Small cooperatives, of course, have the challenge of acquiring a small amount of financing in the beginning, because they can't always use their equity or property as a traditional business would.
When it comes to large cooperative enterprises, it is true that all financial institutions do not necessarily have a good understanding of cooperative structures or an awareness of that model. We are probably better informed at Desjardins. So there are educational challenges, but there are legal ones as well.
If we look at the legal challenges, I can use Desjardins Group as an example. This past spring, we were able to launch an issue of capital shares worth over a billion dollars. To make that happen, however, we had to work hand in hand with both levels of government, just to be able to structure that capital share issue, which will mean permanent shares in the cooperative and will generate some dividends.
So a capital share issue can happen, but only after close coordination with the authorities in order to comply with requirements. When done right, the results can be tremendous. Just consider the fact that this cooperative-issued capital is Tier 1-ranked under the requirements of what is commonly called the Basel III reform, for financial capitalization.
Cooperatives also enjoy greater stability because of their structure. They have a more loyal following and deeper roots in the community, but they have more trouble accessing capital quickly because they cannot issue shares. Therefore, they often maintain an extra cushion. This capitalization is much more secure. As a result, Desjardins has a capitalization rate of over 17%, which is considerably higher than that of Canada's other major banks.
What is necessary, then, is a very close working relationship with the government to make adjustments possible and to adapt legislation, not simply to the traditional business model, but also to the cooperative enterprise structure.
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