Building Societies Association
April 2007 marks the tenth anniversary of the first of the five demutualisations which occurred in the spring, summer and autumn of 1997. On 21 April of that year Alliance & Leicester Building Society turned itself into Alliance & Leicester Plc. It was followed by Halifax (2 June), Woolwich (7 July), Bristol & West (28 July) and Northern Rock (1 October). The frenzy of demutualisation activity then tailed off with Birmingham Midshires being taken over by Halifax in April 1999 and Bradford & Bingley bringing up the rear in December 2000. There have been no demutualisations since then.
All of the institutions that chose to focus on shareholders rather than customers are now banks, although all seek to disguise that status. In other Anglo-Saxon countries which experienced the demutualisation craze in the 1990s the opportunity for the demutalising entity to call itself a bank was one of the motivating factors in the decision to convert from a building society or savings and loan institution. The UK was unique in the view taken by the converting institutions that the word “bank” added nothing to their High Street appeal – all of them decided to omit that word from the formal title of the newly created plc.
Was all the demutualisation activity worthwhile? A year ago the All Party Parliamentary Group for Building Societies and Financial Mutuals published a report casting considerable doubt on this. The report (Windfalls or Shortfalls – The True Cost of Demutualisation) concluded “The balance of the evidence received by the Inquiry was that mutuals, both in the building society and life assurance sectors, performed better than their plc rivals in a variety of financial performance indicators. It was also shown that they pass these cost advantages onto consumers in terms of better rates. This was clearly backed up by any study of ‘best buy’ tables. The Inquiry also found there had been substantial increases in remuneration enjoyed by directors of those institutions which had demutualised in the 1990s, but no corresponding improvement in performance.”
Many people still mistakenly view the converted institutions as building societies. A full list of the converted institutions can be found here
Details of savings and mortgage providers where customers come first can be found here
