German Cooperative Financial Group
The German Cooperative Financial Group is a major and institutionalised cooperative banking network in Germany that includes local banks named Volksbanken and Raiffeisenbanken, the latter in tribute to 19th-century cooperative movement pioneer Friedrich Wilhelm Raiffeisen. The Cooperative Group represents one of the three "pillars" of Germany's banking sector, the other two being, respectively, the Sparkassen-Finanzgruppe of public banks, and the commercial banking sector represented by the Association of German Banks.
The Bundesverband der Deutschen Volksbanken und Raiffeisenbanken is the nationwide representative body of the Cooperative Financial Group. It operates under the Deutscher Genossenschafts- und Raiffeisenverband, the umbrella organization of the German cooperative movement. Most Volksbanken and Raiffeisenbanken in Germany are quite small and have thus been designated as "less significant institutions" since the entry into force of European Banking Supervision in 2014, directly supervised by the German Federal Financial Supervisory Authority. The exceptions are DZ Bank, Münchener Hypothekenbank, and Deutsche Apotheker- und Ärztebank which are directly supervised by the European Central Bank.
History
Founders' era
In 1843, the first German cooperative bank was created by 50 inhabitants of Öhringen in the Kingdom of Württemberg, who named it the Öhringer Privatspar- und Leihkasse – it still exists as the.In the later 1840s, economist Franz Hermann Schulze-Delitzsch started organizing the creation of cooperatives by local communities of craftsmen or farmers in his home town of Delitzsch, in the Prussian Province of Saxony, and promoted national legislation to encourage it. The first such venture, a Rohstoffassoziation or raw materials purchasing association, was created by a group of shoemakers in 1849. The next year in 1850, Schulze-Delitzsch created another association for advance payments to craftsmen in Delitzsch.
In 1859, Schulze-Delitzsch convened the first group meeting of cooperatives or Genossenschaftstag in Weimar and founded a central bureau of cooperative societies, which he ran from 1861, which in 1864 became the general association of German commercial and economic cooperatives based on self-help. Also in 1864, Schulze-Delitzsch led the creation of the bank Soergel, Parrisius & Co. in Berlin, also known as Soergelbank, to serve as central financial institution for the Allgemeiner Verband.
Meanwhile, in 1864, Friedrich Wilhelm Raiffeisen fostered the creation of the first rural cooperative bank, the Heddesdorfer Darlehnskassen-Verein, in the village of near Neuwied, in Rhenish Prussia between Koblenz and Cologne. Raiffeisen considered joining Schulze-Delitzsch's Volksbanken initiative, but eventually concluded that the needs of rural communities were different from the ones of town craftsmen which were Schulze-Delitzsch's focus. In 1876, Raiffeisen created a financial institution in Neuwied to serve the network, which in 1926 was renamed Deutsche Raiffeisenbank AG. In 1877, he created the Bar Association of Rural Cooperatives, the first national body for his rural cooperative movement. In 1910, that association's headquarters was relocated from Neuwied to Berlin, and in 1917 it was renamed the General Association of German Raiffeisen Cooperatives.
In 1872, another social reformer,, created an agricultural purchasers’ association in Friedberg, Grand Duchy of Hesse. A few months later, 15 other rural purchasing cooperatives joined it to form the Association of Hessian Agricultural Purchasing Associations. In July 1883, Haas expanded his initiative into a national body, the Union of German Agricultural Cooperatives in Darmstadt, which was later renamed the National Association of German Agricultural Cooperatives and moved to Berlin in 1913. Early on, the cooperatives in Haas's network in Hesse used Landwirtschaftliche Kreditbank in Frankfurt, a commercial bank, for wholesale financial services, but in 1883 they opted under Haas's leadership to create their own central institution, the Landwirtschaftliche Genossenschaftsbank AG in Darmstadt, which DZ Bank now views as its origin story. For national business, Haas's network then established a relationship with the Soergelbank in Berlin, but grew dissatisfied with it and in 1902 founded their own national financial institution, the Landwirtschaftliche Reichsgenossenschaftsbank GmbH in Darmstadt.
In 1895, the Prussian government in Berlin and its finance minister Johannes von Miquel fostered the establishment of Preussische Central-Genossenschaftskasse, also known as the Preussenkasse, to facilitate funding of local agricultural cooperative banking throughout Prussia, with capital provided by the Prussian state. Helped by new legislation on limited liability, the number of cooperative banks in Prussia doubled between 1895 and 1900.
In 1901, initiated a second network of professional cooperatives alongside the one created a half-century earlier by Schulze-Delitzsch, represented by the Hauptverbandes der deutschen Gewerblichen Genossenschaften in Osnabrück. As a consequence, there were four separate networks of cooperative banks by the start of the 20th century.
Restructuring and consolidation in the 20th century
In the late 19th century, the Soergelbank was criticized by Volksbanken for its commercialism and largely unsuccessful business expansion outside of the cooperative space. In 1904, its losses led it to merge into Dresdner Bank, which set up specialized departments in Berlin and Frankfurt to serve its cooperative clientele. In subsequent years, Haas's Landwirtschaftliche Reichsgenossenschaftsbank in turn went into distress and eventually an orderly liquidation in 1912, and the Landwirtschaftliche Genossenschaftsbank met the same fate in 1913. The Hessian cooperatives created a new institution, the Zentralkasse der hessischen landwirtschaftlichen Genossenschaften as a substitute. In April 1920, Schulze-Delitzsch's Allgemeiner Verband and Korthaus's Hauptverbandes merged their respective organizations to form the Deutsche Genossenschaftsverband, which became the national entity for all urban professional cooperative banks.In the later 1920s, economic hardship forced a similar merger between the two networks of agricultural cooperatives respectively founded by Raiffeisen and Haas, which on formed the Reichsverband der deutschen landwirtschaftlichen Genossenschaften - Raiffeisen - e.V.. With around 36,000 member cooperatives and four million individual cooperators, it was the largest cooperative organization in the world. The Deutsche Raiffeisenbank AG was liquidated and substituted by regional entities of the Reichsverband. The Preussenkasse was renamed the Deutsche Zentralgenossenschaftskasse in 1932.
In 1933, like other civil society organizations, the cooperative movement became the target of the Nazi government's Gleichschaltung policy of eradicating diversity and dissent. The Reichsverband's president Andreas Hermes was swiftly arrested and replaced by Nazi Richard Walther Darré, and the Raiffeisen movement was incorporated into the Nazi agrarian movement, the Reichsnährstand. On, the DGV first formalized mutual protection and deposit guarantee arrangements for its member banks, allowing the BVR to claim in 2022 that "The protection scheme run by the Cooperative Financial Network is therefore the world's oldest exclusively privately financed deposit guarantee fund for banks." In 1939, Dresdner Bank phased out its cooperative-serving operations whose business was transferred to the Zentralgenossenschaftskasse, which thus became the sole national financial institution serving the cooperative banks. During World War II, savings were directed towards investment in government bonds as part of the regime's policy of financial repression.
At the end of the war, the Zentralgenossenschaftskasse found itself in the Soviet occupation zone. In 1949, the cooperatives in West Germany created a new central institution to replace it, the Deutsche Genossenschaftskasse in Frankfurt, with support from Hermes who had narrowly escaped execution by the Nazis in 1944 and was instrumental in reviving democratic life in the new West German environment. The DGK was located in a head office building am Taunustor 3, erected in phases in the 1950s on designs by, which after 1978 was used by Commerzbank, as DGK's successor the DG Bank had moved to the nearby City-Haus high-rise, and eventually demolished in 2011 to make way for the Taunusturm development. Meanwhile, in 1948, the agricultural cooperatives in West Germany had formed the in Berlin as their new federal-level representative organization. In 1956, Union Investment was created in Frankfurt to provide asset management services to the Volksbanken network.
In the late 1960s, financial reform led to increased competition in the German banking sector, including with the Sparkassen, and encouraged the consideration of merger between the two national cooperative banking organizations, the Raiffeisenverband and the Deutscher Genossenschaftsverband. The negotiations were completed in 1972 with the creation of the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken in Bonn. At the same time, many local cooperatives merged, and regional organizations were consolidated. In 1975, new federal legislation redefined the role of the DGK, renamed it DG Bank, and allowed it to gradually take over the Cooperative Group's regional financial institutions. The next year, DG Bank started developing an international network, with its first offices abroad established in New York and Hong Kong. In the mid-1980s the cooperative group's regional structures in Bavaria ran into financial difficulties, and were taken over by DG Bank. This triggered a debate on the structure of the group, either with two tiers or three. In December 1989, a compromise was adopted, known as the Verbund-Konvention, which acknowledged the coexistence of two-tier and three-tier structures within the Cooperative Financial Group. In July 1990, with German reunification, DG Bank assumed the role of central financial institution for the still existing and new Kreditgenossenschaften in East Germany. In 1998, DG Bank was converted into a joint-stock company, and the cooperatives purchased the shares owned by the German federal government. In 2000, two of the remaining regional entities, Suedwestdeutsche Genossenschafts-Zentralbank AG in Frankfurt, a successor to the Landwirtschaftliche Genossenschaftsbank of Darmstadt, and Genossenschaftliche Zentralbank in Stuttgart merged to form GZ-Bank.