Alliance & Leicester Building Society

Building society

A building society is a financial institution, owned by its members, that offers banking and other financial services, especially mortgage lending.

The term building society first arose in the 19th century, in the United Kingdom, from co-operative savings groups: by pooling savings, usually in terminating deposits, members could buy or build their own homes.

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. Every building society in the UK is a member of the Building Societies Association.

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.

Deposits with building societies of up to £50,000 per individual are normally protected by the Financial Services Compensation Scheme.

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. 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.
Building Society Date Details Current position
Abbey National 1989 Converted to plc Now known as "Abbey", a subsidiary of Banco Santander
Cheltenham and Gloucester 1994 takeover by
Lloyds Bank
Now part of Lloyds TSB although C&G still have a branch network.
National & Provincial Building Society 1995 takeover by
Abbey National
Business merged into Abbey National, name no longer used
Alliance & Leicester 1997 Converted to plc Remains independent but a takeover by Banco Santander, which also owns Abbey, has been approved by shareholders
Bristol and West 1997 takeover by the
Bank of Ireland
Remains a division of Bank of Ireland but its savings balances and branch network were transferred to the Britannia Building Society in 2005
Halifax 1997 Converted to plc Now a division of Bank of Scotland plc, the UK banking subsidiary of HBOS, which itself agreed to a merger with Lloyds TSB on 18 September 2008
Northern Rock 1997 Converted to plc Nationalised in February 2008 following near bankruptcy due to the Subprime mortgage crisis
The Woolwich 1997 Converted to plc Now part of Barclays plc. Woolwich brand name now only used for mortgages from Barclays with the Woolwich branch network merging with that of Barclays in 2007
Birmingham Midshires 1999 takeover by the Halifax Now a division of Bank of Scotland plc
Bradford & Bingley 2000 Converted to plc Nationalisation with part sale to Abbey announced 29 September 2008

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 .

Name Fate Successor Year
Abbey Road Building Society and
National Building Society
merged to form the Abbey National Building Society in 1944
Bingley Permanent Building Society and
Bradford Equitable Building Society
merged to form the Bradford & Bingley Building Society in 1964
Co-operative Permanent Building Society changed its name to Nationwide Building Society in 1970
Bedfordshire Building Society and
Temperance Permanent
merged to form Gateway Building Society in 1974
Huddersfield & Bradford Building Society and
West Yorkshire Building Society
merged to form Yorkshire Building Society in 1982
Coventry Economic Building Society and
Coventry Provident Building Society
merged to form the Coventry Building Society in 1983
Burnley Building Society and
Provincial Building Society
merged to form the National & Provincial Building Society in 1984
Alliance Building Society and
Leicester Building Society
merged to form the Alliance & Leicester Building Society in 1985
Birmingham & Bridgwater Building Society and
Midshires Building Society
merged to form the Birmingham Midshires Building Society in 1986
Anglia Building Society and
Nationwide Building Society
merged to form
which reverted to the
Nationwide Anglia Building Society
Nationwide Building Society
in 1987
in 1991
Gateway Building Society and
Woolwich Equitable Building Society
merged to form the Woolwich Building Society in 1988
Wessex Building Society and
Portman Building Society
merged to form the Portman Wessex Building Society in 1989
Regency & West of England Building Society and
Portman Wessex Building Society
merged to form Portman Building Society in 1990
Hendon Building Society was taken over by Bradford & Bingley Building Society in 1991
Heart of England Building Society merged with the Cheltenham & Gloucester Building Society in 1993
St. Pancras Building Society merged with the Portman Building Society in 1993
Leeds Permanent Building Society merged with the Halifax Building Society in 1995
Staffordshire Building Society merged with the Portman Building Society in 2003
Lambeth Building Society merged with the Portman Building Society in 2006
Mercantile Building Society merged with the Leeds Building Society in 2006
Universal Building Society merged with the Newcastle Building Society in 2006
Portman Building Society merged with the Nationwide Building Society in 2007

Remaining building societies in the United Kingdom

The remaining building societies are:

(Total group assets of building societies) Source: Building Societies Association

Building societies
Name Asset share to Apr 2008 Asset share to Jan 2007
1 Nationwide Building Society £158,660m £150,586m
2 Britannia Building Society £36,827m £32,431m
3 Yorkshire Building Society £20,498m £16,298m
4 Coventry Building Society* £14,909m £11,090m
5 Chelsea Building Society £13,087m £9,656m
6 Skipton Building Society £12,531m £9,156m
7 Leeds Building Society £9,181m £7,065m
8 West Bromwich Building Society £8,319m £7,208m
9 Derbyshire Building Society** £7,094m £5,097m
10 Principality Building Society £5,853m £4,384m
11 Cheshire Building Society** £4,976m £4,678m
12 Newcastle Building Society £4,816m £3,863m
13 Norwich & Peterborough Building Society £4,308m £3,403m
14 Dunfermline Building Society £3,303m £2,318m
15 Stroud & Swindon Building Society £3,172m £2,514m
16 Nottingham Building Society £3,026m £2,428m
17 Scarborough Building Society £2,298m £1,733m
18 Kent Reliance Building Society £2,134m £1,619m
19 Progressive Building Society* £1,495m £1,248m
20 Cumberland Building Society £1,283m £1,185m
21 National Counties Building Society £1,177m £956m
22 Furness Building Society £845m £770m
23 Cambridge Building Society £844m £751m
24 Leek United Building Society £800m £661m
25 Manchester Building Society £792m £565m
26 Saffron Building Society £784m £662m
27 Hinckley & Rugby Building Society £712m £649m
28 Darlington Building Society £689m £548m
29 Newbury Building Society £605m £565m
30 Monmouthshire Building Society £527m £485m
31 Melton Mowbray Building Society* £439m £385m
32 Market Harborough Building Society £419m £380m
33 Ipswich Building Society* £403m £321m
34 Barnsley Building Society* £376m £346m
35 Marsden Building Society £356m £343m
36 Tipton & Coseley Building Society* £350m £287m
37 Hanley Economic Building Society £341m £322m
38 Mansfield Building Society* £286m £229m
39 Teachers Building Society £271m £240m
40 Loughborough Building Society* £260m £239m
41 Chesham Building Society* £254m £196m
42 Dudley Building Society £251m £228m
43 Vernon Building Society £246m £217m
44 Scottish Building Society £221m £211m
45 Bath Investment & Building Society £190m £157m
46 Chorley & District Building Society* £160m £147m
47 Harpenden Building Society* £158m £126m
48 Holmesdale Building Society* £149m £142m
49 Stafford Railway Building Society* £148m £132m
50 Beverley Building Society* £145m £117m
51 Buckinghamshire Building Society* £139m £135m
52 Swansea Building Society £120m £95m
53 Earl Shilton Building Society* £92m £88m
54 Shepshed Building Society £86m £79m
55 Penrith Building Society* £78m £74m
56 Ecology Building Society* £75m £63m
57 Catholic Building Society* *** £44m £38m
58 City of Derry Building Society* £36m £28m
59 Century Building Society* £22m £22m
* 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 .

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

Other countries

References

See also

External links

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