I was only 21 years old when I got into an argument with my Bank over being charged pounds for being mere pennies overdrawn. To be slapped with a disproportionately high penalty for such a minor misdemeanour soured my opinion of the high street banks and I quickly told them where to stick their service.
My new choice of current account was with a building society with whom I have stayed for many years now. I also have a savings account with another Building Society. My reason for these choices were simple – the mutual status of building societies is appealing in that they are run by their members for their members; there are no external shareholders extracting money from the society.
All that said it comes as interesting news that Bradford & Bingley, once a building society and, since 2000, a purely commerical bank, is to be nationalised. The B&B found itself in such difficulty, as did Northern Rock, that it was becoming a threat to the financial stability of the country and the government has decided to take it under its wing (costing the taxpayer £40million to boot).
Commenting on the takeover in his blog BBC financial correspondent, Robert Peston, says:
“…nationalisation will be seen as proof that the demutualisation of building societies – which began when Abbey National became a bank in 1989 – has been a colossal failure for both the former building societies and the British economy.
These specialist mortgage lenders were under such pressure to grow their profits, as public companies, that they became reckless adventurers in wholesale funding markets.”
And hence the troubles in the financial markets today. He goes on to say that:
“Every single demutualised building society has either collapsed and had to be rescued or has been swallowed up by a bigger bank.”
Although he does fail to point out that the Nationwide swallowed up the Anglia Building Society, albeit many years ago, the Portman Building Society a little while ago, and, more recently, the Derbyshire and Cheshire Building Societies.
However, it does partially vindicate any decisions to remain with the mutual societies as they have certainly had far less exposure to the risky lending and borrowing policies that have resulted in the recent meltdown.
“The conversion of building societies into banks is an instance where deregulation and the liberalisation of an industry appears to have been an unmitigated disaster.”
That’s damning condemnation of the excesses in the financial sector, particularly for those institutions that were driven by the prize of huge profits, although it remains to be seen if our beloved societies are as safe as houses.