Building Socities how long before they disapper

cheggers

I just can not see how the smaller societies can keep going in this current climate, savings rates are so poor can not see why investors are keeping money with them in 0.1% accounts.

Robert_Sterling_3

There were 5000
Then by the year 2000 they were down below 100
Now there are about 50.

thrupence

cheggers wrote: »

I just can not see how the smaller societies can keep going in this current climate, savings rates are so poor can not see why investors are keeping money with them in 0.1% accounts.

Many people will still be on high fixed rates until around June-October 2009.

I expect we'll begin to see a real impact around summertime.

At the moment it's mostly anecdotal and media stories...

Farway

cheggers wrote: »

I just can not see how the smaller societies can keep going in this current climate, savings rates are so poor can not see why investors are keeping money with them in 0.1% accounts.

My guess would be they wil have to become more competative in savings rates once current savers fixed rates end, may not suit the borroweres but the money has to come from somewhere, and in present climate 0.5 extra from anywhere is better than nothing

opinions4u

I think the OP opens up a wider question.

Financial services in the UK have traditionally been delivered by local banks and building societies.

This has changed over the decades with a wave of mergers, acquisitions, financial crises and globalisation of the wider economy.

A year ago there were over a dozen banks listed on the FTSE. Now there are 5 or 6. And one of those (Standard Chartered) doesn't count for UK consumers.

Is it:
(1) Acceptable to have such limited competition left in the market?
and
(2) If no, how do the powers that be enable competition to spring up and replace the heritage that we have lost?

Can it be made possible for credit unions to be converted in to building societies? If so, how do they meet the necessary capital requirements? And even if they can, how can they compete without the economies of scale that bigger competitors enjoy?

Do we look encourage people like Tesco to build their financial services empire faster?

Should companies like Lloyds Banking Group be forced to return Cheltenham and Gloucester to the mutual sector or float off Intelligent Finance (not that anybody is likely to want to buy it at the moment)?

Will there come a time when the government can sell of Northern Rock or reignite the Bradford & Bingley without a branch network?

I don't have the answers.

But I do think that excessive low level regulation and light touch high level regulation has served to damage the small players who struggle to comply with expensive training requirements while allowing the big boys to stuff us all with their stupid approach to lending.

As it stands, we're left with a high street choice of HM Government, Spain, Barclays Arabia, HSBC or Nationwide. And very little innovation in the market. It's very sad.

Doomcow

would you rather 0.1% or would you rather 0% having it in the house where its easily nicked?

Milarky

opinions4u wrote: »

Can it be made possible for credit unions to be converted in to building societies? If so, how do they meet the necessary capital requirements? And even if they can, how can they compete without the economies of scale that bigger competitors enjoy?

Well it's daft that CUs can't be taken over by non-CUs (perhaps the Butterfil Bill has changed that?) or otherwise be kept going when they get into financial difficulties and have to be wound up instead - that's so '19th Century'. Something has to give there. At one level they are as regulated as high street banks but at the other they have no scope for innovatory products whatsoever. [Dare I say it, they still can pay 'interest' in the conventional sense..]

I thought it was nice (and pretty hopeful) of ZOPA wanting to become an ISA-elligble body. But you get the feeling of the dead hand of Labour on the policy tiller and whilst they let really big fish though they become needlessly officious where it really wouldn't hurt to show some flexible interpretations of rules...

I do think that excessive low level regulation and light touch high level regulation has served to damage the small players who struggle to comply with expensive training requirements while allowing the big boys to stuff us all with their stupid approach to lending.

Yes and no. This crisis has shown the regulators to be out to lunch and also the use of the FSCS levy has had unintended (and, for regulators, unforeseen or at least unacknowledged) difficulties for the BS sector's profitability and prospects. In a parallel move to the 'waive-the-rules' takeover of HBOS by Lloyds, we had the 'big daddy' of the BS, Nationwide, sector 'rescuing' two relatively middling societies - Derbyshire and Cheshire - whereas if they had received comparable treatment to the banks there would have been government money going straight into them - and the Nationwide would have kept whatever financial 'strength' it originally possessed. Perhaps NW's very low rates are partly a reflection of the 'cost' of carrying the liabilities of the Derbyshire and Cheshire.

If anything, regulation has been a 'scatter-gun' IMO - somethimes heavy-handed and sometimes woefully lacking.

Reaper

cheggers wrote: »

I just can not see how the smaller societies can keep going in this current climate, savings rates are so poor can not see why investors are keeping money with them in 0.1% accounts.

Small societies are vulnerable to the whims of the economy simply because they are small. However remember that building societies did not take part in most of the idiocy the banks did for ther simple reason they were not allowed to. Banks had free access to the wholesale markets in a way they didn't.

So I would by no means write them off. Banks are going to be crippled by debt for years to come while the building societies may be able to expand into the void. It could be an opportunity not a threat.

apt

It's the state of the housing market and rising unemployment/repossessions more than low interest rates that is the main threat to the building societies. I've just received Leeds BS results for 2008. No problem with savings volumes. But 'impairment losses' are up from some £6 million to £42 million and the FSCS levy from £300,000 to £9.7 million. As a result profits are down 75%. Needless to say management pay and bonus have held up much better.

cheggers

apt wrote: »

It's the state of the housing market and rising unemployment/repossessions more than low interest rates that is the main threat to the building societies. I've just received Leeds BS results for 2008. No problem with savings volumes. But 'impairment losses' are up from some £6 million to £42 million and the FSCS levy from £300,000 to £9.7 million. As a result profits are down 75%. Needless to say management pay and bonus have held up much better.

I always vote against relection/election of any board members, all over paid.

I bet the board members still get a pay rise this year, when the vast majority of there members wont be getting a pay rise from there employers this year.

theGrinch

I take a different view. I can see a movement to some of these Lloyds TSB/HBOS and RBS size banks demerging with some of the smaller division returning to mutual status. Who knows about the Halifax.

I can also see a case of Northern Rock returning to mutual status one day.

I can see radical changes happening once we get out of this slump and those suggested arent the most radical.

We may see fewer mutual building societies, but we could see them bigger in a bigger sector.