3rd International Research Conference on the Social Economy of

3rd International Research Conference on the Social Economy of
CIRIEC
The Social Economy, prop of a new model of sustainable economic
development
Valladolid, Spain, 6-8 April
Why do Credit Co-operatives Disappear? The Determinants of
Portuguese Agricultural Credit Co-operative Failures
Paula Cabo
Assistent, Polytechnic Institute of Bragança (IPB) and Mountain Research Centre (CIMO), Campus de Santa
Apolónia, apartado 1172, 5301-855 Bragança, Portugal, E-mail: [email protected]
João Rebelo
Full Professor, Department of Economics, Sociology and Management and CETRAD, University of Trás-osMontes and Alto Douro , Av. Almeida Lucena, 1, 5000 – 911 Vila Real, Portugal, E-mail: [email protected]
ABSTRACT
The recent financial crisis and subsequent economic recession highlight the strengths of cooperative banks, but also their weaknesses. For the Portuguese case, there is no doubt that the
improvement of co-operative banking performance is a strategic and operational matter to
ensure the economic and financial survival of Agricultural Credit Co-operatives, CCAM
(Caixas de Crédito Agrícola Mútuo).
The aim of this paper is to identify “problematic” CCAM and to evaluate their risk of
insolvency. For assessing potential failure of CCAM, as a function of financial and
operational indicators, in the period between 1995 and 2009, logistic regression and a
multiple discriminant analysis are used. The paper identifies: Costumer Resources Growth,
Transformation Ratio, Credit Overdue, Expenses ratio, Structural Costs, Liquidity,
Indebtedness and Financial Margin as determinants of CCAM failure.
Keywords: Insolvency, cooperatives, banking, logit analysis, multiple discriminant analysis
RESUMEN
La reciente crisis financiera y la subsecuente recesión económica destacan las fuerzas de los
bancos cooperativos, pero también sus debilidades. Al caso portugués, no hay duda que la
mejora del desempeño de las actividades bancarias cooperativas es una cuestión estratégica y
operacional para asegurar la supervivencia económica y financiera de las cooperativas de
crédito agrícola, CCAM (Caixas de Crédito Agrícola Mútuo). Este artículo intenta identificar
las CCAM “problemáticas” y evaluar su riesgo de insolvencia. Para eso analiza la quiebra de
las CCAM en el período entre 1995 y 2009, usando un análisis de regresión logístico y un
análisis discriminante múltiple para determinar la quiebra potencial de las CCAM en función
1
de indicadores financieros y operacionales. El articulo identifica: El crecimiento de los
recursos de clientes, la transformación de los depósitos en crédito, lo crédito atrasado, la
razón de costos, los costes estructurales, la liquidez, el endeudamiento y el margen financiero
como determinantes de la quiebra de las CCAM.
Palabras Claves: insolvencia, cooperativas, banca, análisis logístico, análisis discriminante múltiple
ABSTRAIT
La récente crise financière et la suivante récession économique accentuent les forces des
banques coopératives, mais également leurs faiblesses. Au cas portugais, il n'y a aucun doute
que l'amélioration de la performance d'opérations bancaires coopératives est une question
stratégique et opérationnelle pour assurer la survie économique et financière des coopératives
de crédit agricole, CCAM (Caixas de Crédito Agrícola Mútuo). L’objectif de ce article est
identifier las CCAM « problématique » et évaluer leur risque d'insolvabilité. Pour cela il
analyse des faillites de las CCAM dans la période entre 1995 et 2009, utilisant une analyse de
régression logistique et une analyse discriminante multiple pour évaluer la faillite potentiel de
las CCAM en fonction des indicateurs financiers et opérationnels. Le article identifie : La
croissance de ressources de clients, el ratio de transformation, el crédit retard, el ratio de
dépenses, les coûts structuraux, la liquidité, l'endettement et la marge financière comme
causes déterminantes faillite de CCAM.
Mots Clés: insolvabilité, coopératives, banque, analyse logistique, analyse discriminante multiple
1 - INTRODUCTION
The banking system robustness is an actual concern and a policy priority for EU and national
authorities, due of its importance to the real economy and social confidence.
The recent financial crisis and subsequent economic recession highlight both the strengths and
weaknesses of co-operative banks (The Economist, January, 23th 2010: 66). For the
Portuguese case, there is no doubt that the improvement of co-operative banking performance,
is a strategic and operational matter to ensure the economic and financial survival of
Agricultural Credit Co-operatives, CCAM (Caixas de Crédito Agrícola Mútuo). Although
Crédito Agrícola performance, as a group, compares favourably with that of other credit
institutions, individual CCAM occasionally do enter in distress as illustrated by past events.
The increasingly large size of the CCAM raises concerns regarding the resolution of potential
distress situations, given some of the cooperative governance rules.
In the past, resolution of CCAM problems typically involved the merge or incorporation of
the weak CCAM by another CCAM (Cabo and Rebelo, 2005). However, this strategy is more
difficult to apply to a large systemic CCAM. Also, CCAM regional orientation can be a
strong constraint to find another CCAM able to absorb it, without losing their territorial
identity.
As a system, in the process of strategic planning, more specifically, in the phase of diagnosis
and subsequent adoption of plausible prescriptions by the main stakeholders (members, board
of directors, regulation and supervision entities) it is important to know something about the
survival of the units that integrate the system. In other words, it is relevant to estimate the
probability that a CCAM with a given set of characteristics will survive longer than some
specified length of time into the future, and what are the characteristics that most contributed
to the CCAM insolvency. The achievement of this objective requires the use of some sort of
statistical model to translate CCAM characteristics into estimates of risk.
The issue of insolvency has been studied by several authors was to determine the causes of its
possible occurrence, in order to anticipate processes of restructuration and to reduce the
2