In his concluding remarks at the Bank of Italy\u2019s annual meeting, held on 31st May, Governor Ignazio Visco recalled the original purpose of cooperative banks, defined as \u201crestricted to a limited geographical area and characterised by a high degree of mutuality,\u201d highlighting how such a purpose may contrast with the status of a listed company. Mr. Visco concluded by expressing his wish for a simpler transformation of listed cooperative banks into limited companies.<\/p>\n
It is clear the Governor\u2019s reference to Banca Popolare di Milano (\u201cBPM\u201d), where the Management Board recently tried to turn the Bank into a limited company. The proposal was submitted to the BPM\u2019s EGM, to be held on next June 21st, but the very strong opposition coming from the internal structure blocked the resolution, that was finally withdrawn.<\/p>\n
The internal contrasts were so strong that they even jeopardised the approval of the BPM's 2012 financials (only 10 out of 18 Board members voted in favour). Given such strong opposition, the Supervisory Board's Chairman, Filippo Annunziata, resigned, followed by 3 other Board members.<\/p>\n
Why is the status of a cooperative bank so relevant for the bank\u2019s employees? And why should it be relevant for external shareholders?<\/p>\n
On the blog post \u201cBanca Popolare di Milano\u2019s rights issue and the problem of listed cooperative banks in Italy\u201d, dated 30th September 2011, we already described the peculiarities of Italian listed cooperatives: distinction of shareholders between \u201cmembers\u201d and \u201cnon-members\u201d; only \u201cmembers\u201d are enabled to vote at General Meetings; each \u201cmember\u201d casts one vote, regardless the number of shares held; each proxy agent (compulsorily a non-employee \u201cmember\u201d) may represent a restricted number of other \u201cmembers\u201d. All rules that aim to strongly limit the influence of external shareholders on the Bank\u2019s governance. But the employees\u2019 interests do not always align with the creation of value for all shareholders (which should be the main purpose of a listed company).<\/p>\n
The example given in the 2011 post, relating to the EGM held in June of that year, is quite clear. Two main resolutions were tabled: a share capital increase, which would have almost tripled BPM\u2019s outstanding shares, and an increase in the maximum number of proxies per agent, from 3 to 5. Surprisingly, almost the entire discussion at the meeting centred on the number of proxies: clearly, the shareholder-members were far more interested in keeping external shareholders at bay. At that meeting, 3,840 members voted (almost 3.5%), of whom approximately 10% were underage, representing 2,02% of the share capital. Of course, the substantial share capital increase was approved by 99.5% of voting members, whilst the increase in the number of proxies per agent was rejected by 55%.<\/p>\n
The true oddity of listed cooperative banks lies in their hybrid nature: large banking groups, open to international investors and operating worldwide (some with branches in Luxembourg, Switzerland, Ireland, the USA, China, Singapore, and so on) that follow very local strategies. Just to give an example of their governance, at Banco Popolare at least 16 board members must reside in the bank's \u201chistorical areas\u201d of Verona, Lodi, and Novara.<\/p>\n
As highlighted by the Bank of Italy\u2019s Governor, the issue is not the cooperative system by itself, but the distortion of their scope caused by the status of listed companies. Cooperative banks have a capital role in the Italian economy: they support local businesses and territorial development, without necessarily focusing on the creation of value for their shareholders (that should be the meaning of \u201cmutuality\u201d).<\/p>\n
Mr. Visco correctly reminded that listed companies are also held by \u201cinstitutional investors representing a multitude of small savers whose aims and interests are unrelated to mutuality\u201d. And each listed company should pursue the interests of all shareholders.<\/p>","protected":false},"excerpt":{"rendered":"
On his concluding remarks at the Bank of Italy\u2019s annual meeting, held on may 31st, the Governor Ignazio Visco reminded the original purpose of the cooperative banks, intended as \u201crestricted to a limited geographical area and marked by a high degree of mutuality\u201d, underlining how such purpose may be in contrast with the status of […]<\/p>","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[111,113,14],"tags":[43,17,128,114,115,125,87],"class_list":["post-553","post","type-post","status-publish","format-standard","hentry","category-english-news","category-market-rules","category-news","tag-banca-popolare-di-milano","tag-banco-popolare","tag-bank-of-italy","tag-banks","tag-cooperatives","tag-shareholder-rights","tag-ubi-banca"],"acpt":null,"_links":{"self":[{"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/posts\/553","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/comments?post=553"}],"version-history":[{"count":0,"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/posts\/553\/revisions"}],"wp:attachment":[{"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/media?parent=553"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/categories?post=553"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/frontisgovernance.com\/en\/wp-json\/wp\/v2\/tags?post=553"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}