At the beginning of this century there were more than 2000 building societies, fiercely independent mutual organisations, formed in the spirit of Victorian self help. There are now just 71. Some of these that have disappeared were terminating societies with a fixed wind up date. The last "terminating" society was the Fist Salisbury which wound up in 1980. Other societies have been swallowed up in take-overs or converted into banks in the great 1997 demutualisation.

This assignment will discuss this trend with particular reference to the potential costs and benefits in the short and long term. This assignment will examine the costs and benefits to the building societies as well as those to the members and staff.

The Costs and Benefits to the Building Society

Conversion to plc status is seen as having the major advantage that there would be freedom from the limitations imposed by the Building Societies Act 1986, 1997 the statutory framework for the Building Society industry. The restrictions the Act impose include the following:

1) 75% of all lending has to be secured against residential property

In 1997 a number of building societies decided to give up their mutual status in favour of plc status. These conversions and take-overs resulted in a number of windfall payments to society members. These windfalls were in the form of cash or free shares. The size of windfall varies from society to society, but investors due to receive windfalls from all the building societies that surrendered their mutual status during 1997 (Halifax, Northern Rock, Alliance & Leicester, Woolwich, Bristol & West) can expect shares worth an average total of about L6,000 (IC vol. 120/1524 page 34).

3) The plc becomes open to possible take-over bids

much regarded as lenders to businesses. As a result of the Building Societies Act 1997, building societies are now also able to :

In general building societies have low levels of bad debt relative to banks. The lower levels of bad debt can be put down to the loaning restrictions set down by the Building Societies Act 1986, 1997 (e.g. 75% of loans must be secured against residential property).

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Approximate Word count = 2755
Approximate Pages = 11 (250 words per page double spaced)