Cooperative and mutual banks: definition, legal framework and list in France

A cooperative bank (or cooperative bank) is a credit institution in the form of a cooperative society, governed by the law no. 47-1775 of 10 september 1947 and the Monetary and Financial Code (art. L. 512-1 et seq.). Owned by its member-customers according to the democratic principle of «one man, one vote», a cooperative bank differs from a commercial bank in its participative governance, the non-divisible nature of its reserves and the ceiling on the return on capital. In France, the three major cooperative networks - Crédit Agricole, Crédit Mutuel and the BPCE group - account for around 60 % of bank deposits.

What is a cooperative bank? Definition

The cooperative bank is a credit institute which combines two distinct legal statuses:

• The status of’credit institute, They are subject to ordinary banking law (ACPR/BCE approval, prudential rules, supervision); ;
• The status of cooperative society, subject to the cooperative principles set out in the law of 10 September 1947.

Article 1^er of the 1947 law defines a cooperative as a «cooperative".« a company formed by a number of people who have come together voluntarily to meet their economic or social needs through their joint efforts and the provision of the necessary resources ». Applied to the banking sector, this model means that the bank's customers are also its owners: this is the dual member/user status.

Mutual and cooperative banks are governed by Chapter II of Title I.^er of Book V of the French Monetary and Financial Code (art. L. 512-1 et seq.). They are subject to the rules governing mergers and spin-offs of public limited companies and may offer their shares to the public under the conditions set out in the AMF General Regulation (art. L. 512-1 CMF).

What is the difference between a cooperative bank and a commercial bank?

Criteria	Cooperative bank	Commercial banking
Legal form	Cooperative society with variable capital	Public limited company (SA)
Property	Owned by its members (customers)	Owned by its shareholders
Governance	One man, one voice	Proportional to capital held
Objective	Meeting the needs of our members	Maximising profit for shareholders
Distribution of profits	Rebates + compulsory reserve	Dividends in proportion to capital
Return on capital	Capped (TMO + 2 points, art. 14 of the 1947 law)	Free
Reserves	Unsharable	Distributable
Stock exchange listing	Unlisted shares (certificates possible)	Listed shares
Territorial anchoring	Network of local/regional caisses	Centralised branch network
Approval	ACPR/BCE (same regime)	ACPR/BCE (same regime)
Prudential rules	Identical (Basel III, CRR/CRD)	Identical (Basel III, CRR/CRD)

Despite these structural differences, today's cooperative banks operate in the same way. banking operations than commercial banks (receipt of funds, credit, payment services). We speak of’universalisation of the cooperative model.

The fundamental principles of the cooperative banking model

The dual status of member/user

In a cooperative bank, the customer is in principle an individual. member They hold shares in the institution and at the same time benefit from its banking services. This rule, which stems from the general cooperative statutes, has however been greatly attenuated by the special texts applicable to the various networks:

• The Banques Populaires may «receive deposits from any person or company» (art. L. 512-2 CMF); ;
• The Crédit Mutuel may «allow third parties who are not members to benefit from their assistance or services» (art. L. 512-55 CMF); ;
• Le Crédit Agricole may serve «any natural or legal person» (art. R. 512-5 CMF).

In practice, subscribing for shares in companies is often just an option. credit terms and conditions. The Court of Cassation has ruled that, in this case, the cost of this subscription must be included in the calculation of the overall effective rate (Cass. 1^re civ., 9 December 2010, no. 09-67.089; Cass. com., 12 January 2016, no. 14-15.203).

The «one man, one vote» democratic principle»

Unlike joint-stock companies, where voting rights are proportional to shareholdings, each member of a cooperative bank has the right to vote.’one vote at the General Meeting, regardless of the number of shares held (art. 4 of the 1947 Act).

However, there are exceptions to this principle: Article 3 bis of the 1947 law authorises the admission of’non-cooperating partners (investors) up to a limit of 50 % of the share capital. In addition cooperative investment certificates and cooperative share certificates (art. 19 sexdecies à 19 duovicies) are non-voting securities used to raise external funds.

Controlled distribution of profits

A cooperative bank's surpluses are not distributed in the form of dividends, but rather in the form of a dividend. discounts, These are proportional to the transactions carried out with the cooperative (and not to the capital held). The return on capital is capped It may not exceed the average, over the previous three calendar years, of the average rate of return on bonds issued by private companies, plus two points (art. 14 of the 1947 law).

In principle, reserves are non-shareable (art. 16 of the 1947 law): they may not be distributed to members, even in the event of dissolution. Members' shares are redeemed at their par value, without any capital gain.

Cooperative exclusivism and the 80 % rule

Article 3 of the 1947 law lays down the principle of’cooperative exclusivism In principle, the cooperative may only serve its members. In the banking sector, this rule has been largely relaxed by special legislation, but it remains in a more attenuated form.

Article L. 512-86 of the CMF requires cooperative banks to grant at least 80 % of their assistance to their members. Banques Populaires, Crédit Mutuel and Crédit Agricole benefit from broader exemptions, expressly authorising transactions with nonmembers.

The legal framework for cooperative banks

The Act of 10 September 1947 and the Monetary and Financial Code

Cooperative banks are subject to a dual body of law :

• Le general cooperative law Law no. 47-1775 of 10 September 1947 on the status of cooperation, amended in particular by Law no. 2014-856 of 31 July 2014 on the social economy; ;
• Le special banking law Monetary and Financial Code, Book V, Title I^er, Chapter II (art. L. 512-1 to L. 512-86), with sections specific to each network.

This normative duality reflects the hybrid nature cooperative bank: a credit institution subject to the same prudential requirements as commercial banks, but structured according to cooperative principles.

ACPR/BCE approval

Like any credit institution, a cooperative bank must obtain an approval issued by the European Central Bank (ECB), on the recommendation of the Autorité de contrôle prudentiel et de résolution (ACPR). This authorisation is subject to compliance with the conditions set out in articles L. 511-9 et seq. of the CMF (minimum capital, good repute of directors, programme of operations, etc.).

Cooperative banks are subject to the same prudential regulations than commercial banks: solvency ratio (Basel III / CRR), liquidity ratio (LCR, NSFR), leverage ratio and governance requirements.

The Court of Cassation has confirmed that the exercise of a commercial activity by an establishment governed by the cooperative statute does not render it null and void (Cass. com., 20 November 2007, no. 05-16.219).

Central bodies: role, powers and financial solidarity

Each cooperative bank is affiliated imperative to a central body (art. L. 511-31 CMF). The loss of this affiliation leads to a review of the authorisation by the ACPR.

Article L. 511-30 of the CMF designates three central bodies:

• Crédit Agricole S.A. (central body of the Crédit Agricole network); ;
• BPCE (central body for savings banks and banques populaires) ;
• La Confédération nationale du crédit mutuel (CNCM).

The central bodies have extensive powers (art. L. 511-31 CMF) :

• Representation of the network in dealings with the Banque de France and the ACPR; ;
• Guaranteed liquidity and solvency of each affiliate and of the network as a whole; ;
• Administrative, technical and financial control ;
• Power of limit or prohibit the distribution of dividends ;
• Power of merger or forced dissolution affiliates in difficulty, after informing the ACPR.

The internal financial solidarity is at the heart of the system: if an affiliate is in difficulty, the other members of the network contribute to the financial support. This mechanism is akin to an implicit group guarantee.

The Court of Cassation confirmed the prerogatives of the central body in Crédit Mutuel Arkéa v CNCM (Cass. com., 14 October 2020, no. 18-16.887), ruling that the CNCM could legitimately hold the collective mark «Crédit mutuel» in its capacity as central body.

Mandatory cooperative audit

Cooperative banks are subject to a cooperative revision (art. 25-1 to 25-5 of the 1947 Act), to check that they are operating in accordance with the cooperative principles. This audit, which is separate from the prudential control exercised by the ACPR, is carried out by an approved auditor.

Cooperative banks in France: list and organisation

Cooperative banks play an important role in the French banking landscape, accounting for around 60 % bank deposits and employ over 300,000 people.

Crédit Agricole

Crédit Agricole, France's leading cooperative banking network, is organised into three levels (art. L. 512-20 et seq. CMF) :

• Local mutuals (art. L. 512-21 to L. 512-33): cooperative companies with variable capital, they collect members' savings but are not themselves credit institutions; ;
• The regional mutuals (art. L. 512-34 to L. 512-42): 39 regional mutual banks, cooperative companies authorised as credit institutions, carrying out banking transactions; ;
• Crédit Agricole S.A. (art. L. 512-43 to L. 512-54): public limited company listed on the stock exchange, central body of the network.

Historically dedicated to agricultural financing (law of 5 November 1894), Crédit Agricole is now a major player in the agricultural sector. universal banking serve any natural or legal person (art. R. 512-5 CMF).

Crédit Mutuel

Crédit Mutuel, heir to the relief banks created in Alsace in 1882 on the model of Friedrich Wilhelm Raiffeisen, is organised according to the same pyramid logic (art. L. 512-55 et seq. CMF):

• Local mutuals cooperative societies, the basis of the network ;
• Regional federations (departmental or interdepartmental funds) ;
• La Confédération nationale du crédit mutuel (CNCM): central body, cooperative society ;
• La Caisse centrale du crédit mutuel SA with variable capital, credit institution.

The Crédit Mutuel network is unique in that its regional federations enjoy relative autonomy, which is the source of the conflict between Crédit Mutuel Arkéa and the CNCM over network governance.

The BPCE Group (Banques Populaires and Caisses d'Épargne)

Groupe BPCE was created through the merger of the Banques Populaires (art. L. 512-2 et seq. CMF) and the Savings Banks (art. L. 512-85 et seq. CMF). The BPCE central body coordinates the two networks.

Banques Populaires, created by the Clémentel law of 13 March 1917, were initially reserved for traders, industrialists and craftsmen, but can now receive deposits from anyone (art. L. 512-2 CMF).

Other cooperative networks

• Le Crédit Coopératif A popular bank specialising in the social economy, part of the BPCE group; ;
• La Nave Ethical finance cooperative, specialised credit institution; ;
• Le Crédit Maritime Mutuel (art. L. 512-68 et seq. CMF): created by the law of 23 April 1906 for the financing of sea fishing, affiliated to BPCE.

Origins and development of cooperative banks

The origins of the cooperative banking model (XIX^e century)

The cooperative banking model has its roots in the relief funds created by Friedrich Wilhelm Raiffeisen (1818-1888) in Germany to provide credit to rural populations excluded from the traditional banking system.

In France, the cooperative banking movement has developed in several waves:

• 1882 - Creation of the first Crédit Mutuel banks in Alsace, based on the Raiffeisen model; ;
• 1894 - Law of 5 November 1894 creating Crédit Agricole to finance agriculture; ;
• 1917 - Clémentel Act of 13 March 1917 instituting Banques Populaires for traders and craftsmen; ;
• 1947 - Law of 10 September 1947 on the general status of cooperation.

These establishments were founded to meet the needs of social groups rejected by banks farmers, craftsmen and small shopkeepers.

Universalization: from the category model to universal banking

Cooperative banks have progressively moved from a "one-size-fits-all" approach to a "one-size-fits-all" approach. categorical model (exclusive service for one socio-professional category) to a universal model offering a full range of banking services to all customers.

This phenomenon of universalisation has been achieved through successive legislative expansions:

• Crédit Agricole has extended its customer base beyond the agricultural sector (art. R. 512-5 CMF); ;
• The Banques Populaires are open to deposits from «any person or company» (art. L. 512-2 CMF); ;
• Crédit Mutuel has been authorised to admit third parties who are not members (art. L. 512-55 CMF).

This development has led to a convergence (or «commoditisation») between cooperative banks and commercial banks, with the former now offering a range of products and services identical to those of the latter.

Advantages and disadvantages of the cooperative banking model

Advantages :

• Democratic governance Each member has one vote, irrespective of his capital contribution; ;
• Financial stability the non-shareability of reserves and the internal solidarity mechanism strengthen the resilience of the network; ;
• Territorial anchoring The network of local mutuals ensures proximity to customers and contributes to financing the local economy; ;
• Long-term vision The absence of short-termist shareholder pressure makes for a more stable credit policy; ;
• Financial inclusion Historically, cooperative banks have served populations excluded from the traditional banking system.

Disadvantages:

• Difficulties in raising capital Unlisted shares, which are redeemed at par value, are less attractive to investors than listed shares; ;
• Complexity of governance The pyramid structure and the democratic principle can slow down decision-making; ;
• Risk of trivialisation Universalization has reduced the specific characteristics of cooperatives, raising the question of real differentiation; ;
• Internal governance conflicts The Arkéa/CNCM dispute illustrates the tensions between the autonomy of local entities and the power of the central body.

Contemporary issues

Cooperative banks are facing a identity-related tension How can we maintain the specific features of the cooperative model (democratic governance, local roots, mutualism) while adapting to the demands of today's banking market (digitalisation, competition from neo-banks, stricter prudential requirements)?

There are a number of issues at stake:

• La shareholder participation attendance at general meetings is often low, weakening the democratic principle; ;
• The development of capital-intensive subsidiaries (Crédit Agricole S.A., Natixis for BPCE) creates tension between the cooperative logic of the network and the shareholder logic of the listed subsidiary; ;
• L'public offering of shares (art. L. 512-1 CMF), while encouraging financing, can transform membership into a financial investment far removed from the cooperative commitment; ;
• The requirements of the CRR regulation and Basel III apply in the same way to cooperative and commercial banks, without taking into account the specific characteristics of cooperatives.

Frequently asked questions

What is a cooperative bank?

A cooperative bank is a credit institution set up as a cooperative company, owned by its customer-members on a «one man, one vote» basis. It is subject to both banking law (Monetary and Financial Code) and cooperative law (Law of 10 September 1947).

What are the cooperative banks in France?

The three major French cooperative networks are Crédit Agricolethe Crédit Mutuel and the BPCE (Banques Populaires and Caisses d'Épargne). There are also specialist institutions such as Crédit Coopératif, Nef and Crédit Maritime Mutuel.

What is the difference between a cooperative bank and a commercial bank?

The main difference lies in the governance In a cooperative bank, each member has one vote, regardless of his or her contribution. Profits are redistributed in the form of rebates (not dividends) and reserves cannot be shared. However, both types of bank carry out the same operations and are subject to the same prudential rules.

How does a cooperative bank work?

The cooperative bank operates according to a pyramid structure Local mutuals: local mutuals are affiliated to regional mutuals or federations, which are themselves supervised by a central body (Crédit Agricole S.A., BPCE or CNCM). The central body guarantees the liquidity and solvency of the entire network.

What are the advantages of a mutual bank?

The main advantages are democratic governancethe financial stability (non-divisible reserves, internal solidarity), the’territorial anchorage and a long-term vision that is less subject to pressure from the financial markets.

Do credit unions exist in France?

Yes, French cooperative banks are credit cooperatives in the legal sense. They account for around 60 % of bank deposits in France and constitute the country's largest banking networks (Crédit Agricole, Crédit Mutuel, BPCE).