Joan Cavallé (Barcelona, 1956) is the general director of Caixa d’Enginyers since 2006, an entity that he joined in 2002 after a professional career in the financial sector. Degree in Economic Sciences from the University of Barcelona (UB) and with training in Esade-Wharton and INSEAD, among others, he has combined his professional activity in the financial sector with teaching, in institutions such as the UB, the UPC or Esade, among others. Member of the governing council of the National Union of Credit Cooperatives, of which he was second vice president, since 2014 he has been a member of the executive committee of the European Association of Co-operative Banks (EACB).
Caixa d’Enginyers is a cooperative financial institution. What does it mean to be a cooperative bank?
As indicated, as a cooperative bank, Caixa d’Enginyers is a private entity owned by its members, who are also its users. The capital belongs to the users, thus eliminating the conflict of interest between users and shareholders who do have other types of entities. That is what makes cooperative banking, in general, have more elements of proximity and alignment of values with its customers. And this is what explains why we are entities with different levels of stability, solvency and aversion to risk than others. If in these entities the priority of the shareholder is to maximize the value of the share, here it is to respond to the needs of the partner.
The cooperative banking model is a minority here, but in other parts of Europe it is much more widespread …
That’s how it is. In Germany, the BVR Group, the second largest financial institution after Deutsche Bank, is a cooperative. In France, 60% of the market is cooperative, with entities such as Credit Agricole. In Holland there is Rabobank, also cooperative … There is a whole social movement behind it, which is related to a reflection made by the Nobel Prize winner in Economics Amartya Sen, who wonders why money is so controversial and must have this negative stigma , when it is such a useful element for economic and human development.
Something that connects with the social function of our defunct savings bank ecosystem. Was Caixa d’Enginyers left out of the mergers and acquisitions dance for having been a cooperative?
There are many factors. There is the question of the look, which is different in our case, as a cooperative bank. Throughout this process of concentration of the sector and the disappearance of savings banks, our gaze was always on what our partners needed and what services had to be implemented in the entity for this. That is why, based on a very solid structure of the entity, at that time we did not have the weaknesses that much of the sector had: we had not invested in subprime products, we had no real estate exposure, we did not have overvalued assets …
In the crisis of 2008, that was certainly a good starting position …
After the bankruptcy of Lehman Brothers and the financial crisis of 2008, here in Spain no cooperative entity has needed public money. That has its reasons. In our case, always based on two levers: asset quality and liquidity positions. At Caixa d’Enginyers we have always given a lot of credit, but we have done it responsibly, with viable credits in which the member has the ability to repay them. Because non-payment is a problem not only for the entity, but above all for the person. Unfortunately, for many years, the sector had asset inflation and asset overvaluation that were not consistent. The other lever, after asset quality, is liquidity.
Having liquidity avoids being rescued or merged. It was that?
Having liquidity is essential for a bank, yes. And that is why, in our case, Caixa d’Enginyers’ resilience in the face of a liquidity crisis goes beyond one year, because the ultimate goal is to protect the partner.
Why do you think so many savings banks forgot those principles?
The concept of governance is key. One thing that explains the savings bank crisis is governance that is not as solid or aligned as it had to be. In cooperative banking, the member participates in the assembly and is the one who makes the decisions, after which the governing council is the one who binds it, and supervises that the executives are well aligned with what the assembly wants. It is a very intense governance, which goes to the bottom of everything, because each partner is important. Here, when a partner complains it is a drama; It is not like when a customer complains to his bank.
Or to your savings bank …
That is the problem that savings banks had. Credit cooperatives are entities that function thanks to the capital contributed by the members, but in the savings banks there was no one who had capital exposure. I believe that if the savings banks had been converted into cooperatives, 50% of the Spanish banking sector would now be cooperative. In addition, we would have a very positive business diversity, because biodiversity brings wealth, and in the financial sphere it helps financial stability.
Will cooperative banking ever reach that 50%?
In Europe, credit cooperatives have 22% of the market share, while in Spain we are around 10%. But, since the beginning of the 2008 financial crisis, that rate has risen by four points.
Is everything limited to governance or does the social function also weigh?
As a credit cooperative and social economy entity, 10% of Caixa d’Enginyers profits go to the Cooperative Education and Promotion Fund, dedicated to social improvement, training and the reduction of social exclusion. Along with that, we have the Caixa d’Enginyers Foundation, with an annual budget of 500,000 euros, where we work in three main areas: sustainability, social exclusion and talent, in the latter case with agreements with universities.
You carry the symbol of the UN Sustainable Development Goals on your lapel …
Sustainability is one of the great lines that we have. One of our characteristics is our strong commitment to socially responsible investment and the valuation of the companies to which we grant credit for their environmental and social impact. Today, 75% of our fund portfolio follows ESG criteria [Ambientales, Sociales y de Gobernanza]. It is a field where we are doing very important work.
Caixa d’Enginyers is today the first financial institution with its headquarters in Catalonia. Will it continue to be so? Will we see her immersed in some process of concentration?
It is evident that we are the only entity that has its headquarters in Barcelona, and we are very proud to have maintained it and to maintain it over time. Regarding the concentration processes, we have seen possibilities, but we have not valued them. One of the reasons is that we are an entity that is growing at double digits year after year, when the sector as a whole is declining. We have organic growth that allows us to look to the future.
Where does that future face?
Caixa d’Enginyers was founded in Catalonia in 1967. In 1998 the first office was opened in Madrid, which was office number three of the entity. And we continue to open offices in Spain during the first years of this century. In recent years, and especially as of October 2017, we have reinforced the opening of offices in Catalonia because we have had a lot of demand from the population, with a high recommendation among people because we did not move the headquarters , and that generated an interest in an entity that behaved differently from the others. But we belong to each partner: 78% of our partners are in Catalonia and the other 22% in the rest of Spain, and we are going to continue growing everywhere. Of course, with some differences: in Catalonia, and based on what I was saying, we have a more retail banking presence, while in the rest of Spain our profile is more of a professional cooperative.
Has Caixa d’Enginyers ceased to be an entity limited to engineers and professionals?
We are an open entity, which has been evolving. The first partners were industrial engineers from the college, then their relatives joined, then other professionals … and little by little it has been opened. We have roots, which are engineers, and we are a bank of professionals, but for example, since 2014, as a result of the financial crisis, we are also a bank for companies. We serve companies, families, public administrations … it is an absolutely open entity, and it has been a natural evolutionary process.
They reached the Great Recession of 2008 without serving businesses. Has your entity reached the Covid-19 crisis prepared to manage ICO credits and Next Generation EU funds?
Yes. In ICO credits, for example, we had a very significant level of activity, covering and over-covering the quota that had been assigned to us, and with a level of incidents of delinquency due to this activity that, in our case, is very low. With the Next Generation EU funds, we have an agreement with a consultancy to provide our partners with services to access European funding programs and support them in the presentation of projects. We have people in the house to structure these initiatives, but this is going slower than planned and would be desirable.
In the demarcation of Tarragona, they have an office in the city of Tarragona. Will they continue to expand their network?
During all the years of existence of Caixa d’Enginyers we have continued to open offices, although we have always been an entity with few offices. I remember that in 2004 or 2005, Caixa Manlleu, which was similar in size to ours at the time, had 100 branches. We had seven! The reason is that we had always bet on the Internet and digital banking, and we continue to do so. Although today we have 32 offices, they are essentially advisory centers, they are not traditional operational offices. But we have space to open and continue to open offices, because we understand that the physical presence and the proximity professional team concept is important to have a presence in the territory.
Does that imply opening an office in Reus?
I do not rule out an office in Reus at all. I cannot say when, but it is a square that is within the forecasts. I would tell you that it is a matter of quarters.
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Joan Cavallé “If the savings banks had been converted, 50% of the Spanish banking sector would today be cooperative”