A Guide to Building Societies in England

Building societies in England have a rich history, dating back to the 19th century. They were initially formed to provide affordable housing for working-class people.

The first building society, the Equitable Building Society, was established in 1860. It was a mutual organization, owned and controlled by its members.

In 1986, the Building Societies Act gave building societies the power to convert to banks, but many chose to remain mutuals. Today, there are over 40 building societies operating in England.

Building societies are known for their customer-centric approach, often offering more competitive rates and better customer service compared to banks.

Demutualisation was a significant change in the UK building society landscape. This process allowed building societies to convert into limited companies, offering shares to their members in exchange for their mutual rights.

The first demutualisation was that of the Abbey National Building Society in 1989. This was followed by eight more societies demutualising between 1995 and 1999, accounting for two-thirds of building societies' assets as at 1994.

These demutualised societies either became joint stock banks, merged with other companies, or were taken over by larger financial groups. For example, Abbey National became a plc and was later acquired by Banco Santander, while Cheltenham and Gloucester was taken over by Lloyds Bank.

Here's a list of the ten building societies that demutualised between 1989 and 2000:

Northern Rock (Asset Management)1997Nationalised 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, with remaining riskier mortgage business retained by the government and renamed NRAM plc (now Landmark Mortgages Limited).The Woolwichconverted to plcBarclays1997Now 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 Midshirestaken over byHalifax1999Now owned by Lloyds Banking Group. The brand name is still retained, but running entirely by post and internet.Bradford & Bingleyconverted to plc2000Nationalisation with sale of savings book to Abbey (now Santander).

Demutualised building societies in the UK were a result of changes in banking laws in the 1980s. The Building Societies Act of 1986 allowed societies to demutualise, or become a limited company, if more than 75% of members voted in favour.

Between 1989 and 2000, ten building societies demutualised, either becoming a bank or being acquired by a larger bank. The first to demutualise was the Abbey National Building Society in 1989.

A number of these demutualised societies were acquired by larger financial groups. For example, Cheltenham and Gloucester was taken over by Lloyds Bank in 1994, while National & Provincial was taken over by Abbey National in 1995.

Here are the fates of the ten demutualised building societies:

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.

British building societies have a unique funding structure that's different from banks. They're not allowed to raise more than 50% of their funds from wholesale markets.

This limitation can be a significant disadvantage compared to banks, which have a diverse array of funding sources, including open markets, bond issuances, and investments in commercial markets.

Some building societies, however, made the same investment decisions as banks before the financial crisis and suffered the consequences. Barnsley Building Society, for example, was acquired by Yorkshire Building Society in 2008.

Derbyshire Building Society and Dunfermline Building Society also faced similar challenges and were eventually acquired by Nationwide Building Society in 2008 and 2009, respectively.

A building society roll number is a reference code composed of letters and numbers.

It's generally an eight-character code, but sometimes it can be longer.

You won't need it most of the time, but if you're making an online payment to an account with a roll number, include it as the reference.

You can usually find your roll number on your card, statement, or in your passbook, depending on the type of account you have.

The Building Societies (Funding) and Mutual Societies (Transfers) Act 2007 gave building societies greater powers to merge with other companies, which was used by the Britannia in 2009 and Kent Reliance in 2011.

This led to their demutualisation, a significant change in the way these societies operated.

The Financial Services Compensation Scheme (FSCS) protected deposits up to £50,000 per individual, per institution, until 31 December 2010.

In 2008 and 2009, Nationwide and Yorkshire building societies negotiated a temporary change to the FSCS terms to protect their members after mergers.

This allowed former members to maintain multiple entitlements to FSCS protection until 30 September 2009, which was later extended to 30 December 2010.

The 1980s and 1990s were a time of significant change and growth.

The personal computer revolutionized the way people worked and communicated, with the IBM PC released in 1981 and the Apple Macintosh in 1984.

This period also saw the rise of the internet, with the first domain name (symbolics.com) registered in 1985.

In 1991, the World Wide Web was invented by Tim Berners-Lee, making it easier for people to access and share information online.

The 1990s also witnessed the emergence of mobile phones, with the first text message (SMS) sent in 1992.

In the 2000s and 2010s, the UK's building society landscape underwent significant changes. The Building Societies (Funding) and Mutual Societies (Transfers) Act 2007, also known as the Butterfill Act, was passed in 2007 giving building societies greater powers to merge with other companies.

This led to the demutualisation of Britannia in 2009 and Kent Reliance in 2011, allowing them to merge with other companies. Prior to 2010, deposits with building societies were protected by the Financial Services Compensation Scheme (FSCS) up to £50,000 per individual, per institution.

Nationwide and Yorkshire building societies negotiated a temporary change to the FSCS terms in late 2008/early 2009, allowing former members of multiple societies to maintain multiple entitlements to FSCS protection until 30 September 2009. The general FSCS limit for retail deposits was increased to £85,000 for banks and building societies on 31 December 2010.

The transitional arrangements in respect of building society mergers came to an end on 31 December 2010.

Building societies in England have a lot in common with credit unions, but they also have some key differences. One key similarity is that both provide financial services to their members, such as loans and savings accounts.

Both building societies and credit unions are member-owned, which means that members have a say in how the organization is run. This can lead to more personalized service and better interest rates for members.

However, building societies are generally more established and have a longer history than credit unions, with some dating back to the 19th century. This has given them a more stable financial foundation and a wider range of services.

Building societies are unique organizations that offer a range of financial services to consumers. They're not publicly traded companies like banks, which means they're not accountable to shareholders.

One of the key differences between building societies and banks is their ownership structure. Building societies are owned by their members, each of whom has a vote. This means that the interests of the members come first, rather than the interests of external investors.

Building societies are also restricted in how they can raise funds. They can't raise more than 50% of their funds from the wholesale market, which gives them a strong incentive to offer competitive interest rates to savers.

Here's a comparison of the ownership structures of banks and building societies:

This difference in ownership structure has a significant impact on how building societies operate. They're more focused on serving their members and providing competitive financial services, rather than maximizing profits for external investors.

Similar organisations can be found in other countries, with varying structures and purposes. In Austria, for example, there are four co-operative banks: Allgemeine Bausparkasse (ABV), Raiffeisen-Bausparkasse, Bausparkasse Wüstenrot AG and Bausparkasse der Sparkassen (savings bank).

In Finland, the Mortgage Society of Finland was founded in 1860 and has been handling mortgage loans through its licensed bank, Suomen AsuntoHypoPankki, since 2002.

Germany has a unique system, with 8 Bausparkassen of the Sparkassen-Finanzgruppe (Landesbausparkassen) and 12 private Bausparkassen, such as Schwäbisch Hall and Wüstenrot.

In the United States, savings and loan associations, as well as credit unions, have a similar organisation and purpose to building societies.

Denmark's Realkreditinstitut issue low-interest rate bonds tied directly to the home's value, covering up to 80% of the home's value, and additional loans are needed for the remaining amount.

Here's a brief overview of these similar organisations: