Cooperative banks are hugely important in Finland, with a combined market share of over one-third, one of the highest in Europe. The cooperative banking sector in the country was shaken up in the 1990s, when a minority of banks split from the central cooperative banking group, OP Group. They formed their own competing cooperative banking group, now known as POP Pankki (POP Bank), a unique occurrence in the history of European cooperative banks.
Banking markets were deregulated in the 1980s, generating a boom in bank lending and other investment activities. In the early 1990s, a sharp economic downturn led to an unprecedented increase in bank loan delinquencies. Cooperative banks generally came through the crisis more strongly than savings banks, many of which failed, but some larger cooperative banks still needed to be bailed out by the centralized cooperative banking group. By the first half of the decade, the mutual guarantee fund for cooperative banks had been exhausted, and healthy cooperative banks had to make additional contributions to cover the losses from less sound banks within the group.
Heikki Suutala, the managing director of POP Pankkiliitto (POP Bank Alliance, the POP Bank Group’s central organization), describes what happened next: “The old group made a policy change by introducing a mutual unlimited responsibility between all banks in the group and more centralized power to the central organization. Those banks that valued operative independence could not approve the change and were therefore forced to resign from the old group and form a new group of their own.” The result was the POP Pankki cooperative banking group, founded in 1997, while the remaining banks became known as the OP-Pohjola Group, the largest retail bank in Finland.
According to economics professors Derek Jones and Panu Kalmi, this shows that local banks may actively shape their destiny and leave the group if they do not agree with the policies of the majority.
The POP Pankki group currently has 36 independent cooperative banks, which have more autonomy than the OP-Pohjola banks. Membership has been growing steadily since the group was founded, and there are currently over 100,000 members, who are known for their high loyalty and customer satisfaction. POP Pankki has been named the best customer-service company in Finland ten times between 2001 and 2012.
According to Suutala, as a cooperative the bank aims to create a sustainable service for customers, not just maximize profit. He says that as a customer-owned cooperative, the banking group is naturally an active actor within local development and activities, being important for small local companies and offering banking and financial services on a long-term basis.
“The POP Bank group has a very light central organization and operates in a modern and cost-effective way,” he says. “We see that it is not wise to make everything by ourselves. We buy services from the best vendors or partners. We focus on customer relationships and have outsourced the production of many products like mutual funds, securities, life insurance and cards.”
In spring 2011, branding within the group was strengthened: “The POP Bank brand name was created and taken into operation as a marketing name to be used by all our banks,” says Suutala. “This made marketing more effective and made it possible to create a united brand image for all our banks.” The group has also broadened its financial services with an innovative online store with a light cost structure of non-life insurance policies, POP Vakuutus (POP Insurance).