Building society: halifax building society, britannia building society, nationwide building society uk

In the UK today building societies actively compete with banks for most banking services, especially mortgage lending and deposit accounts. As of 2008, there are 59 building societies in the UK (listed below) with total assets exceeding £360 billion^[1]. Every building society in the UK is a member of the Building Societies Association.

The number of independent societies has declined by a tenth thoughout 2008, due to a series of mergers brought about by the effects of the financial crisis of 2007-2008. It is too early to say whether this trend will continue.

Origins

The original Building Society was formed in Birmingham in 1774. Most of the original societies were fully terminating, where they would be dissolved when all members had a house: the last of them was wound up in 1980. In the 1830s and 1840s a new development took place with the Permanent Building Society, where the society continued on a rolling basis, continually taking in new members as earlier ones completed purchases, such as Leek United Building Society. The main legislative framework for the Building Society was the Building Society Act of 1874, with subsequent amending legislation in 1894, 1939 (see Coney Hall), and 1960.

In their heyday, there were hundreds of building societies: just about every town in the country had a building society named after that town. Over succeeding decades the number of societies has decreased, as various societies merged to form larger ones, often renaming in the process, and other societies opted for demutualisation followed by - in the great majority of cases - eventual takeover by a listed bank. Most of the existing larger building societies are the end result of the mergers of many smaller societies.

1980s and 1990s

In the 1980s, British banking laws were changed to allow building societies to offer banking services equivalent to normal banks. The management of a number of societies still felt that they were unable to compete with the banks, and a new Building Society Act was passed in 1986 in response to their concerns. This permitted societies to 'demutualise'. If more than 75% of members voted in favour, the building society would then become a limited company like any other. Members' mutual rights were exchanged for shares in this new company. A number of the larger societies made such proposals to their members and all were accepted. Some became independent companies quoted on the London Stock Exchange, others were acquired by larger financial groups.

A movement arose whereby investors would open a savings account with a mutual building society, thereby getting voting rights in the society, and pressurise for a vote on demutualisation, with the intent of getting a windfall payment as a result. A number of societies' members and managers were very unhappy about such investors, who were termed carpetbaggers, maintaining that as mutual societies, they could supply better and cheaper home loans than the banks and demutualised societies, as they only had to make a profit to cover their operational costs, and had no need to generate an additional profit to return to shareholders.

In the end, after a number of large demutualisations, and pressure from carpetbaggers moving from one building society to another to cream off the windfalls, most of the remaining societies modified their rules of membership in the late 1990s. The method usually adopted were membership rules to ensure that anyone newly joining a society would, for the first few years, be unable to get any profit out of a demutualisation. With the chance of a quick profit removed, the demutualisations have slowed considerably, as of December 2001.

One academic study (Heffernan 2003) found that demutualised societies' pricing behaviour on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. ^[2]

List of building societies in the United Kingdom that have demutualised

Ten building societies of the United Kingdom demutualised between 1989 and 2000, either becoming a bank or being acquired by a larger bank.^[3]^[4] By 2008, every building society that floated on the stock market in the wave of demutualisations of the 1980s and 1990s has either been sold to a conventional bank, or been nationalised.^[4]

List of building societies in the United Kingdom that no longer exist

The following is an incomplete list of building societies in the United Kingdom that no longer exist, since they either merged with or were taken over by other building societies ^[5].

Remaining building societies in the United Kingdom

* These societies do not form part of a corporate business group, although they may own other businesses.

** It has been announced that the Cheshire and Derbyshire building societies are both to merge with the Nationwide. As the merger is expected to proceed through a board resolution, it is expected to be completed by December 2008. Source: Building Societies Association ^[8].

*** It has been announced that the Catholic building society is to merge with the Chelsea. Source: Chelsea Building Society ^[9].

**** It has been announced that the britannia building society is in merger talks with Co-operative Financial Services^[10].

***** It has been announced that the Barnsley Building Society is to merge with the yorkshire building society ^[11].

****** It has been announced that the Skipton and Scarborough building societies are to merge. The merger is expected to proceed
through a board resolution, and be completed by early 2009. Source: Skipton Building Society ^[12]

Other countries

References

^ ^a ^b Building Societies Association
^ Shelagh Heffernan. "The Effect of UK Building Society Conversion on Pricing Behaviour (March 2003)" (pdf). Faculty of Finance, CASS Business School, City of London. Retrieved on 2007-10-10.
^ Building Society Takeovers and Flotations Building Societies Association website (Retrieved 5 April 2007)
^ ^a ^b Pollock, Ian (2008-09-29). "Not such a good idea after all?". bbc.co.uk. BBC News. Retrieved on 2008-10-01.
^ Building Society Mergers and Conversions since 1980 Building Societies Association website (Retrieved 5 April 2007)
^ http://www.bsa.org.uk/docs/consumerpdfs/yearbooknamechangepart1.pdf retrieved 2008-07-12.
^ The Temperance Permanent was so-called because the directors were required to sign the pledge, a requirement which was dropped with the merger and name-change — to the reported dismay of some members. [The Times, Friday, Apr 25, 1975; pg. 4; Issue 59379; col E, 'Temperance abandoned by building society'. Retrieved from InfoTrac on July 17, 2008.]
^ BSA welcomes mergers (Retrieved 8 September 2008)
^ Chelsea and Catholic building societies to merge (Retrieved 13 September 2008)
^ http://www.britannia.co.uk/home/news/news_releases/2008_10/position_statement.html
^ http://www.barnsley-bs.co.uk/mergerstatement.htm
^ Merger of Skipton Building Society and Scarborough Building Society (retrieved 4 November 2008)

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