The mutuality issue
Mutuality means a system where an organisation is owned by its members and run in their interests. There are no outside shareholders wanting a slice of the profits. Building societies are mutual bodies, and so are friendly societies. However, many famous building societies have changed their spots to become stock market quoted banks. Conversion means cash windfalls for members – but is this just short-sighted thinking?
The lack of outside shareholders means that mutuals are usually able to offer better deals to their members. In the case of a building society this means generally better rates for savers and cheaper terms for borrowers. A windfall is not necessarily a better deal. If you’re a borrower, for example, cheaper mortgage rates if the society remains mutual will make up for your windfall in just three years with bigger savings in store in the future.
If you are a saver there are two things to consider. If all the building societies became banks, competition on the High Street would be decimated. It is precisely this competition which prevents banks from offering even worse deals to their customers. So the end of building societies would mean everyone getting a worse deal. Secondly, there’s a moral question. Windfalls come from society reserves built up over decades and which helped them ride out the recession of the 1980s. Do you really have the right to raid them for your own benefit, especially if you opened an account with the bare minimum deposit, just in the hope of a windfall?