Simona Caselli, CCFS, at the International Co-operative Alliance Global Conference in Cape Town, November 2013.

1. ICA
GENERAL
ASSEMBLY
-­‐
Cape
Town
Workshop
D2
"Tackling
the
economic
crisis.
Coops
at
the
forefront
of
a
beGer
world”
-­‐
Sunday
3
November
Italian
Legacoop’s
financial
network:
a
story
of
“useful
finance”
for
a
be2er
world
Simona
Caselli
Director
of
Financial
Services
and
Development
at
CCFS
Consorzio
CooperaSvo
Finanziario
per
lo
Sviluppo
soc.
coop
President
of
Legacoop
Reggio
Emilia

2. Summary
ü Global
finance:
the
need
to
constantly
advocate
a
“real
economy
oriented”
finance
ü The
case
of
Italian
Legacoop
financial
instruments
network
ü Future
challenges:
Ø Basel
3
rules
and
expected
increase
of
credit
crunch
Ø Fair
raSng
system
for
co-­‐ops
Ø Expected
process
of
disintermediaSon
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
2

3. 1.
Global
Financial
Markets
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
3

4. Global
Finance
ü A[er
more
than
5
years
from
the
beginning
of
the
crisis,
global
financial
system
is
sSll
dominated
by
speculaSve
acSviSes
ü The
recently
introduced
regulaSons
seems
to
mainly
affect
ordinary
banks,
while
huge
amount
of
liquidity
are
sSll
invested
in
derivaSves
or
speculaSve
acSviSes,
o[en
realized
through
“dark
pools”
or
“over
the
counter”
pla`orms
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
4

5. Global
Finance
DerivaSves
are
sSll
there…
ü DerivaSves
are
esSmated
at
700
trillion
$,
including
those
on
food
commodiSes,
which
are
highly
dangerous
in
terms
of
consequences
on
people’s
access
to
food
§ Only
about
10%
of
transacSons
pass
trough
Stock
Exchanges;
the
rest
is
“Over
the
Counter”…
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
5

6. Global
Finance
Dark
pools
grow
fast…
ü Dark
pool
transacSons
are
increasing
at
very
high
rate
so
bringing
up
the
quesSon
whether
we
can
really
trust
Stock
Exchange
quotes
Ø The
total
value
of
shares
traded
through
dark
pools
in
Europe
in
the
second
and
third
quarter
rose
from
€143bn
to
€207bn.
Ø The
total
value
of
shares
traded
in
Europe
across
all
pla`orms
in
the
same
period
stayed
flat
at
about
€4.8tn.
It’s
also
esSmated
that
the
average
value
of
trade
size
rose
from
€6,639
to
€9,150
bn.
Ø 4/5
of
dark
pools
transacSons
are
short
term
and
speculaSve
Ø The
use
of
high
frequency
trading
(HFT)
can
make
the
scenario
even
worse
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
6

7. Dark
Pools
ü Dark
pools
are
essenSally
private
stock
exchanges
reserved
for
the
largest
traders,
including
hedge
funds,
major
insStuSonal
funds,
pension
funds,
and
big
banks.
ü While
all
exchanges
have
a
degree
of
anonymity,
dark
pools
have
an
increased
level
of
secrecy
because
neither
the
size
of
the
trade
nor
the
idenSty
of
the
parScipants
are
disclosed
unSl
the
trade
is
fulfilled.
ü Financial
regulators
remain
years
away
from
being
able
to
peer
into
"dark
pools,"
the
high-­‐tech
mechanism
that
insiders
use
to
conduct
secret,
advantageous
transacSons.
ü European
policy
makers
and
exchanges
have
raised
concerns
that
dark
pools
may
damage
transparency
and
investors’
ability
to
find
the
best
prices.
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
7

8. Trade
Size
for
European
Dark
Pools
Source:
Thomson
Reuters,
Deutsce
bank
AG
London
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
8

9. The
Growth
of
Dark
Trading
in
Europe
and
U.S.
Source:
The
TABB
Group
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
9

10. The
need
to
keep
campaining
for
Good
and
Useful
Finance
ü DerivaSves
and
Dark
Pools
are
only
two
examples
of
how
financial
markets
sSll
work
ü This
is
surely
not
the
way
of
building
a
beGer
world!
ü We
must
conSnue
campaigning
for
a
Good
a
Useful
Finance
aimed
at
supporSng
people’s
work,
life
and
sustainable
development
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
10

11. 2.
Italian
Legacoop
Financial
Network
tackling
the
crisis
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
11

12. What
happened
to
credit
market
in
Italy?
ü A[er
a
period
of
“easy
loans”
credit
crunch
arrived
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
12

13. What
happened
to
credit
market
in
Italy?
ü And
money
costs
increased…
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
13

14. Legacoop
system
ü Associates
over
11.000
co-­‐ops
and
consorSa
(coop
of
coops),
including
SME
and
large
firms,
acSve
in
all
economic
sectors
(agriculture,
consumer,
social
services,
manufacturing,
retail,
building
etc)
ü More
than
8
millions
members
ü Approx
55
billion
€
consolidated
turnover
ü More
than
500.000
employees
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
14

15. How
Legacoop
reacted
ü At
the
beginnig
of
the
crisis
Legacoop
decided
to
promote
a
network
among
exisSng
Financial
coop
insStuSons
(CCFS,
Coopfond,
CFI)
and
to
add
new
specialized
instruments
(for
factoring,
leasing,
merchant
banking
to
support
merging
and
aquisiSons)
ü
These
internal
financial
instruments,
directly
and
through
partnership
with
banks,
should
work
to
garantee
support
to
co-­‐ops
investments
and
ordinary
acSvity
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
15

16. Legacoop
financial
instrument
network
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
16

17. CCFS
The
company
and
his
mission
ü CCFS
is
the
only
"Purpose
Company"
of
the
Italian
Legacoop
that
operates
in
the
field
of
the
financial
intermediaSon
and
other
related
services,
in
order
to
provide
its
Member
Co-­‐ops
with
financial
resources
they
need
to
support
their
acSvity
and
investments.
ü CCFS’s
aim
(in
accordance
with
its
By
Laws)
is
Ø to
promote
the
development
of
the
members
Companies
(Co-­‐ops
and
their
controlled
LLCs);
Ø to
parScipate
in
the
development
and
consolidaSon
of
the
CooperaSve
Movement,
Legacoop
and
other
Bodies
that
are
appointed
to
represent
it,
in
Italy
and
abroad;
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
17

18. CCFS
The
company
and
his
mission
ü Actual
acSvity
is,
thus,
instrumental
to
that
aim
and
is
to
Ø help
the
sesng
up
of
new
Co-­‐ops
in
many
and
diversified
economic
sectors;
Ø Facilitate
member’s
access
to
credit
and
to
other
financial
resources;
Ø intermediate
financial
resources
received
by
member
co-­‐ops,
providing
other
meber
co-­‐ops
with
loans,
under
different
technical
forms
Ø financial
advisoring
Ø other
services
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
18

19. CCFS
Loans
to
members
2008-­‐2013
900
800
700
600
500
400
300
200
100
0
2008
2009
2010
2011
medium
indirect
member
loans
stock
(mln
€)
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
2012
2013
(sept)
medium
member
loans
stock
(mln
€)
3/11/2013
19

20. CCFS
Some
key
figures
(updated
september
2013)
ü More
than
1.150
member
co-­‐ops
ü €
1.150
million
Deposits
from
Members
ü €
828
million
Loans
to
Members
ü €
6,5
billion
compensaSng
transacSons
among
member
co-­‐ops
ü OperaSng
with
more
than
40
banks,
for
a
total
yearly
amount
of
financial
movements
of
€
46
billion
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
20

21. Coopfond
ü Italian
law
59/1992
regulates
the
insStuSon
of
MutualisSc
Fund
for
cooperaSve
start-­‐up
and
development
(according
to
the
principle
of
external
mutuality)
ü Every
Italian
cooperaSve
must
pay
3%
of
its
net
annual
profit
to
MutualisSc
Fund
(this
principle
adds
on
others
cooperaSve
principles
such
as
indivisible
reserves,
one
head-­‐one
vote,
open
membership,
limited
yeld
on
capital…)
ü Coopfond
is
the
Company
that
manages
the
Fund
insStuted
by
Legacoop
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
21

22. Coopfond
ü The
Fund
is
generated
by:
Ø the
collecSon
of
3%
of
annual
profits
of
all
exisSng
cooperaSves;
Ø the
collecSon
of
the
residual
assets
of
dissolved
and
transformed
cooperaSves
Ø Fund’s
own
increases
achieved
by
retained
profits
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
22

23. Coopfond
The
Mission
ü To
produce
an
opSmal
environment
for
the
development
of
the
Italian
co-­‐operaSve
system
ü To
manage
efficiently
the
Fund
and
to
guarantee
its
holdings,
reducing
losses
ü To
favour,
in
the
Company’s
acSvity,
innovaSng
and
socially
qualified
enterprises
ü To
aid
in
territorial
re-­‐balancing,
parScularly
between
northern
and
southern
Italy
ü To
improve
partnerships
within
the
Co-­‐operaSve
Movement
and
relaSonships
with
local
communiSes
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
23

24. Coopfond
Basic
guidelines
ü Coopfond’s
acSvity
usually
foresees
temporary
intervenSons
with
medium-­‐long
term
horizon
(5-­‐10
years),
in
accordance
with
refundable
rules
of
acSvity:
Ø loans
have
a
natural
duraSon
according
to
scheduled
payment
plans
Ø capital
share
pay
back
is
planned
by:
§ withdrawal
at
nominal
value
§ buy-­‐back
from
co-­‐op
(especially
if
Coopfond
is
a
member
of
new
enterprise
under
co-­‐op
control)
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
24

25. Coopfond
The
Fund’s
Stock
ü The Fund’s stock managed by Coopfond now amounts to about
€ 430 million (Sept.
Balance
Year
2013)
The time series shows how economic crisis has hit net profitability of
cooperatives (this show social committments of coops: reduction of
margin with stable or even growing employment)
(*) the 2012 data are not still final
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
25

26. Coopfond
Accumulated
IntervenSons
(equity
and
loans)
800000
700000
600000
500000
400000
Loans
300000
Equity
200000
100000
0
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
26

27. Coopfond
In-­‐payments
and
desSnaSons
In-­‐payments
per
year
40000
120000
35000
100000
30000
80000
25000
60000
20000
15000
40000
10000
20000
0
0
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
93
94
95
96
97/98
98/99
99/00
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
5000
Equity
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
Loans
27

28. Coopfond
Some
key
figures
(updated
september
2013)
Total
amount
in
21
years
ü More
than
750
projects
coming
from
more
than
550
cooperaSves
ü 270
projects
realized
and
480
in
por`olio
ü More
than
1,5
billion
€
of
investments
enabled
by
cooperaSves
and
25.000
increase
in
employees
ü €
620
million
disbursed
by
Coopfond
(sum
of
collecSon
of
3%
and
refund),
of
which
Ø €
420
ml
directly
refundable
projects
Ø €
200
ml
indirectly
invested
in
refundable
projects
in
instrumental
companies
Ø €
320
ml
by
share
capital
Ø €
300
ml
by
loans
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
28

29. Coopfond
Concluding
remarks
ü The Fund was created in order to generate a virtuous circle
designed to develop the cooperative enterprise form using selfgenerated resources coming from other cooperatives (principle of
solidarity)
ü The financial means provided in equity shares have allowed many
cooperative to strenghten their equity and improve their
creditworthiness (by providing “patient capital”)
ü Coopfond acting as a sort of merchant bank without being
a classic merchant bank (no capital gain, no surplus value, eased
interest rate, valued added created left in the cooperative) has raised
the entrepreunerial vision of cooperative system as a whole
ü The refundable principle has allowed to disburse more financial
resources than those collected just from the funds raised with the 3%
ü The number of unsuccesses (bankruptcy, write-off and insolvency
proceedings) is below the average of the credit system (even if
increasing due to economic crisis), also thanks to the support given by
other cooperatives and consortia involved and careful monitoring
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
29

30. 3.
Future
Challenges
Ø Basel
3
and
credit
crunch
Ø Fair
raSng
for
co-­‐ops
Ø DisintermediaSon
and
access
to
capital
markets
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
30

31. ü Basel
III
new
requirements:
Ø Increase
of
Common
Equity
percentage
held
by
the
bank
from
2%to
4,5%
of
Risk
Weighted
Assets
(RWA)
Ø Capital
Tier
1
capital
raIo
from
4%
to
6%
of
RWA
Ø Total
regulatory
capital
confirmed
at
8%
of
RWA
Ø IntroducSon
of
a
Capital
ConservaIon
buffer
equal
to
2,5%
made
by
Common
Equity
Tier
1
to
be
retained
in
non-­‐stress
periods
Ø IntroducSon
of
a
variable
Countercyclical
Capital
Buffer
made
by
Common
Equity
Tier
1
under
naSonal
legislators
decision,
during
expanding
credit
period,
unSl
a
max.
2,5%
Credits:
Federico
Parmeggiani
-­‐
Università
di
Modena
e
Reggio
Emilia
–
Department
of
Economics"
Basel
3:
what
changes

32. Credits:
Federico
Parmeggiani
-­‐
Università
di
Modena
e
Reggio
Emilia
–
Department
of
Economics"
Capital
requirements
Basel
2/
Basel
2.5
to
Basel
3
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
32

33. Credits:
Federico
Parmeggiani
-­‐
Università
di
Modena
e
Reggio
Emilia
–
Dipartment
of
Economics"
Phase-­‐in
arrangements
Basel
3
capital
requirements
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
33

34. Consequences
of
Basel
3
rules
ü More
capital
stability
in
banks,
but…
ü It
has
been
esSmated
(Slovik
–
Cournède,
OECD,
2011)
that
Basel
III
rules
can
cause
a
reducSon
in
GNP
among
-­‐0,05%
and
-­‐0,15%
under
non-­‐stress
condiSons
ü Some
studies
(Slovik,
OECD,
2012)
suggests
big
banks
with
high
systemic
relevance
could
more
easily
bypass
rules
in
tricky
way,
so
small
and
medium
sized
banks
are
expected
to
be
more
affected
and
penalized
ü An
esSmated
worldwide
credit
crunch
equalling
5,000
billion
euros
(Boston
ConsulSng
Group,
Facing
New
Reali:es
in
Global
Banking,
2012)
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
34

35. Italian
Companies
Funding
!"#$%&'"#()#$)*+*,)+'"*-%#(".."#)'/&"0"#)-+.)+*"#
Credits:
Luca
Penna
–
Partner
Bain&Co.
=0%-(&')(&,(%#&,/)&+>#(&+0/
An
InternaSonal
comparison
Source:
Il
Sole
24
Ore
1!"#$"%&'%!()&"%*+","&"-."234#'+#).#5%*$&%*-%#+#.)6"..%#)*-"&*+,)%*+."7#"6)("*,)+#+*5%&+#8*#$%&-"#
InternaSonal
comparison
shows
big
differences
in
use
of
“private
debt”
or
alternaSves
to
()$$"&"*,)+."#*".#&)5%&0%#+#$%&'"#()#$)*+*,)+'"*-%#+.-"&*+-)6"#+.#5+*+."#9+*5+&)%#
bank
loans
?(&,/@%=0%A(0/%BC%D)/
<
!"#$%#&'()*+,#(&%#$%-(&'#./&,#+0%+&.%1+$%2)/2+)/.%34%5+#&%6%7(*2+&4%$(0/04%'()%,"/%8$/%('%(8)%-0#/&,9%#,%#$%&(,%,(%3/%)/0#/.%(&%34%+&4%:).%2+),4%1#,"(8,%5+#&;$%2)#()%1)#,,/&%-(&$/&,
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
35

36. CriScal
issues
for
a
fair
co-­‐op
raSng
ü If
predicSons
on
disintermediaSon
process
are
true
the
need
for
a
fair
raSng
system,
really
able
to
understand
co-­‐
operaSves,
becomes
more
urgent.
ü What’s
important
to
consider
in
order
to
have
a
fair
raSng
for
co-­‐ops?
Ø Members’
rebates:
§ addiSonal
remuneraSon
for
workers,
recognized
on
year
basis
if
co-­‐op
efficiency
produces
profits,
aren’t
considered
by
raSng
system,
because
they
are
buried
into
work
costs.
So
efficiency
is
always
underesSmated.
Ø Indivisible
reserves
(retained
profits)
Ø Special
rewards
for
the
goods
conferred
by
members
in
agro-­‐
industrial
sector.
Ø Member’s
loans
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
36

37. The
urgent
need
of
fair
raSng
system
for
co-­‐ops
ü Current
raSng
systems,
used
by
banks
and
other
financial
operators,
are
build
for
ordinary
for-­‐profit
companies.
No
specific
raSng
system
for
non-­‐profit
and
co-­‐ops
companies
has
been
officially
validated
yet
ü A
fair
raSng
for
co-­‐ops
will
be
crucial
and
so
it
should
be
part
of
“CooperaSve
Decade”
acSons
(with
regard,
in
parScular,
to
“legal
framework”
and
“capital”
secSons
of
the
document)
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
37

38. ü THANK
YOU
FOR
YOUR
ATTENTION!!!
Simona
Caselli
caselli@ccfs.it
ICA
GENERAL
ASSEMBLY
CAPE
TOWN
3/11/2013
38