european fi,
Rl merger
Following the signing of a memorandum of understanding last December, the
Italian cooperative financial organization, Credito Cooperativo, has joined up with
DG and Rabobank to build a European cooperative financial group. Based on the
so-called multi-domestic concept, this growing partnership is preparing the way
for a new Europe. But what is the multi-domestic concept? And how will it work?
Ongoing consolidation
Mobile customers
What's NewS Issue 4 June/ July 2000
Like all good ideas, the multi-domestic
concept (MDC) is siniple. F.ach coun
try in Europe has its own particular do-
mestic market served hy its own estab-
lished domestic banks. Until the growth of
the EU as both a single market and - in
2002 - a single currency hitte, domestic
players tended to remain focused on the
home business, setting up international
activities as and when required. While
markets remained relatively closed to 'for-
eign' players, domestic banks' major chal-
lenge was to take market share from the
competition and retain existing customers.
As borders are increasingly opened by the
single currency and people widen their
horizons, that rather cozy situation will
change dramatically. The launch of the
single currency turned major domestic
names into small regional players
overnight. A response was inevitable. Also
from the cooperative movement. And so
the multi-domestic concept was bom.
So what is it? The MDC allows members
to do what they do best, while taking full
advantage of products and services devel-
oped and provided by partners around
Europe. In other words, each member
continues to focus on its domestic market,
especially on the retail side. But can use its
partners' networks around Europe (and
the world) to extend a region-wide service
to its customers. It is a move which
anticipates developments in Europe in the
run up to the full implementation of the
single currency. 'The rationale behind the
MDC,' says Arnold Kuijpers of Rabobank
Nederland's strategie developtnent unit, 'is
that Europe is in the process of concentra-
tion and consolidation, especially in the
retail market. Some of the smaller coun-
tries - 1'm thinking here of Scandinavia
and, say, Holland - have already realigned
their banking sectors. Others, such as
France and Germany, are very much in the
ntiddle of that process.'
Many European financial institutions are
looking for alliances, some within the
same country, but also cross-border. One
reason is customer retention. Another is
to create the economies of scale in distrib-
ution essentiai to survival in a new Europe
where people and business are increas
ingly mobile. 'There is a concern,' says
Kuijpers, 'that customers will go to a local
bank in other countries, and, if that bank
offers cross-border services, decide to
make it their primary European bank.
