In paper the economic and financial efficiency of cooperative banks in Poland in 2004- 2018 was assessed. It was developed and the efficiency gap ratio, which determines the efficiency gap of cooperative banks towards commercial banks in particular areas of banking activity, was applied. It was shown that the effectiveness of cooperative banks compared to commercial banks is gradually deteriorating, which was already visible from 2013. Negative trends mainly concern the return on assets and the return on equity, the ability to transform deposits into loans to customers and the quality of the loan portfolio. It was found that the deterioration of economic and financial efficiency of cooperative banks occurred primarily in 2015-2018, in conditions of a good macroeconomic situation in Poland. This means that the reasons for the weakening of cooperative bank efficiency are internal sources, i.e. the model of a bank’s operation and the organization and rules of functioning of cooperative bank associations. The reversal of these negative trends is a prerequisite for the sustainable development of cooperative banks and requires changes in their business model and strengthening intra-group integration. This will reduce the operating costs of banks and achieve economies of scale.