Consumers
1775 The first known society was formed - Richard Ketley's, at the Golden Cross Inn, Birmingham. The earliest societies were 'terminating', and wound up when all their members had been housed. They were confined to the Midlands and the North of England. The last terminating society in existence (First Salisbury) was dissolved in March 1980
1812 Test case of Pratt v Hutchinson, involving arrears in payment to the Greenwich Union. Until this point societies had been operating under the Friendly Societies Act of 1793. The Court ruled in the society's favour - the first formal recognition of building societies' rights.
1825 The Jubilee of the industry - over 250 societies in existence throughout the country.
1832 The Great Reform Act, which extended the franchise to owners of property worth forty shillings a year, resulted in a rapidly increased growth of the industry.
1836 The first legislation dealing specifically with the industry. The Regulation of Benefit Building Societies Act officially recognised societies for the first time. It came about partly because the Government wished to encourage building society saving - the Savings Bank rate of 4.5%, subsidised by the Treasury, having proved embarrassingly expensive. A barrister was appointed to certify societies' rules and offer advice. Later he became known as the Chief Registrar of Friendly Societies.
1838 'Model rules' concerning the operation of building societies were compiled by the Chief Registrar and issued by the Lords of Treasury.
1840s Societies began to accept savings from members who were not necessarily potential home owners.
1845 James Henry James produced a leaflet that outlined a new idea for 'permanent' building societies.
1845 The first known permanent society formed - The Metropolitan Equitable.
1847 Publication of Arthur Scratchley's famous Treatise on Benefit Building Societies which outlined the permanent principle in greater detail and provided tables for the calculation of interest and repayments, etc.
1855 The Liverpool and London Building Society Protection Associations were formed, both to safeguard the industry from increasing legislation designed to extract more tax revenue from the industry.
1860 Over 750 societies in existence in London and 2,000 in the provinces.
1869 The Building Societies' Gazette established.
1869 The Building Societies Protection Association formed in London by James Higham to act as the national body for the industry.
1870 The Royal Commission on Friendly Societies included building societies in its enquiries. Many had retained the features of members balloting for loans, thus attracting gamblers as well as genuine house-buyers.
1874 The Commission's Report, plus amendments from the Association, resulted in the Building Societies Act.
1875 The Chief Registrar's Report on Friendly Societies now included a separate annual section on building societies.
1884 A Building Societies Act dealing with the question of arbitration was passed, enabling societies to take erring members to court rather than employing arbitrators.
1892 The spectacular collapse of the largest building society in the country - The Liberator Permanent Benefit - due to the financial activities of its founder.
1894 The Building Societies Act, which closed loopholes in the 1874 Act and guarded against the recurrence of the Liberator fiasco, as well as legislating against the so-called 'promoter' societies, such as Bowkett, Star-Bowkett, Richmond, Self-Help etc, which were founded on dubious gambling principles.
1910 1,723 societies in existence with 626,000 members and total assets of over £76m.
1926 The Building Societies Protection Association was renamed The Building Societies Association, with 310 member-societies.
1936 A split in the industry caused by the 'Code of Ethics' resulted in the Association being wound up and the formation of a new Building Societies Association, but with a splinter group called the National Federation of Building Societies.
1937 The famous case of Bradford Third Equitable v Borders which disputed the legality of collateral security and which claimed societies' responsibility for the condition of property to be mortgaged and for builders' description of new houses. The ruling was in favour of societies.
1939 The Building Societies Act, passed with the co-operation of the Association and the Government, restricted the mortgage security that building societies could accept.
1940 The Association and the National Federation were re-united.
1951 Ruling by the Association on 7.5% liquidity as a condition of membership.
1960 The Building Societies Act, ensuring liquid funds were both liquid and safe, increased the power of the Chief Registrar and restricted size of loans, particularly to corporate bodies.
1962 The Building Societies Act - a consolidation of all previous legislation. This proved too restrictive in the 1980s.
1975 The industry is officially 200 years old.
1980 The last terminating society in existence (First Salisbury) was dissolved in March 1980.
1986 New Building Societies Act. Gave wider powers to societies in the field of housing and personal banking services. Established the Building Societies Commission as societies' regulator.
1989 Abbey National passes a resolution enabling it to convert to plc, and bank, status. This was an option given under the Building Societies Act 1986. From July 1989 the Abbey National no longer a building society.
A new central trade body for mortgage lending institutions established in August. The Council of Mortgage Lenders was promoted by four trade bodies (the Association of Mortgage Lenders, the Association of British Insurers, The Building Societies Association and the Finance Houses Association), with the BSA withdrawing from most mortgage and housing matters.
1991 The Tax-Exempt Special Savings Account (TESSA) was introduced. The number of repossessions hit 75,500 for the year - the highest ever recorded figure.
1995 Cheltenham & Gloucester Building Society converted to plc, and bank, status and became part of the Lloyds Bank Group - the first example of a society using the provisions in the 1986 Act to be taken over by an existing organisation.
1997 In March the Building Societies Act 1997, which made substantive amendments to, but did not replace, the Building Societies Act 1986, was enacted. The 1997 Act introduced a more flexible operating regime for societies. It increased the powers of the Building Societies Commission in line with the new powers granted to societies and included a package of measures to increase the accountability of building societies' boards to their members.
The industry's largest society, Halifax Building Society, converted to plc, and bank, status, along with four other societies.
1999 Legislation changed to increase the number of members required to propose a resolution for consideration at an annual general meeting; nominate a candidate for director; and requisition a special general meeting. The Individual Savings Acccount (ISA) was introduced, replacing the Tax-Exempt Special Savings Account (TESSA).
2000 Bradford & Bingley Building Society converts to plc status - the last, to date, to convert.
2001 The Financial Services and Markets Act 2000 - providing for a single legislative framework for regulation of financial services in the UK - came into force on 1 December 2001. The Financial Services Authority became societies' regulator (replacing the Building Societies Commission) and substantive amendments were made to the Building Societies Act 1986.
2004 The Consultation Document prepared by Paul Myners to inform his work on the corporate governance of mutual life offices was published in July. In December the full report is published. The general tenor of the Report is supportive of the valuable role played by financial mutuals.
2005 Britannia Building Society buys the savings and branch business of Bristol & West plc, the first remutualisation of a converted institution. The Child Trust Fund was introduced.
2007 -The Building Societies (Funding) and Mutual Societies (Transfers) Act 2007 (the “Butterfill” Act) recived Royal Assent. The main provisions in the Act (all of which require secondary legislation before they come into force) were to: increase the current 50% non-member funding limit to a maximum of 75%; to alter priorities on dissolution and winding-up ensuring that ordinary shareholders would rank equally with ordinary creditors; enable the transfer of a building society, friendly society, industrial and provident society, mutual insurance company or an equivalent European mutual, to a subsidiary of another mutual.
2008 The Banking (Special Provisions) Act 2008 received Royal Assent in February – this was emergency legislation introduced following the collapse of Northern Rock. It enabled the government to nationalise Northern Rock and to provide temporary powers to intervene in other banking collapses. The temporary provisions lapsed twelve months later.
HM Treasury and the Bank of England introduced a package of measures to provide support for banks (and building societies, although both HM Treasury and the FSA have indicated that they believe that building societies have been less affected by the credit crisis than banks) intended to promote stability and provide protection for savers and borrowers.
2009 The new Banking Act 2009 makes provision for a Special Resolution Regime for deposit-takers, under which various tools (“stabilisation options”) will be available – such as directed transfer to a private sector purchaser, transfer to a bridge bank, and transfer to temporary public ownership. There is also provision for partial transfers.
Dunfermline Building Society's’s retail and wholesale deposits, branches, head office and originated residential mortgages were transferred to Nationwide Building Society. This followed a sale process conducted by the Bank of England under the Special Resolution Regime provisions of the Banking Act 2009.
Britannia Building Society merged with the mutual Co-Operative Financial Services – the first merger between a building society and a mutual bank since such mergers were made possible under the ‘Butterfill Act’.
The FSA recognised a new form of tier 1 permanent capital instrument for building societies – profit-participating deferred shares (PPDS). The West Bromwich building society has announced that it has issued PPDS in exchange for existing holdings of subordinated debt, thereby upgrading its capital, and is the first society to take advantage of this new instrument .
Suggested Further Reading
- The building society movement/E J Cleary
London: Elek Books, 1965 - Building societies: their origins and history/Seymour J Price
London: Franey & Co, 1958 - The building society story/Herbert Ashworth
London: Franey, 1980 ISBN:0 900382 38 4 - The building society industry/Mark Boléat
London: George Allen & Unwin, 1982 ISBN:0 04 332087 2
