Abstract
This paper empirically assesses the financial performance of Czech credit unions in relation to other European cooperative banks in terms of their profitability and stability. We created a unique dataset of 283 cooperative banks from 15 European countries in the period 2006-2013.
Using the system GMM and alternative panel data methods, we reveal worse performance of Czech credit unions in terms of both profitability and stability compared to their European peers. We also argue that big credit unions in the Czech Republic have assumed a non-sustainable business model depending on excessive risk taking while enjoying implicit subsidy via deposit insurance.
In conclusion, we argue that under recent capital management policies, big Czech credit unions will likely face serious financial problems in coming years.