Cooperative banks, the internet and market discipline

Abstract

This paper analyses market discipline mechanisms at Polish cooperative banks within the special context of their internet activity. I argue that cooperative banks’ depositors punish more risky banks for their bad behavior by withdrawing deposits. The findings demonstrate that a greater emphasis could be placed on stimulating market discipline at cooperative banks because a large number of these institutions hampers their regulatory discipline. To strengthen the market discipline mechanisms, regulators should promote internet activity at cooperative banks and among their depositors, as well as require banks to present financial information on their websites and to adopt online banking systems.