Banks, for better or for worse: "The winning BCC model must be recognized"

"For better or for worse." In times of economic growth, as well as during the dramatic days of the floods.

The cooperative credit banks of Emilia-Romagna are committed to operating locally through branches and direct relationships with their customers, including families and SMEs.

"In good times and in bad, it evokes marriage, where we promise to always love each other: this is the strength of a stable relationship capable of strengthening us in good times, but also in facing inevitable difficulties," acknowledges the president of the CEI, Cardinal Matteo Zuppi of Bologna, in the video message that opened the proceedings of the conference "Relationship Banking in Good Times and Bad Times," organized by the Emilia-Romagna Federation of BCCs at Palazzo Varignana for the 140th anniversary of cooperative credit.

"BCCs are community banks, operating within their local communities and following the dynamics of the communities in which they operate. We saw this with the flood," recalls Mauro Fabbretti, president of the Regional Federation of BCCs. "Ours are community banks because they are founded by citizens, because they don't relocate, because they combat bank depopulation, because they support social volunteering and the third sector, and because they reinvest their profits in the local community.

The 'grab and run' mentality doesn't apply to us. We operate a generative, not an extractive, economy. This is why we forcefully demand that our uniqueness be recognized. We demand it in Europe, as well as in Italy," Fabbretti emphasizes. Indeed, recognition has recently arrived, despite intense lobbying, both at the European and Italian levels.

"The request made by cooperative credit unions at the end of June for the recognition of proportionality (of the requirements required by the EU from banks, ed.) has been accepted in Europe. This request was pursued with great skill and determination by Federcasse Confcooperative and the entire cooperative sector. Indeed, we recall that in May 2021, the Emilia-Romagna Legislative Assembly was the first in Italy to accept several proposed regulatory changes regarding proportionality, which were translated into an amendment subsequently submitted to the European Union. This example has been followed by other regions," recalls the Federation's president.

Turning to the Italian debate, the tax on excess profits must necessarily exclude community banks like ours. This is a demand I personally expressed to Vice President of the Council of Ministers Antonio Tajani at a meeting in Forlì at the end of August, and it was enacted into law following our requests just a few days ago: instead of the payment, banks will be able to allocate an amount equal to two and a half times the tax to a non-distributable reserve.

This is, in fact, a profound paradigm shift that demonstrates how cooperative credit is a winning strategy. "Because, by law, at least 70% of BCC profits must be allocated to unavailable reserves," Fabbretti claims.

The congress was attended by MP Rosaria Tassinari and Emilia-Romagna's Councillor for Budget and EU Relations, Paolo Calvano. Round tables included MEPs Elisabetta Gualmini and Marco Zanni, Federcasse Director Sergio Gatti, Federcasse President Augusto dell'Erba, Confcooperative President Maurizio Gardini, Gruppo Bcc Iccrea President Giuseppe Maino, and Gruppo Cassa Centrale Banca Deputy Vice President Carlo Antiga.

In the European provisions "the concept of proportionality of obligations has been inserted: the objective is to recognise the value of the BCCs which we ask to join and which we cannot ask to be punished from the point of view of their structural characteristics", underlines Gualmini.

"Big banks have advantages, but we also need a local banking model that offers services that citizens demand and that large banking groups can't provide," Zanni argues.

It's our responsibility to remain faithful to our commitment to the local area and communities. We're in the midst of a difficult situation: the economy is stalled, GDP growth expectations have shrunk, and consequently, revenues aren't growing either. We're seeing a sharp increase in diversity and poverty: the country is split in two, and the portion of the country that can't cope is growing. We must help SMEs survive; we must support them," warns Gardini.

"The BCCs are community banks, standing by their communities in the most difficult times. For us, they are a partner in the Pact for Work and Climate, sharing the strategy of ensuring that even the most marginalized communities are at the center of public policies," Calvano emphasizes. The BCCs and their parent companies have made €500 million available for subsidized loans and mortgage moratoria. In addition, donations to the flood-affected populations have now exceeded €5 million.

"Even and especially in times of adversity, cooperative credit has responded 'presently' to the region's call for help," Fabbretti remarks. The Emilia-Romagna BCC Federation brings together nine cooperative credit banks present in all the region's provinces, specifically in 161 municipalities (in 12 of which they are the only banking institution), with 350 branches (18% of those in the region), 145.000 members, and 2.800 employees.

Direct collections amounted to €16,6 billion, while loans to customers amounted to €13,5 billion, representing an 11% share at the regional level (rising to 13,6% for consumer households and 17,3% for producer households, with average levels of 24% for accommodation and food services and 18% for agriculture).

BANKS. "WHERE THERE ARE BCCs, THERE ARE FEWER INEQUALITIES," STUDIES MEASURE.
TORLUCCIO: MORE EQUAL GROWTH. BECCALLI: ALSO PRESENCE OF COUNTERS COUNTS
Proximity to the territory. Capillarity, ability to support businesses and families, even in the most disadvantaged areas of the region. It is the trademark of the Imorese cooperatives, which claim proximity, not only physical, to their customers as a distinctive feature of their activity. But is it something that can be measured?

Giuseppe Torluccio, professor of Economics and Finance at the University of Bologna, did so with his research "Cooperative Credit in Emilia-Romagna: The Value of Proximity Between Economic Development and Social Cohesion," presented at Palazzo Varignana during the conference "Relationship Banking in Good Times and Bad Times" organized by the Emilia-Romagna Federation of BCCs.

"Cooperative banks play a positive role in maintaining the redistribution of wealth. They have favored the homogeneous growth of the territories, and the areas where BCCs are present have lower inequality indicators," is the conclusion reached by Torluccio's study, which starts from the observation that even in "Emilia-Romagna a process of bank branch desertification is underway, with inland areas containing municipalities without banks."

The research uses various indicators, the most important of which is the wealth concentration index, which helps identify wealth polarization. "Some areas with the presence of mutual banks (CBs) experience less intense polarization and a more equitable redistribution of growth," explains Torluccio. From this perspective, the study highlights the importance of the presence of branches.

"The branch helps people because it allows them to communicate their needs and the bank to provide services more tailored to their needs. Home banking is not enough," certifies the Alma Mater professor. Another study presented today by Elen Beccalli, dean of the Faculty of Banking, Financial and Insurance Sciences at the Catholic University of Rome, reaches the same conclusions. The nine BCCs belonging to the Emilia-Romagna Federation had 350 branches in 161 municipalities in 2022: in 12 municipalities, cooperative credit banks were the only ones present.

"Our study aimed to measure the benefits that this proximity between the bank and the customer can bring, especially when the customer is a small or medium-sized business in need of financing and often has difficulty accessing credit," explains Beccalli. "We obtained evidence that greater proximity facilitates access to credit for small and micro businesses.

We have seen how this benefit of proximity, especially when the BCC is the only possible counterparty, and this occurs in a large number of cases, translates into better debt quality," adds the economist. "There is still a value associated with the presence of branches, because even in a period of intense digital transformation, the benefit of the branch's presence determines the possibility of a relationship of proximity," concludes the professor.