ cooperative banking ”, valletta 27 september 2012. * * * honourable ministers, distinguished guests, ladies and gentlemen. as the previous speakers have shown, cooperative banks, though not often in the news, in these times perhaps thankfully, have a considerable presence in most countries, particularly, but not only, in european countries. indeed, data for 2010 show that in europe cooperative banks hold a market share of over 20 % of deposits and a similar market share for loans. their presence is particularly marked in france, where the three cooperative banking groups ( credit agricole, bpce and credit mutuel ) account for some 50 % of the market share for loans and 60 % of that for deposits. there is also a significant presence in italy, where they enjoy a market share of 34 % of deposits and 30 % for loans ; in germany, where they have a market share of 19 % for deposits and 16 % for loans ; in the netherlands, with a market share of 43 % of deposits and 30 % for loans ; and in finland, with a market share of 34 % for deposits and 32 % for loans. they include, apart from the well - known french banks already mentioned, such respected names as rabobank in holland and the raiffeissen banks in germany. cooperative banks also have a significant presence in south korea, japan, canada, morocco, mexico and brazil. so the question immediately arises : how come that no such institution has ever been set up in malta? after all one would have thought that the idea of cooperation and solidarity, and the spirit of the seven basic principles of the international cooperative alliance ( ica ) would have a strong appeal in malta. these seven principles consist of : voluntary and open membership ; democratic member control ; member economic participation ; autonomy and independence ; education, training and information of members and employees ; cooperation with other cooperatives ; and, especially, concern for the community. moreover, we do have cooperatives in other spheres of activity here, and these have been around for some time. indeed, the start of the cooperative movement in malta dates back to the later years of the 19th century ( around 1884 ), and the first form of legislation regulating cooperatives here – the cooperative societies ordinance 1946 – came into effect on 12th december

not because there is no scope for one, because there is no niche to be exploited, but because our legislative framework, as it has evolved so far, doesn ’ t permit it! for the truth of the matter is that while we have laws governing banking activities and a law governing cooperatives in malta, we do not have laws governing cooperative banks! in our current legislative framework, the latter seem to fall between two stools. our banking act envisages only joint stock banks, that is banks whose customers are not their owners, while the law governing cooperative societies in malta, though it provides for the establishment of a fund into which all registered cooperatives are obliged to deposit 5 % of their annual operating surplus to help pay for research and the education and training of their members and the general development of the cooperative movement, does not provide for the establishment of cooperative banks – that is institutions that are licensed to accept deposits and make loans. clearly, for such a bank, or banks, to be able to be established here, either our banking act, or the law governing cooperative societies, or both, will have to be amended. but this is precisely what minister azzopardi said he has proposed to do in his introductory speech : to amend the relevant legislation. then, once the amendments being proposed by the minister come into force, we will be in a better position to judge whether or not there is scope for setting up a cooperative bank in malta. bis central bankers ’ speeches