German Cooperative Banks: Structure, Governance and New Challenges

Cooperative banking groups combine the advantages of a decentralised network of independent banks and a central organization that helps independent cooperative banks to realize economies of scale. This article describes the organizational structure of the German Cooperative Banking Group. Cooperative banks in Germany are independent entities, but cooperate to get reliable access to services like corporate banking or liquidity and products like mutual funds and insurances. On the other hand the joint institute protection scheme requires some collaboration in the group's risk management. Nevertheless, the group's central bodies do not have the authority to issue instructions to the banks. Current challenges like regulation and digitalisation create economies of scale. Low interest rates put pressure on the banks returns. Cooperative banks have reacted by merging, implementing cost reductions on the primary and central level and by introducing new digital solutions for their customers and in their back-offices.