Financial Deregulation and Economic Distress: Is There a Future for Financial Co-operatives?

The last years have witnessed a wide reshaping of the banking scene. According to researchers and authorities, the aftermath of these developments include an increased risk of demarketing of the conventional banking system towards certain customer segmentations and marginal areas and activities. Recently the banking scene has deteriorated, especially at the local level, as the financial crisis increased the scarcity of readily available, sufficient and reliable services. Behind the current crisis seems to be the influential corporate governance of dominant financial institutions, which introduced innovative products that resulted in less transparency and created uncertainty and a lack of trust toward and within the financial system. The present paper argues that this new reality can be thought of as giving new opportunities for financial co-operatives to increase their importance among the market and areas that they historically serve. The paper bases its analysis on the development pattern of the financial co-operatives of Italy and Greece and outlines the critical path that the financial co-operatives should follow in order to provide efficient (and crucial for local development banking) services and products. It is argued that these changes can be exploited only if the financial co-operatives would be able to transform without losing their basic values. Further, this route goes through the development of new strategies and in certain cases of the modernization of their services. The authors also stress and define the risk of failing that might hinder the co-operative movement, as the huge potential of co-operative endeavors are rarely translated to gains automatically.