Co-operative banks safe during financial crisis

By Melissa Shin | June 12, 2013 | Last updated on November 20, 2023
2 min read

During a downturn, choose co-operatives, says a new report from the International Labour Organization, a UN agency.

The study, Resilience in a downturn: The power of financial cooperatives, found financial co-operatives outperformed traditional banks during the global financial crisis on almost every rating level.

“Unlike many investor-owned [traditional] banks, they maintained very good credit ratings, increased their assets and customer-base and the minority that suffered losses quickly bounced back and are growing again,” says report author Johnston Birchall.

Read: U.S. banks could lose $462 billion in crisis

The study defines these co-operatives as customer-owned banks, credit unions and building societies. In these organizations, surpluses are put into reserves, which are eventually returned to members through annual dividends or cheaper financial products.

Read: Proposed B.C. tax hikes would strain credit unions

The report highlighted Canadian co-operative Desjardins, saying, “The Desjardins Group is the jewel in the crown of the worldwide credit union movement. There are three features that make it special; its sheer size in relation to the banking sector in its region, the complexity of its organization structure and its strong cooperative ethos.”

Desjardins is the fifth-largest financial co-op in the world, according to the World Co-operative Monitor.

Read: Desjardins deal strengthens co-op alternative

In the years leading up to the 2008 crisis, the co-ops studied had higher Tier 1 ratios than the investor-owned banks. They scored 9.2%, compared to 8.4% for traditional banks. In France and the Netherlands, co-operative ratios were more than 50% higher.

Their profits improved in comparison with traditional banks between 2003 and 2010, with average returns of 7.5%, versus 5.7% for investor-owned banks. Co-operative bank assets also grew between 2007 and 2010, as did their number of customers. Birchall also notes most co-ops did not require government bailouts.

Read: Canadian credit unions post strong 2012 growth

In Canada, 11 million people belong to financial co-ops, and co-op deposits count for 9.5% of the total assets of deposit-taking institutions.

Vancity, a Vancouver-based co-operative, was recently awarded Best Corporate Citizen by Toronto-based media company Corporate Knights.

Read: Small credit unions squeezed by Budget 2013

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Melissa Shin

Melissa is the editorial director of and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at You may also call or text 416-847-8038 to provide a confidential tip.