The Power of Customer-owned Banks
Chapter 9: Regulation, governance and the need for member participation
Banks are regulated; they have to work within a legal and fiscal environment created by government, and are granted powers to do different kinds of banking. The regulator acts on behalf of the public, which includes looking after the interests of customers, but also the wider interest of citizens. Banks are also supervised in order to ensure compliance with the regulation, and also honesty and stability in the system. It can be done by governments if there is no alternative, but is better done by the sector itself, through audit unions and central federations. For self-supervision to become possible, it requires a mature movement that cedes real powers to the centre, that submits to the mutual disciplines of agreed rules and standards, and that contributes towards a mutual insurance fund that can be drawn on if things go wrong. Governance is the running of the business, which can mean either control over day-to-day decisions or strategic decision-making, depending on the level of competence and independence management has reached. Governance provides a strategic direction for the business, a check on managerial powers and representation of member interests. However, it does not guarantee the public interest; that is the job of government. In all but the most atomised of customer-owned banking sectors, governance works on two levels; the group as a whole and the individual primary society. Table 9.1 cross-references five levels of activity with the three types of cooperative sector suggested by Desrochers and Fischer (2005).
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