The Greek Cooperative Credit System

Abstract

The credit cooperative system was introduced into the Greek banking system at the beginning of the 1990s. According to Greek Law, the credit cooperative system is distinguished between cooperative banks and credit cooperatives. Cooperative banks are banking institutions, while credit cooperatives are not banking institutions and cannot offer banking services. Since its establishment, the credit cooperative system has developed remarkably with regards to the number of cooperative banks, geographic regions and banking operations. Some cooperative banks exhibit much higher development in comparison to others. On a national level, cooperative banks have a limited position in the Greek banking sector concerning assets and branches. This is primarily due to the restrictions imposed on the credit cooperative system by the Greek legislative framework and the absence of cooperative banks in Greece’s two main urban centers. The Greek credit cooperative system is characterized by its autonomy based on independent local cooperative banks. These banks undertook efforts to create a nationwide non-cooperative bank.

The international financial crisis resulted to economic crisis in Greece that created a significant recession during the period of 2009–2014. As a consequence significant problems have been created in the banking sector. Cooperative banks suffered from the economic recession at a different level. They mainly suffered the consequences of non-repayment of loans. This new banking environment set further limits on the growth of the Greek credit cooperative system. Consequences were very serious for six cooperative banks because the Bank of Greece recalled their licenses, while, for others, consequences were more limited, even in comparison to commercial banks.