A bank with no boss!
That’s the promise I saw in an advert.
But is it really true?
Mutual banks and commercial banks
When we think of banks, we usually picture the standard commercial model: shareholders, dividends and profit as the ultimate goal.
But there’s another model, very common in France: mutual banks.
That’s the model the advert is promoting.
What does that mean in practice?
A commercial bank belongs to its shareholders.
Its main aim is to make a profit and pay dividends.
Commercial banks such as BNP Paribas and Société Générale work this way.
A mutual bank "belongs" to its customers.
You become a member by buying membership shares.
Profits are mainly retained as reserves, and members may receive interest on their shares.
Crédit Mutuel and Banque Populaire are examples.
You might say, "OK Bobby, but what difference does that actually make?"
For an ordinary customer, not much.
The services are similar: current accounts, bank cards, loans and savings.
The main difference is in how the bank is governed and the philosophy behind it.
Different rules
Mutual banks
I mentioned that you can buy membership shares to become a member of a mutual bank.
But buying more doesn’t give you more power.
Every member gets one vote, whether they own one share or ten.
In practice, though, members rarely vote because their role isn’t really highlighted.
Many don’t even know they have that right...
Commercial banks
In a listed bank, the more shares you own, the more voting power you have.
Whoever owns the most shares naturally carries more weight in decisions.
Large shareholders can steer the bank’s strategy towards their own interests.
No boss doesn’t mean no management
The "no boss" claim isn’t true.
A mutual bank has a board elected from its members, and general meetings that set its overall direction.
It also has a CEO and management teams, like any other business.
At a local level, the bank is a customer cooperative.
But nationally, there may be a listed entity with shareholders, as there is at Crédit Agricole.
Why do mutual banks exist?
Originally, they helped people on modest incomes access banking services.
Tradespeople, farmers and workers came together to create their own bank and lend to one another.
Today, they describe their approach as more local and collective, funding regional projects and supporting local economies.
The stated difference is that profits mainly strengthen the bank and improve its services, rather than reward outside shareholders.
But a mutual bank is still a business that needs to make a profit to survive.
Member or not, you’re still a customer. Advisers still have sales targets.
And if you ask me, at least some of this "no boss" message is good marketing.