building society - Origins, 1980s, List of building societies in the United Kingdom that have demutualised

An institution which lends money to enable people to buy property (via a mortgage loan). Their funds are derived from investors who obtain interest on the sum deposited. Interest paid to the society by the borrower is higher than the rate paid out. In the UK there were once some 150 societies, but their numbers have been falling through amalgamations. Following the Building Societies Act (1986) societies are permitted to provide other services. They are also allowed to become limited companies, and several of the largest ones have done so. The US equivalent is the savings and loan association.

In the UK today building societies actively compete with banks for most "banking services" especially mortgage lending and deposit accounts.

Origins

The original Building Society was formed in Birmingham in 1774. 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: most of the existing larger building societies are the end result of the mergers of many smaller societies.

1980s

In the 1980s, British banking laws were changed to allow building societies to offer banking services equivalent to normal banks. From the 1980s onwards, a number of societies, under pressure from profit seeking members and fuelled by government Thatcherite policies, 'demutualised' to become commercial enterprises with shares of stock like any other company: members of the society would get a cash 'windfall' - usually several hundred pounds, sometimes more - as their share of the assets of the society.

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.

List of building societies in the United Kingdom that have demutualised

The following show a number of notable building societies in the United Kingdom that have since demutualised and hence became banks and the list is shown in order of demutualisation. Bingley - 2000 Bristol and West - (was demutualised but has since remutualised following a takeover of the savings balances and branch network of Bristol and West from their owners Bank of Ireland to the Britannia Building Society in 2005).

Remaining building societies in the United Kingdom

The remaining building are:

(Total Group assets of Building Societites with over £1 billion under management, as of August 2006.) Source: Building Societies Association

Nationwide £120,586m (announced merger with Portman Building Society on 12 September 2006) Britannia £32,431m Portman £18,895m (Portman merged with the Lambeth Building Society on 30 September 2006; On 12 September 2006, it announced plans to merge with Nationwide Building Society in September 2007) Yorkshire £16,298m Coventry £11,090m Chelsea £9,656m Skipton £9,156m West Bromwich £7,208m Leeds £7,065m Derbyshire £5,097m Cheshire Building Society £4,678m Principality Building Society £4,384m Newcastle £3,863m Norwich & District, The Holmesdale Buckinghamshire Harpenden Stafford Railway, The Beverley Swansea Earl Shilton Shepshed Penrith Ecology, The Catholic City of Derry Century

Australia

In Australia, building societies evolved along British lines. Because of strict regulations on banks, building societies flourished until the deregulation of the Australian financial industry in the 1980s.

Works Cited

Wikisource has an original article from the 1911 Encyclopædia Britannica about: Building Societies ^ Building Societies Association