When a building society becomes a bank

innocent_girl

How do account holders get money. What is the criteria for recieving this money? Do they have to be an account holder for a certain amount of time or have a certain amount of money in the account or what? A certain type of account? Thanks.

olly300

What happens nowadays is that if you have a savings account, current account or mortgage the building society will make you sign an agreement that if they were to become a bank any money you would get will go to their designated charity. This is to stop carpet baggers.

If you had an account for years and years then if a bs became a bank you would get shares which you can sell immediately or keep. It's up to the bs to set the rules which means a member can qualify for shares i.e. length of time you are a member, amounts you need to have in your account.

Most bs are not doing anything at the moment due to the uncertain financial climate.

Milarky

Savers need to keep a minimum of £100 in a 'share' (i.e. membership) account at all times. In practice almost all accounts available from building societies are share accounts.

'Signaway' clauses: These state that if you now become a member of a building society you waive the right to receive the same 'compensation' - for a period of time after joining - as other members are entitled to if the building society converts to a non-mutual or is sold to a bank or other non mutual organisation. The period of this waiver is ususally fives year - but sometimes is unspecified - and in the case of Nationwide BS is actually 'for life'.

Practical comment: Because any society needs 75% of members voting in favour of a change - and all members regardless of when they join have a vote - the signaway clause is deemed a 'dead letter'. One recent example (2006) was the demutualisation of Standard Life (not a building society but still subject to the same rules) where the pre-existing signaway clause was removed and both types of customer received free shares irrespective of whether they had been under a signaway obligation

Building Societies are more like to merge and remain mutual: This can trigger payments to members of either or both societies as they remain 'mutual' following merger - so signaway clauses do not apply in this case. However, where the larger society is more than five times the size (by assets) of the smaller one in any merger there is no duty on the board to ask members to vote in approval (same 75% threshold required) This happened when Nationwide merged with the much smaller Portman in 2007. Portman had to consult its members - and gave them all a 'bribe' to get the necessary 75% support. Nationwide didn't have to consult its members however and so nothing was 'offered' to them.

theowl_2

On the Nationwide voting forms for their AGMs there used to be the option to vote for candidates who wanted the building society to become a bank. On the 2008 form this option doesn't seem to be here.

Mark7799

Maybe none of the candidates standing this time are in favour of demutualisation?