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The Changing Role of Banks in the Financial System: Social Versus Conventional Banks

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Sustainable Finance and ESG

Abstract

Social banks have emerged as a new group of banks that call themselves as “alternative”, “ethical”, “sustainable”, and “value-based”. Their small market share increases at a rapid pace and is still expected to grow in the future. Social banks are institutions with both (at least some) activities of financial intermediation and one or several non-financial missions, typically based on environmental and social values. By unpacking the observable, real-life differences between social banks and conventional banks, this chapter paves the way to theorizing the multidimensional characteristics of social banks within the global banking industry. Business models, governance issues, lending technologies, and social outcomes appear to be key aspects to understand how innovative, value-based, social banks work and how they might one day substantively affect mainstream banking business.

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Notes

  1. 1.

    Monte means a combination of loans, while Pietà refers to an image of Passion of Christ (Milano, 2011).

  2. 2.

    https://febea.org/.

  3. 3.

    http://inaise.org/en/.

  4. 4.

    https://www.gabv.org/.

  5. 5.

    The authors use a variant of the trust game coined by Berg et al. (1995). The two players are endowed with EUR 50. The first mover (the sender) decides on an amount between EUR 0 and 50 to send to the second mover. The amount sent is tripled by the experimenter, and the second mover (the receiver) decides how much of the money he/she returns to the sender. Hence, the sender’s earnings are EUR 50 minus the amount sent back plus the amount returned by the receiver. The receiver’s earnings are EUR 50 plus the triple of the amount received from the sender minus the money sent back. The authors use the second mover’s behavior as a measure of intrinsic social preferences.

  6. 6.

    Evidence indicates that any non-financial factor increasing borrower creditworthiness is favorable to risk management (Weber et al., 2010). Chava (2014) also suggests that firms generating less negative environmental externalities benefit from cheaper capital.

  7. 7.

    In the last two decades and mostly in the United States, financial intermediation largely adopted the originate-to-distribute model. Nevertheless, the potentially complex consequences of originate-to-distribute operations in terms of information and incentives are mainly ignored by the current Basel supervisory framework (Ferri & Neuberger, 2015).

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Authors and Affiliations

  1. CREM CNRS, and Center for European Research in Microfinance (CERMi), Université de Rennes 1, Rennes, France

    Simon Cornée

  2. Montpellier Business School and CERMi, Montpellier, France

    Anastasia Cozarenco

  3. SBS-EM, CEBRIG and CERMi, Université Libre de Bruxelles (ULB), Bruxelles, Belgium

    Ariane Szafarz

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  1. Simon Cornée
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  2. Anastasia Cozarenco
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  3. Ariane Szafarz
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Correspondence to Anastasia Cozarenco .

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Editors and Affiliations

  1. Department of Economics, University of Crete, Rethymno, Greece

    Chrysovalantis Gaganis

  2. Montpellier Business School, Montpellier, France

    Fotios Pasiouras

  3. School of Accounting, Economics and Finance, University of Portsmouth, Portsmouth, UK

    Menelaos Tasiou

  4. School of Production Engineering and Management, Technical University of Crete, Chania, Greece

    Constantin Zopounidis

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Cornée, S., Cozarenco, A., Szafarz, A. (2023). The Changing Role of Banks in the Financial System: Social Versus Conventional Banks. In: Gaganis, C., Pasiouras, F., Tasiou, M., Zopounidis, C. (eds) Sustainable Finance and ESG. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-24283-0_1

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