OPTIMAL DEPOSIT AND LOAN INTEREST RATES SETTING IN CO-OPERATIVE BANKS

This paper tries to solve theoretically the problem of interest rate determination by a co-operative bank in the absence of preferential treatment of its members (owners) against non-members in terms of charged interest rates. The optimisation model considers bank's borrower-, depositor- and neutral-oriented policy as well as purely commercial (profit-oriented) approach. Obtained results indicate that the optimal rates on loans and deposits at a co-operative bank depend mainly on its preference. They are also influenced by market interest rates and bank's balance sheet and income statement elements. The paper contributes to an increased understanding of behaviour of co-operative bank as social economy organisation and adds to the models of optimal interest rates setting in co-operative financial institutions.