Critical Perspectives on the Evolution of American and British Banking
Edited by Matthew Hollow, Folarin Akinbami and Ranald Michie
Chapter 6: Demutualization and risk: the rise and fall of the British building society
This chapter charts the development of the mutually owned building society in the UK as a means of providing a small and simple range of financial services to consumers in the nineteenth, twentieth and twenty-first centuries. The decline of the size of the sector in the late twentieth century is described, and this is identified as an unforeseen consequence of a small legal change in the Building Societies Act 1986 which permitted conversion of a mutual building society into a registered limited company with a share capital. The large number of consequent conversions and takeovers is noted. A legal change which was motivated by a desire to increase competition for consumers, in fact resulted in a reduction in competition and in the removal from the marketplace of financial services providers who had a simple and distinct product offering and ethos. Some restrictive features of building society legislation are identified and comments are made about the consequent financial stability of these necessarily conservative entities.
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