On the relationship between bank business models and financial stability. Evidence from the financial crisis in OECD countries

Based on a sample of cooperative, savings and commercial banks from OECD countries over the period 2001-2010, this paper examines the contribution of cooperative banks to the stability of other banks operating in the same financial system, with particular attention to those having a larger size. To account for changing impacts of sample mutual banks in varying macroeconomic and financial conditions, the analysis encompasses two time periods: a pre-crisis period (2001-2006) and a crisis period (2007-2010). The results of the empirical analysis indicate that cooperative banks become a significant determinant of the financial stability only during the crisis period and shows a positive relationship. Moreover, our results indicate that only during financial crisis, a greater presence of cooperative banks exerts a positive and increasing influence on the stability of large banks in the same banking system. Hence, banking systems characterized by a high presence of cooperative banks seem to be able to face in a better way future periods of financial distress.