Difference between savings banks, credit unions and banks

The term financial entity is very broad. It includes, so far, savings banks, credit unions and banks, among the most common. And, although they may appear to be the same, they operate differently. Today, we will explain the main differences between them so that, as a customer, you know which one interests you most.

Currently, we all have to turn to a financial institution to properly manage our money. Addressing a payroll, applying for a loan or requesting a mortgage are some of the most common procedures that lead us to establish a relationship with a financial institution.

 

Main differences to consider

bank and credit unions

The first big difference between savings banks, credit unions and banks lies in their owners . While a bank is owned by its shareholders, savings banks belong to its impostors and credit cooperatives to its cooperative members.

Banks are corporations and savings banks are non-profit entities with a social purpose, so they are required to allocate part of their dividends for social purposes.

Credit unions are private companies where their cooperative members are those that contribute capital to the entity. These partners are workers and customers. In the end, the corporate purpose of credit cooperatives is to serve the financial needs of their cooperative members and third parties, through the exercise of the activities of credit institutions.

For this reason, the management bodies of all of them are also different . A bank is managed by a Board of Directors, elected at a Shareholders’ Meeting. The owners, as we have indicated, are their own shareholders and the weight within the organization will depend directly on the number of shares. The more shares you have, the more you vote on that Board.

Savings banks have a General Assembly, a Board of Directors and a Control Commission, which are responsible for directing and managing the entity.

In credit cooperatives, on the other hand, cooperative members are responsible for making directive decisions on the entity.

 

Within the Spanish credit cooperatives, rural savings banks stand out

Within the Spanish credit cooperatives, rural savings banks stand out

Under current legislation, in order to establish a credit cooperative with a corporate name that includes the expression “Cara Rural”, in addition to the requirements for its constitution as a credit cooperative, the promoter group must include at least one agricultural cooperative or 50 partners natural persons owners of farms ..

 

What happens to the economic benefits?

economic benefits

Another difference between savings banks, credit unions and banks lies in the distribution of economic benefits. Banks share their profits among their shareholders.

In the case of credit unions, the destination of these benefits is regulated by the aforementioned law. Once the losses of previous years not absorbed with own resources have been covered, in the event that there are any, and after deducting the required taxes and interest on capital, the net benefit will be obtained that will be used to:

  • At least 50%, at the end of the Mandatory Reserve Fund. During the first three years of existence of credit cooperatives, constituted as of the entry into force of the Law, 100% of the remaining benefit will be used for the same purpose, which will be extended, if necessary, and in the terms that in each case the competent authority may establish, until the Obligatory Reserve Fund reaches, at a minimum, the value of the contributions made to Capital.
  • At least 10%, to the endowment of the Education and Promotion Fund.
  • The rest will be available to the General Assembly, which may distribute it as follows:
    • Distribution between partners.
    • Provision to the Voluntary Reserve Fund.

In the case of savings banks, regulated by Law 26/2013, of December 27, of savings banks and bank foundations, the distribution is similar to that of credit unions. They allocate, at least, 50% to the endowment of the Obligatory Reserve Fund and the rest to Social Work through its foundations.

 

Banking foundations

Banking foundations

The foundations, as stated in the law, are those that hold a stake in a credit institution that reaches, directly or indirectly, at least 10 percent of the capital or voting rights of the entity, or that allows you to name or dismiss a member of your administrative body.

Its purpose is necessarily social and its main activity is oriented towards the attention and development of the social work and the adequate management of its participation in a credit institution.

 

The Cara Rural Group

The Cara Rural Group

Cara Rural is one of the main banking groups operating in Spain. It has more than 8,400 employees and offers more than 2,350 bank offices spread throughout almost the entire national territory. A fact that has now become more relevant since, unlike others, the entities of the Cara Rural Group remain in areas with less population to fight against financial exclusion.

The rural savings banks of the Group therefore have a defined field of action to play their role, in a differentiated but not isolated way, because cooperation within the Group allows access to broader areas. In this way, the entities of the Cara Rural Group can provide the same services as banks and savings banks, keeping intact the link with their territorial scope.

 

Financial education from the Cara Rural Group

Financial education from the Cara Rural Group

The entities of the Group have decided to make a firm commitment to improve the social knowledge of the finance sector.

Among the initiatives to achieve this goal, this blog was launched at the end of 2018. An information channel open to the public whose main objective is to bring some of the most interesting topics of everyday life.

You can see all the entities of the Cara Rural Group in your province on our map here.

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