Cooperative banks in need of transition: The influence of Basel III on the business model of German cooperative credit institutions. Issue 1 (May 2017)

• Record Type: Journal Article
• Authors: Jovanović, Tanja; Arnold, Christian; Voigt, Kai-Ingo
• Is Part Of: Journal of co-operative organization and management. Volume 5:Issue 1(2017:Jun.)
• Page Start: 39
• Page End: 47
• Publication Date: 2017-05
• Subjects: Cooperative credit institutio -- Cooperative bank -- Financial regulation -- Business model -- Group discussion -- Quantitative survey; Cooperative societies -- Management -- Periodicals; Cooperative societies -- Periodicals; Cooperative Behavior -- Periodicals; Cooperative societies; Cooperative societies -- Management; Periodicals; 658.04705
• DOI: 10.1016/j.jcom.2017.03.003
• Languages: English
• ISSNs: 2213-297X

Abstract

Highlights: Negative influences of the financial regulation, initiated in the context of Basel III, are expected in all fields of the business model. The strongest impacts are visible in the fields of cost structure, revenue streams and key activities. The regional-based business model of cooperative banks results in the dilemma of cost reduction and sustaining their local branches. In the course of digitization, implementation of an omni-channel strategy could decrease costs and reach new potential customers. Abstract: The financial crisis of 2007 revealed that there were insufficient existing regulations. As a result, the Basel Committee on Banking Supervision developed Basel III, which is a reformed regulatory framework. The concomitant financial regulation has wide-ranging consequences for the banking world as a whole. However, little is known about the consequences of Basel III on the business model of cooperative banks in Germany. Therefore, the aim of the present study is to investigate the following question: How has the financial regulation that was initiated in the context of Basel III affected the business model of established cooperative credit institutions? To answer this question, a triangulation approach was chosen, including a group discussion with five experts and a quantitative survey among Bavarian banks that was based on the group discussion's results. The findings clearly show that the business model is negatively affected in all its facets, especially revenues, costs, and activities. To ensure sustainability, German cooperative credit institutions should adapt their strategy in terms of value chain and political influence.