What Others Say

Building societies generally offer a better deal to the consumer because they do not have to pay dividends to shareholders. Accordingly they are able to offer lower mortgage rates and higher savings rates to their customers than other institutions. This is not just the view of the BSA and building societies, but of a number of external commentators - regulators, journalists, MPs, analysts, academics and others - as the following selection of comments shows.

• There has been some interesting goings on in Wednesbury in the Black Country. Apparently, Birmingham Midshires staff, irritated at the decision to close their branch, have encouraged customers to defect to the opposition. So over the past few weeks West Bromwich Building Society has picked up around 500 new customers - that is around 30 new accounts a day. West Brom is now the only financial services provider in the town centre. More defections have taken place across the West Midlands...[Birmingham Midshires] has become increasingly irrelevant having no clear identity since being swallowed up by the Halifax.
  Tony Hazell, Personal Finance Editor, Daily Mail, Writing in Financial Adviser
  18 November 2005
  
  
• " .. more people than ever before are doing business with societies, the industry is awash with savers' money, societies are leading the way in product innovation - as confirmed by the wave of pensioner-friendly savings accounts and child trust funds - and more societies are involving members in the running of the businesses...." "Building societies are an integral part of the financial services landscape."
  Jeff Prestridge, Mail on Sunday
  16 November 2005
  
  
• Millions of pounds of savings are on the move across the West Midlands as disgruntled customers abandon Birmingham Midshires [part of Halifax Bank] in protest over its decision to close its high street branches. Mutually owned building societies that still offer face-to-face services and old-style passbook accounts are cashing in on the protest. They have opened hundreds of new accounts and taken millions of pounds of new deposits from former Midshires customers in recent weeks.
  icBirmingham.co.uk
  3 November 2005
  
  
• The Government welcome the contribution made by mutual societies, in competition with other providers, in providing for greater choice and diversity in the economy.
  Ivan Lewis MP (Lab, Bury South)
  24 October 2005
  
  
• It is a welcome move in an industry that often reserves its top savings rates for new customers leaving existing savers on poorer deals. And it underlines the main difference between banks and building societies - that building societies can use their profits to benefit members rather than shareholders.
  Sylvia Morris, Daily Mail
  5 October 2005

• Building societies have reacted positively to the intense competition in the mortgage market Not only are their net interest margins, the barometer of consumer value, low for their sector, but the margin has dropped for the third year in succession. Although the market has moved in the same direction, societies feature prominently in best buy tables, have maintained market share and offer their members a good deal.
  Richard Gabbertas, Partner, KPMG
  20 September 2005

• In general, the sector remains well capitalized. The last five years have seen a modest decline of just 24 basis points in average gross capital ratios of the larger societies, still leaving them very comfortably capitalized by current regulatory requirements and with substantial surplus capital compared to the requirements of Basel II.
  KPMG press release, September 2005
  20 September 2005

• I remain convinced that building societies have an important role to play in providing consumers with financial choice. They are also far more loyal to their "communities" than their banking counterparts, keeping open branches in locations which the banks have long deserted for commercial reasons.
  Jeff Prestridge, Personal Finance Editor, Mail on Sunday, writing in Financial Adviser
  8 September 2005

• I personally like the mutual idea....With building societies, it seems that all staff want to treat customers well", he says. "With banks, there is a suspicion that they're keen to get your money, but not necessarily offer good service.
  Bank and building society customer Colin Riley, quoted in the Mail on Sunday
  21 August 2005

• Life on the stock market has not proved a bed of roses for a number of the building societies which opted to demutualise. The Abbey, taken over by Spain's Banco Santander after inept management by the Brits, could vouch for that. The feisty Nationwide has meanwhile demonstrated that remaining mutual is no bar to delivering competitive products or strong financial results.
  Daily Mail
  4 August 2005

• We examined the relation between corporate performance and executive compensation of converted and mutual building societies and determinants of compensation over the period. Several findings emerge. First, average compensation of chief executives of converted building societies increased three folds in seven years while their counter parts in mutual societies benefited only by a modest increase. Second, whilst there is no significant difference in the performance of these two groups, the executives of converted societies received significantly higher compensation. Their total benefit increased significantly after the conversion. Third, the study confirms a significant difference in the determinant of compensation in converted and mutual societies. Finally, neither the corporate performance nor the size explains the compensation received by the executives of converted societies. However, a positive relation between corporate performance and executives’ compensation is observed in the cases of remaining mutual building societies. Overall, the possibility that the flotation of the mutual societies was inspired by the private interests of executives cannot be ruled out.
  Abstract of Building Societies’ Demutualization and Managerial Private Interest, by Radha K Shiwakoti, Lecturer in Accounting, Kent Business School, University of Kent
  10 July 2005

• If you want to secure a good mortgage this summer, pass the big banks on your local high street and head towards the building society. New research has found the majority of the best buy deals on the market are available from mutuals.
  Thisismoney.co.uk
  4 July 2005

• ...building societies help to keep banks on their toes.
  Jonathan Guthrie, Financial Times
  22 June 2005

• A few years ago, pundits were predicting the eventual disappearance of mutually-owned building societies, as most of the biggest had converted to bank plc status. Today, the demutualisation threat is over, and the societies that remain have a healthy share of their chosen markets.
  The Banker
  15 June 2005

• I loathed the carpet-bagging of building societies. It felt to me like the worst example of a "grab the money now and to hell with the consequences" mindset that was prevalent in the 1990s. Thousands of savages would invade one building society after another and attempt to force it to give up its mutuality and pay windfalls. This was nothing to do with long-standing savers earning their just rewards - instead it was fuelled by opportunists determined to make a fast buck.
  Tony Hazell, Financial Adviser
  9 June 2005

• Letters from readers outraged by the shoddy service at former building societies such as Northern Rock and Halifax have swelled the Money desk mail bags in recent weeks.
  The Sunday Times
  1 May 2005

• Becoming a listed company adds to the pressure to make profits, which can definitely have a detrimental impact on service because banks have to cuts costs while continuing to attract customers with competitive products. The result is often that they reduce the number of staff, which has a knock-on effect on the service their customers receive.
  Colin Bell, Purely Mortgages, quoted in The Sunday Times
  1 May 2005

• The results of the annual current-account survey conducted by Which?, the consumer lobbyist, provide further evidence that former building societies do not generally view customer service as a priority. And the latest poll indicates that standards at some of the biggest names have slipped even further over the past year or so.
  The Sunday Times
  1 May 2005

• Co-ops and mutuals have a wider impact on the economy, not only as a result of what they do themselves, but from the constraints they put on private companies and plcs. There is compelling evidence that the stronger the co-operative and mutual presence in a market, the less other companies are, for example, able to raise prices, for fear of losing market share.
  Professor Jonathan Michie, Director, Birmingham Business School, The Guardian
  18 March 2005

• Building societies tend to show that mutuality works, with better value products and an upfront attitude.
  The Times
  5 February 2005