Building society

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A high street building society branch, in Banbury The Unicorn Hotel - Banbury.jpg
A high street building society branch, in Banbury

A building society is a financial institution owned by its members as a mutual organization, which offers banking and related financial services, especially savings and mortgage lending. They exist in the United Kingdom, Australia and New Zealand, and formerly in Ireland and several Commonwealth countries, including South Africa as mutual banks. [1] They are similar to credit unions, but rather than promoting thrift and offering unsecured and business loans, the purpose of a building society is to provide home mortgages to members. Borrowers and depositors are society members, setting policy and appointing directors on a one-member, one-vote basis. Building societies often provide other retail banking services, such as current accounts, credit cards and personal loans. The term "building society" first arose in the 19th century in Great Britain from cooperative savings groups.

Contents

In the United Kingdom, building societies compete with banks for most consumer banking services, especially mortgage lending and savings accounts, and regulations permit up to half of their lending to be funded by debt to non-members, allowing societies to access wholesale bond and money markets to fund mortgages. The world's largest building society is Britain's Nationwide Building Society. In Australia, building societies also compete with retail banks and offer the full range of banking services to consumers.

History in the United Kingdom

Building societies as an institution began in late-18th century Birmingham – a town which was undergoing rapid economic and physical expansion driven by a multiplicity of small metalworking firms, whose many highly skilled and prosperous owners readily invested in property. [2] Many of the early building societies were based in taverns or coffeehouses, which had become the focus for a network of clubs and societies for co-operation and the exchange of ideas among Birmingham's highly active citizenry as part of the movement known as the Midlands Enlightenment. [3] The first building society to be established was Ketley's Building Society, founded by Richard Ketley, the landlord of the Golden Cross inn, in 1775. [4] Members of Ketley's society paid a monthly subscription to a central pool of funds which was used to finance the building of houses for members, which in turn acted as collateral to attract further funding to the society, enabling further construction. [5] By 1781 three more societies had been established in Birmingham, with a fourth in the nearby town of Dudley; and 19 more formed in Birmingham between 1782 and 1795. [6] The first outside the English Midlands was established in Leeds in 1785. [7]

Most of the original societies were fully terminating , where they would be dissolved when all members had a house: the last of them, First Salisbury and District Perfect Thrift Building Society, was wound up in March 1980. [8] 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 Building Society. The main legislative framework for the building society was the Building Societies Act 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.

All building societies in the UK are members of the Building Societies Association. At the start of 2008, there were 59 building societies in the UK, with total assets exceeding £360 billion. [9] The number of societies in the UK fell by four during 2008 due to a series of mergers brought about, to a large extent, by the consequences of the financial crisis of 2007–2008. There were three further mergers in each of 2009 and 2010, a demutualisation and a merger in 2011, and four further mergers 2013–2018 which resulted in there being only one building society headquartered respectively in Scotland and Northern Ireland. Since then, the only merger has been in 2023, when the Manchester society merged with the Newcastle society.

Demutualisation

The Abbey National was the first society to demutualise in July 1989. Abbey National bank on Commercial Street, Leeds.jpg
The Abbey National was the first society to demutualise in July 1989.

In the 1980s, changes to British banking laws allowed 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 Societies 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 listed on the London Stock Exchange, while others were acquired by larger financial groups.

The process began with the demutualisation of the Abbey National Building Society in 1989. Then, from 1995 to late 1999, eight societies demutualised accounting for two-thirds of building societies assets as at 1994. Five of these societies became joint stock banks (plc), one merged with another and the other four were taken over by plcs (in two cases after the mutual had previously converted to a plc).

As Tayler (2003) mentions, demutualisation moves succeeded immediately because neither Conservative nor Labour party UK governments created a framework which put obstacles in the way of demutualisation. Political acquiescence in demutualisation was clearest in the case of the position on 'carpetbaggers', that is those who joined societies by lodging minimum amounts of £100 or so in the hope of profiting from a distribution of surplus after demutualisation. The deregulating Building Societies Act 1986 contained an anti-carpetbagger provision in the form of a two-year rule. This prescribed a qualifying period of two years before savers could participate in a residual claim. But, before the 1989 Abbey National Building Society demutualisation, the courts found against the two-year rule after legal action brought by Abbey National itself to circumvent the intent of the legislators. After this the legislation did prevent a cash distribution to members of less than two years standing, but the same result was obtained by permitting the issue of 'free' shares in the acquiring plc, saleable for cash. The Thatcher Conservative government declined to introduce amending legislation to make good the defect in the 'two-year rule'.

1980s and 1990s

Building societies, like mutual life insurers, arose as people clubbed together to address a common need interest; in the case of the building societies, this was housing and members were originally both savers and borrowers. But it very quickly became clear that 'outsider' savers were needed whose motive was profit through interest on deposits. Thus permanent building societies quickly became mortgage banks and in such institutions there always existed a conflict of interest between borrowers and savers. It was the task of the movement to reconcile that conflict of interest so as to enable savers to conclude that their interests and those of borrowers were to some extent complementary rather than conflictive. Conflict of interest between savers and borrowers was never fully reconciled in the building societies but upon deregulation that reconciliation became something of a lost cause. The management of building societies apparently could expend considerable time and resources (which belonged the organisation) planning their effective capture—of as much of the assets as they could. If so, this is arguably insider dealing on a grand scale with the benefit of inside specialist knowledge of the business and resources of the firm not shared with outsiders like politicians and members (and, perhaps, regulators). Once the opportunity to claim was presented by management the savers in particular could be relied upon to seize it. There were sufficient hard-up borrowers to take the inducement offered them by management (in spite of few simple sums sufficing to demonstrate that they were probably going to end up effectively paying back the inducement). ( Tayler 2003 )

Management promoting demutualisation also thereby met managerial objectives because the end of mutuality brought joint stock company (plc) style remuneration committee pay standards and share options. Share options for management of converting societies appear to be a powerful factor in management calculation. Rasmusen (1988) refers to this in the following terms:

" ... perks do not rise in proportion to [mutual] bank size. If a mutual is large, or is expected to grow if it can raise capital by a conversion, its managers derive more value from a conversion but do not suffer much loss of perks than if the bank were small. Their benefit is in the right to purchase the new stock, which are valuable because the new issues are consistently underpriced [referring to USA mutual bank conversions]. Moreover, by no means are all mutual managers incompetent, and conversions allows the bank to expand more easily and to grant executive stock options that are valuable to skilled managers".

Instead of deploying their margin advantage as a defence of mutuality, around 1980 building societies began setting mortgage rates with reference to market clearing levels. In sum they began behaving more like banks, seeking to maximise profit instead of the advantages of a mutual organisation. Thus, according to the Bank of England's Boxall & Gallagher (1997):

"... there was virtually no difference between banks and building society 'listed' interest rates for home finance mortgage lending between 1984 and 1997. This behaviour resulted in a return on assets for building societies which was at least as high as Plc banks and, in the absence of distribution, led to rapid accumulation of reserves".

As Boxall & Gallagher (1997) also observe:

"... accumulation of reserves in the early-1990s, beyond regulatory and future growth requirements, is difficult to reconcile with conventional theories of mutual behaviour".

Llewellyn (1996) draws a rather more direct and cynical conclusion:

By adopting a policy of building up reserves by maintaining an excess margin, building societies simultaneously allowed banks to compete and may have undermined the long run viability of mutuality. A more cynical approach is that some societies may have adopted an excess-margin strategy simply to enhance their value for conversion.

Some of these managements ended up in dispute with their own members. Of the first major conversion of the Abbey in 1989, Kay (1991) observed:

[T]he paradox of the Abbey members who campaigned against flotation [conversion to a shareholder-owned bank] of their building society. They were fighting to preserve a degree of accountability to the membership which the management of the Society patently did not feel. For incumbent management, the contrary views of some of their members were not matters to be weighed in the balance and taken account of in formulation of policy. They were a nuisance to be dealt with by the costly use of public relations advisers and legal processes.

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 societies whose management wished to keep them mutual 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 wave of demutualisations came to an end in 2000.

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. [10]

2000s and 2010s

The Building Societies (Funding) and Mutual Societies (Transfers) Act 2007, known as the Butterfill Act, was passed in 2007 giving building societies greater powers to merge with other companies. These powers have been used by the Britannia in 2009 and Kent Reliance in 2011 leading to their demutualisation.

Prior to 31 December 2010, deposits with building societies of up to £50,000 per individual, per institution, were normally protected by the Financial Services Compensation Scheme (FSCS), but Nationwide and Yorkshire building societies negotiated a temporary change to the terms of the FSCS to protect members of the societies they acquired in late 2008/early 2009. The amended terms allowed former members of multiple societies which merge into one to maintain multiple entitlements to FSCS protection until 30 September 2009 (later extended to 30 December 2010), so (for example) a member with £50,000 in each of Nationwide, Cheshire and Derbyshire at the time of the respective mergers would retain £150,000 of FSCS protection for their funds in the merged Nationwide. [11] On 31 December 2010 the general FSCS limit for retail deposits was increased to £85,000 for banks and building societies and the transitional arrangements in respect of building society mergers came to an end.

List of building societies

United Kingdom

Current

As of February 2024, there are 42 independent building societies, [12] all of which are members of the Building Societies Association. [9]

NameGroup assets
(millions) [13]
Other trading namesNumbers ofNo. of
staff
Provides
current
account?
BranchesAgencies
1 Nationwide Building Society £271,893 The Mortgage Works 60517,680
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2 Coventry Building Society [lower-alpha 1] £58,86764152,824
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3 Yorkshire Building Society £58,754 Chelsea Building Society;
Accord
132993,117
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4 Skipton Building Society £33,571822,506
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5 Leeds Building Society £25,514501,538
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6 Principality Building Society £11,25754141,157
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7 West Bromwich Building Society £5,68937633
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8 Newcastle Building Society £5,313 Manchester Building Society 311,393
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9 Nottingham Building Society £3,81331513
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10 Cumberland Building Society £3,09034634    Arbcom ru ready.svg [lower-alpha 2] [14]
11 National Counties Building Society £2,402 Family Building Society 1196
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12 Progressive Building Society [lower-alpha 1] £1,9001136172
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13 Cambridge Building Society £1,85913236
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14 Newbury Building Society £1,54710180
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15 Monmouthshire Building Society £1,4881111145
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16 Saffron Building Society £1,2868181
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17 Leek United Building Society £1,23812164
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18 Furness Building Society £1,2369177
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19 Darlington Building Society £8339113
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20 Hinckley & Rugby Building Society £81272116
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21 Suffolk Building Society [lower-alpha 1] £79991123
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22 Marsden Building Society £734879
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23 The Melton Building Society [lower-alpha 1] £715588
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24 Market Harborough Building Society £6475118
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25 Scottish Building Society £64566171
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26 Dudley Building Society £545591
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27 Tipton & Coseley Building Society [lower-alpha 1] £540483
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28 Loughborough Building Society [lower-alpha 1] £5335155
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29 Swansea Building Society £530436
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30 Hanley Economic Building Society £516773
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31 Mansfield Building Society [lower-alpha 1] £485473
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32 Vernon Building Society £417668
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33 Teachers Building Society £375139
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34 Bath Building Society £362267
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35 Buckinghamshire Building Society [lower-alpha 1] £355139
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36 Chorley & District Building Society [lower-alpha 1] £334350
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37 Harpenden Building Society [lower-alpha 1] £306464
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38 Ecology Building Society [lower-alpha 1] £304125
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39 Stafford Railway Building Society [lower-alpha 1] £292131
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40 Beverley Building Society [lower-alpha 1] £198122
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41 Earl Shilton Building Society [lower-alpha 1] £163227
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42 Penrith Building Society [lower-alpha 1] £138126
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  1. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 These societies do not form part of a corporate business group, although they may own other businesses.
  2. If customer resides within their "operating area".

Demutualised

Ten building societies of the United Kingdom demutualised between 1989 and 2000, either becoming a bank or being acquired by a larger bank. [15] [16] By 2008, every building society that floated on the stock market in the wave of demutualisations of the 1980s and 1990s had either been sold to a conventional bank, or been nationalised. [16]

NameFateSuccessorYearCurrent position
Abbey National converted to plc Santander 1989The new bank, also known as "Abbey", was acquired by Banco Santander and now rebranded as Santander.
Cheltenham and Gloucester taken over by Lloyds Bank 1994Became part of Lloyds TSB, although C&G still had a branch network which became part of TSB Bank in summer 2013.
National & Provincial taken over by Abbey National 1995Business merged into Abbey National (now Santander), name no longer used.
Alliance & Leicester converted to plc Santander 1997Acquired by Banco Santander, which also owns Abbey, in October 2008, and merged into Santander in 2010.
Bristol and West taken over by Bank of Ireland 1997Became a division of Bank of Ireland but its savings balances and branch network transferred to Britannia Building Society in 2005 (which in turn merged with Co-operative Financial Services). Bristol & West mortgages ceased trading in January 2009. [17]
Halifax converted to plc1997Became part of HBOS in 2001, which itself became part of Lloyds Banking Group in 2009. Trading name still in use.
Northern Rock converted to plc Virgin Money
Northern Rock (Asset Management)
1997 Nationalised following near bankruptcy in February 2008, due to the financial crisis of 2007–2008. Most of the business bought by Virgin Money UK in January 2012, [18] with remaining riskier mortgage business retained by the government and renamed NRAM plc (now Landmark Mortgages Limited [19] ).
The Woolwich converted to plc Barclays 1997Now 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 taken over by Halifax 1999Now owned by Lloyds Banking Group. The brand name is still retained, but running entirely by post and internet.
Bradford & Bingley converted to plc2000 Nationalisation with sale of savings book to Abbey (now Santander).

No longer exist

The following is an incomplete list of building societies in the United Kingdom that no longer exist independently, since they either merged with or were taken over by other organisations. [20] They may still have an active presence on the high street (or online) as a trading name or as a distinct brand. This is typically because brands will often build up specific reputations and attract certain clientele, and this can continue to be marketed successfully.

NameFateSuccessorYear
Abbey Road Building Society and
National Building Society
merged to form the Abbey National Building Society 1944
Bingley Permanent Building Society and
Bradford Equitable Building Society
merged to form the Bradford & Bingley Building Society 1964
Co-operative Permanent Building Society changed its name to Nationwide Building Society 1970
Leicester Permanent Building Society and
Leicester Temperance Building Society
merged to form the Leicester Building Society 1974
Bedfordshire Building Society and
Temperance Building Society [‡ 1]
merged to form Gateway Building Society 1974 [21]
Leek & Westbourne Building Society and
Oldbury Britannia Building Society
merged to form Britannia Building Society 1975
Huddersfield & Bradford Building Society
and West Yorkshire Building Society
merged to form Yorkshire Building Society 1982
Coventry Economic Building Society and
Coventry Provident Building Society
merged to form the Coventry Building Society 1983
Burnley Building Society and
Provincial Building Society
merged to form the National & Provincial Building Society 1984
London Permanent Building Society (est 1914)merged into Cheltenham and Gloucester 1984
Alliance Building Society and
Leicester Building Society
merged to form the Alliance & Leicester Building Society 1985
Waltham Abbey Building Society (1847) merged with the Cheltenham and Gloucester Building Society 1985
Birmingham & Bridgwater Building Society
and Midshires Building Society
merged to form the Birmingham Midshires Building Society 1986
Norwich Building Society and
Peterborough Building Society
merged to form the Norwich & Peterborough Building Society 1986
Anglia Building Society and
Nationwide Building Society
merged to form
which changed name to the
Nationwide Anglia Building Society
Nationwide Building Society
1987
1991
Gateway Building Society and
Woolwich Equitable Building Society
merged to form the Woolwich Building Society 1988
Wessex Building Society and
Portman Building Society
merged to form the Portman Wessex Building Society 1989
Regency & West of England Building Society
and Portman Wessex Building Society
merged to form Portman Building Society 1990
Hendon Building Society was taken over by Bradford & Bingley Building Society 1991
Haywards Heath Building Society merged with the Yorkshire Building Society 1992
Cheshunt Building Society merged with the Bristol and West Building Society 1992
Heart of England Building Society merged with the Cheltenham & Gloucester Building Society 1993
St. Pancras Building Society merged with the Portman Building Society 1993
Leeds Permanent Building Society merged with the Halifax Building Society 1995
City & Metropolitan Building Society merged with the Stroud & Swindon Building Society 1996
Nottingham Imperial Building Society merged with the Newcastle Building Society 2000
Gainsborough Building Society merged with the Yorkshire Building Society 2001
Ilkeston Permanent Building Society merged with the Derbyshire Building Society 2001
Clay Cross Building Society merged with the Derbyshire Building Society 2003
Padiham Building Society merged with the Bradford & Bingley Building Society 1983
Staffordshire Building Society merged with the Portman Building Society 2003
Lambeth Building Society merged with the Portman Building Society 2006
Mercantile Building Society merged with the Leeds Building Society 2006
Universal Building Society merged with the Newcastle Building Society 2006
Portman Building Society merged with the Nationwide Building Society 2007
Cheshire Building Society merged with the Nationwide Building Society 2008
Derbyshire Building Society merged with the Nationwide Building Society 2008
Barnsley Building Society merged with the Yorkshire Building Society 2008
Catholic Building Society merged with the Chelsea Building Society 2008
Scarborough Building Society [‡ 2] merged with the Skipton Building Society 2009
Dunfermline Building Society most assets and liabilities
transferred to
Nationwide Building Society 2009
Britannia Building Society [‡ 3] acquired by The Co-operative Bank 2009
Chelsea Building Society merged with the Yorkshire Building Society 2010
Chesham Building Society [‡ 4] merged with the Skipton Building Society 2010
Stroud & Swindon Building Society merged with the Coventry Building Society 2010
Kent Reliance Building Society acquired byOneSavings Plc to form OneSavings Bank 2011
Norwich and Peterborough Building Society merged with the Yorkshire Building Society 2011
Century Building Society merged with the Scottish Building Society 2013
Shepshed Building Society merged with the Nottingham Building Society 2013
City of Derry Building Society merged with the Progressive Building Society 2014
Holmesdale Building Society merged with the Skipton Building Society 2018
Manchester Building Society merged with the Newcastle Building Society 2023
  1. The Temperance Permanent was so-called because the directors were required to sign the pledge, a requirement which was dropped with the merger and name-change – to the reported dismay of some members. [ The Times , Friday, 25 April 1975; pg. 4; Issue 59379; col E, 'Temperance abandoned by building society'. Retrieved from InfoTrac on 17 July 2008].
  2. Merger of Skipton Building Society and Scarborough Building Society, 29 November 2008. Archived 10 April 2009 at the Wayback Machine
  3. Britannia and Co-operative Financial Services unveil plans for super-mutual (Retrieved 22 January 2009) Archived 27 June 2009 at the Wayback Machine
  4. Chesham Building Society AGM, 31 March 2010. Archived 30 May 2010 at the Wayback Machine , accessed 1 April 2010

Australia

In Australia, building societies evolved along British lines. Following the end of World War II, the terminating model was revived to fund returning servicemen's need for new houses. Hundreds were created with government seed capital, whereby the capital was returned to the government and the terminating societies retained the interest accumulated. Once all the seed funds were loaned, each terminating society could reapply for more seed capital to the point where they could re-lend their own funds and thus became a permanent society. Terminating loans were still available and used inside the permanent businesses by staff up until the 1980s because their existence was not widely known after the early 1960s. Because of strict regulations on banks, building societies flourished until the deregulation of the Australian financial industry in the 1980s. Eventually many of the smaller building societies disappeared, while some of the largest (such as St. George) officially attained the status of banks. Recent conversions have included Heritage Bank which converted from building society to bank in 2011, Hume in 2014, while Wide Bay Building Society became Auswide Bank and IMB followed suit in 2015, and Greater Building Society became Greater Bank in 2016. Building societies converting to banks are no longer required to demutualise.

A particular difference between Australian building societies and those elsewhere, is that Australian building societies are required to incorporate as limited companies.

Current building societies are

Eswatini

The Building Societies Act of 1962 allowed for the registration of building societies in Eswatini. For a long time the country only had one building society. A second was registered in late 2019.

Ireland

The Republic of Ireland had around 40 building societies at the mid-20th century peak. [24] Many of these were very small and, as the Irish commercial banks began to originate residential mortgages, the small building societies ceased to be competitive. Most merged or dissolved or, in the case of First Active plc, converted into conventional banks. The last remaining building societies, EBS Building Society and Irish Nationwide Building Society, demutualised and were transferred or acquired into Bank subsidiaries in 2011 following the effects of the Irish financial crisis.

Leeds Building Society Ireland and Nationwide UK (Ireland) were Irish branches of building societies based in the United Kingdom; both have since ceased all Irish operations.

NameDemutualisedSuccessor
Irish Industrial Benefit Building Society (1873–1969)

Irish Industrial Building Society (1969–1975)
Irish Nationwide Building Society (1975 – Feb 2011)

acquired Irish Mutual Building Society, 1989
formerly Allied Irish Building Society(−1976)
acquired Garda Building Society, 1983
acquired Metropolitan Building Society, 1991
February 2011deposit book Permanent TSB Group Holdings plc (February 2011–June 2011)

loan book Anglo Irish Bank (February 2011–June 2011)
Irish Bank Resolution Corporation (July 2011–February 2013 [25] )

Educational Building Society (1935−1991)
acquired The Family Building Society, 1975

EBS Building Society (1991–2011)

acquired Midland and Western Building Society, 1994
acquired Norwich Irish Building Society, 1998
July 2011 EBS d.a.c., subsidiary of Allied Irish Banks
Irish Temperance Permanent Building Society (−1888)

Irish Permanent Benefit Building Society (1888–1940)
Irish Permanent Building Society (1940–1994)

acquired Provident Building Society, 1974
acquired Cork Mutual Building Society, 1975
acquired Munster & Leinster Building Society, 1978
acquired Guinness & Mahon, 1994
1994Irish Permanent plc (1994–1999)

Permanent TSB Group Holdings plc (1999–)
merged with TSB Bank, 2001
Permanent TSB Group Holdings plc

Irish Civil Services and General Building Society (1864–1867)

Irish Civil Service and General (Permanent Benefit) Building Society (1867–1874)
Irish Civil Service (Permanent) Building Society (1874–1969)

acquired City and County Permanent Benefit Building Society, 1932

Irish Civil Service Building Society (1969–1984)

acquired O'Connell Benefit Building Society, 1983
1984subsidiary of Bank of Ireland
renamedICS Building Society (1986)
Workingman's Benefit Building Society (−1960)

First National Building Society (1960–1998)

acquired Grafton Savings and Building Society, 1974
acquired The Guinness Permanent Building Society, 1984
acquired Ireland Benefit Building Society, 1984
acquired Postal Service Permanent Building Society, 1985
acquired Irish Life Building Society, 1993
1998 First Active plc (1998–2004)

acquired by Ulster Bank 2004 and retired in 2009

Society closures

  • Ballygall Building Society, 1977
  • City and Provincial Building Society, 1978
  • Dublin Model Building Society, 1984
  • Dublin Savings Building Society, 1977
  • Four Provinces Building Society, 1978
  • Independent Building Society, 1977
  • Irish Savings Building Society, 1984
  • National Provincial Building Society, 1977
  • Progressive Building Society, 1977
  • West of Ireland Building Society, 1977

Jamaica

In Jamaica, three building societies compete with commercial banks and credit unions for most consumer financial services: [26]

New Zealand

Regulation

In New Zealand, building societies are registered with the Registrar of Building Societies under the Building Societies Act 1965. [27] Registration as a building society is merely a process of establishing the entity as a corporation. It is largely a formality, and easily achieved, as the capital requirement is minimal (20 members must be issued shares of not less than NZ$1,000 each, for a total minimum foundation share capital of NZ$200,000). [28]

As regards prudential supervision, a divide exists between building societies that operate in New Zealand, on the one hand, and those that (although formally registered in New Zealand) operate offshore:

  • Building societies that accept deposits from members of the public in New Zealand are regulated as "non-bank deposit takers" under the Non-bank Deposit Takers Act 2013. [29] Such building societies must (unless they qualify for a particular exemption) comply with the prudential regulations. The Reserve Bank of New Zealand monitors compliance with the prudential regulations, but does not prudentially supervise individual building societies for financial soundness. Most such building societies are supervised for compliance with the terms of their debt securities by trustees appointed under securities legislation, and those trustees have various reporting requirements to the Reserve Bank.
  • Building societies that accept deposits only from offshore customers are not regulated under the Non-bank Deposit Takers Act 2013 or New Zealand's financial markets legislation. Consequently, they are not prudentially monitored by the Reserve Bank or by the Financial Markets Authority. The Reserve Bank cautions on its website that it does not monitor transactions undertaken by New Zealand registered building societies operating in overseas markets. [30] The Department of Internal Affairs is ultimately responsible for all entities that do not expressly fall into other categories for anti money laundering purposes.

Building societies' registration details and filed documents are available in the Register of Building Societies held at the New Zealand Companies Office.

Individual building societies

Over the years, a number of building societies were established.

Some, including Countrywide Building Society and United Building Society, became banks in the 1980s and 1990s. Heartland Building Society (created in 2011 through a merger of Canterbury Building Society, Southern Cross Building Society, and two other financial institutions) became Heartland Bank on 17 December 2012.

Remaining building societies include:

  • Pacific Eagle Capital (formerly General Equity Building Society)
  • Heretaunga Building Society
  • Kiwi Deposit Building Society (in the process of dissolution since 2013) [31]
  • Manawatu Permanent Building Society
  • Nelson Building Society
  • Southland Building Society, which in October 2008 became a registered bank known as SBS Bank. However, it remains a building society and retains its mutual structure.
  • Hastings Building Society merged with SBS Bank in October 2010, but with the Hastings Building Society brand continuing to operate as a building society under the name of HBS Bank. In November 2015, HBS Bank brand was discontinued.
  • Wairarapa Building Society.

Zimbabwe

In Zimbabwe, Central Africa Building Society (CABS) is the leading building society offering a diverse range of financial products and services that include transaction and savings accounts, mobile banking, mortgage loans, money market investments, term deposits and pay-roll loans.

Similar organisations in other countries

In other countries there are mutual organisations similar to building societies:

Operational differences from banks

Roll numbers

Because most building societies were not direct members of the UK clearing system, it was common for them to use a roll number to identify accounts rather than to allocate a six-digit sort-code and eight-digit account number to the BACS standards.

More recently, building societies have tended to obtain sort-code and account number allocations within the clearing system, and hence the use of roll numbers has diminished. When using BACS, one needs to enter roll numbers for the reference field and the building society's generic sort code and account number would be entered in the standard BACS fields. [32]

See also

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Nationwide Building Society is a British mutual financial institution, the seventh largest cooperative financial institution and the largest building society in the world with over 16 million members. Its headquarters are in Swindon, England.

The Abbey National Building Society was formed in 1944 by the merger of the Abbey Road and the National building societies.

<span class="mw-page-title-main">Alliance & Leicester</span> Defunct British bank

Alliance & Leicester plc was a British bank and former building society, formed by the merger in 1985 of the Alliance Building Society and the Leicester Building Society. The business demutualised in the middle of 1997, when it was floated on the London Stock Exchange. It was listed in the FTSE 250 Index, and had been listed in the FTSE 100 Index from April 1997 until June 2008.

<span class="mw-page-title-main">Trustee Savings Bank</span> British financial institution

The Trustee Savings Bank (TSB) was a British financial institution that operated between 1810 and 1995 when it was merged with Lloyds Bank. Trustee savings banks originated to accept savings deposits from those with moderate means. Their shares were not traded on the stock market but, unlike mutually held building societies, depositors had no voting rights; nor did they have the power to direct the financial and managerial goals of the organisation. Directors were appointed as trustees on a voluntary basis. The first trustee savings bank was established by Rev. Henry Duncan of Ruthwell in Dumfriesshire for his poorest parishioners in 1810, with its sole purpose being to serve the local people in the community. Between 1970 and 1985, the various trustee savings banks in the United Kingdom were amalgamated into a single institution named TSB Group plc, which was floated on the London Stock Exchange. In 1995, the TSB merged with Lloyds Bank to form Lloyds TSB, at that point the largest bank in the UK by market share and the second-largest by market capitalisation.

<span class="mw-page-title-main">Permanent TSB</span> Irish banking group

Permanent TSB Group Holdings plc, formerly Irish Life and Permanent plc is a provider of personal financial services in Ireland. Irish Life Assurance plc and the Irish Permanent Building Society merged to form the Irish Life and Permanent Group in 1999 and the merged entity acquired the Trustee Savings Bank in 2001. The group has no connection to the UK's TSB Bank.

<span class="mw-page-title-main">Savings and loan association</span> Type of financial institution

A savings and loan association (S&L), or thrift institution, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans. The terms "S&L" and "thrift" are mainly used in the United States; similar institutions in the United Kingdom, Ireland and some Commonwealth countries include building societies and trustee savings banks. They are often mutually held, meaning that the depositors and borrowers are members with voting rights, and have the ability to direct the financial and managerial goals of the organization like the members of a credit union or the policyholders of a mutual insurance company. While it is possible for an S&L to be a joint-stock company, and even publicly traded, in such instances it is no longer truly a mutual association, and depositors and borrowers no longer have membership rights and managerial control. By law, thrifts can have no more than 20 percent of their lending in commercial loans—their focus on mortgage and consumer loans makes them particularly vulnerable to housing downturns such as the deep one the U.S. experienced in 2007.

<span class="mw-page-title-main">Bradford & Bingley</span> Defunct British bank

Bradford & Bingley plc was a British bank with headquarters in the West Yorkshire town of Bingley.

A mutual organization, or mutual society is an organization based on the principle of mutuality and governed by private law. Unlike a true cooperative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship. A mutual organization or society is often simply referred to as a mutual.

Demutualization is the process by which a customer-owned mutual organization (mutual) or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, members of a mutual usually receive a "windfall" payout, in the form of shares in the successor company, a cash payment, or a mixture of both. Mutualization or mutualisation is the opposite process, wherein a shareholder-owned company is converted into a mutual organization, typically through takeover by an existing mutual organization. Furthermore, re-mutualization depicts the process of aligning or refreshing the interest and objectives of the members of the mutual society.

Banking in Australia is dominated by four major banks: Commonwealth Bank, Westpac, Australia & New Zealand Banking Group and National Australia Bank. There are several smaller banks with a presence throughout the country which includes Bendigo and Adelaide Bank, Suncorp Bank, and a large number of other financial institutions, such as credit unions, building societies and mutual banks, which provide limited banking-type services and are described as authorised deposit-taking institutions (ADIs). Many large foreign banks have a presence, but few have a retail banking presence. The central bank is the Reserve Bank of Australia (RBA). The Australian government’s Financial Claims Scheme (FCS) guarantees deposits up to $250,000 per account-holder per ADI in the event of the ADI failing.

<span class="mw-page-title-main">Mutual savings bank</span> Type of financial institution

A mutual savings bank is a financial institution chartered by a central or regional government, without capital stock, owned by its members who subscribe to a common fund. From this fund, claims, loans, etc., are paid. Profits after deductions are shared among the members. The institution is intended to provide a safe place for individual members to save and to invest those savings in mortgages, loans, stocks, bonds and other securities and to share in any profits or losses that result.

Bristol & West (B&W) was a former mutual building society in the United Kingdom (UK), one of the first to be demutualised to become a publicly traded bank in 1997. Bristol & West had its headquarters in Bristol, England, UK. B&W became a division of the UK arm of the Bank of Ireland in 1997.

Kent Reliance is a banking services provider and trading name of OneSavings Bank plc, based in Kent, England. It was founded in 1898 as the Chatham & District Reliance Building Society, changing its name to the Kent Reliance Building Society in 1986 following the merger with the Herne Bay Building Society.

Norwich & Peterborough Building Society (N&P) is a trading name of Yorkshire Building Society based in Bradford, West Yorkshire. Formed by the merger of the Norwich and Peterborough building societies in 1986, at the time of merger with YBS, it was the ninth largest building society in the United Kingdom, with assets in excess of £4.9 billion.

Terminating deposits were a form of savings-and-loan that were one of the key products of the early building society movement in the UK and from there they spread through what is now the Commonwealth. They were banned in the UK around 1910, and are now illegal everywhere, the last vestiges being seen in New Zealand.

<span class="mw-page-title-main">Cheltenham & Gloucester</span>

Cheltenham & Gloucester plc (C&G) was a mortgage and savings provider in the United Kingdom, a subsidiary of Lloyds Banking Group. C&G specialised in mortgages and savings products. Previously, C&G was a building society, the Cheltenham and Gloucester Building Society. Its headquarters were in Barnwood, Gloucester, Gloucestershire, England. C&G was closed to new mortgage and savings business on 9 September 2013.

Credit unions in the United Kingdom were first established in the 1960s. Credit unions are member-owned financial cooperatives operated for the purpose of promoting thrift, providing credit and other financial services to their members.

Heartland Bank is a New Zealand owned bank that was created in 2011 through the merging of four financial organisations. Heartland was granted its bank registration by the Reserve Bank of New Zealand in 2012. It specialises in motor vehicle loans, reverse mortgages, small business finance, livestock finance, savings, investments and deposits.

References

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Further reading