**Call for ‘Ethical Banking’ as Cyprus Considers New Cooperative Bank**
In a recent statement, Marios Clerides, a member of Cyprus' fiscal council, emphasized the need for "ethical banking" in the nation's financial landscape as discussions surrounding the establishment of a new cooperative bank gain momentum. Clerides advocated for a banking model that prioritizes the interests of borrowers alongside profitability, suggesting that banks should evaluate the repayment capacity of their customers rather than solely relying on collateral.
Clerides expressed concerns about the governance structure of cooperative banks, which traditionally operate on the principle of "one member, one vote." He highlighted potential weaknesses in this system, particularly in relation to political influences, as various political parties may seek to place their representatives within the bank's governance structure. This could lead to conflicts of interest and undermine the ethical banking principles he champions.
A significant point raised by Clerides pertains to the fairness of voting rights within cooperatives. He questioned whether it is just for an investor who contributes €100,000 to have the same voting power as someone who invests merely €100. To address these governance issues, he stressed the importance of a board of directors that operates independently of political agendas and is committed to implementing ethical banking practices.
When asked about the feasibility of obtaining a banking license from the Central Bank of Cyprus and the European Central Bank for the proposed cooperative bank, Clerides expressed optimism. He noted that cooperative banks exist in several European countries, citing examples such as the Netherlands' Rabobank, France's Crédit Agricole, and Austria's Raiffeisen Banking Group. He pointed out that the challenge lies in adapting these successful models to the unique context of Cyprus.
The Cyprus Cooperative Holdings and Promotion Company Ltd recently received authorization from the Cyprus Securities and Exchange Commission (CySEC) to commence the sale of shares for the new Cyprus Cooperative Bank. This company will hold a 60% stake in the bank, while the remaining 40% will be allocated to legal entities and companies within the cooperative sector. Shares are set to be sold at a nominal price of €1, with a total of 42 million shares available for public purchase, and a minimum investment requirement of 100 shares.
The European Central Bank has previously outlined the criteria it considers when evaluating applications for banking licenses. These criteria include the amount, quality, origin, and composition of the applicant's capital, as well as compliance with regulatory requirements. Additionally, the ECB assesses the bank's program of activities, structural organization, and business plan. The suitability of the bank's management and shareholders is also scrutinized in collaboration with national supervisory authorities.
As Cyprus moves forward with the prospect of a new cooperative bank, the call for ethical banking practices underscores the importance of creating a financial institution that prioritizes the needs of its customers while ensuring sound governance. The success of this initiative will depend on addressing the challenges identified by Clerides and fostering a banking environment that aligns with the principles of ethical conduct and community support.