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UK Money
Both banks and building societies are
prominent features on the British high
street. Both offer a wide range of products
and services, often products and services
that are very similar. In the recent credit
crunch much has been made of the instability
of the large financial institutions, most
commonly banks, but much less has been made
of how the building societies are coping
with the problems.
So what are the main differences between
building societies and banks? Primarily
banks are listed on the stock market and are
therefore owned by their shareholders and
accordingly run for their shareholders. This
means that they have to pay dividends to
shareholders which comes out of the profits
of the banks.
Accordingly building societies, free of the
necessity of having to pay dividends to
shareholders, often claim that they can
offer better rates when it comes to interest
on saving accounts and cheaper mortgages.
Building societies have traditionally been
set up as mutual institutions. This means
that consumers who take out accounts become
members and have the right to vote on any
issue that affects their society, most
prominently on proposed takeovers. Each
member has a single vote regardless of how
much they have saved or borrowed.
Traditionally they only lent within a
certain catchment area, inspiring a small,
community based feeling, but local societies
who were successful have become more
nationwide, as is the name of one of the
biggest British building societies. As such
there is no need to look for a building
society based in your area, as there is
almost certainly at least one on your high
street.
In recent years there have been big changes
in the market, and as building societies
become national there are very little
practical differences between banks and
building societies. Many of the latter group
are no longer mutual, and when they do they
become banks in all but name. Some groups of
building society savers have been trying to
get these institutions to turn into banks in
the hope of securing a windfall.
These changes mean that for many, the days
of building societies are numbered and that
they will become banks. Large bases and
international conglomerates mean that banks
can offer deals to match or surpass that
found in building societies. Still, the
presence of certain high profile building
societies on the high street suggests that
there is still a place for mutual societies.
One of the reasons why building societies
may soon disappear is because of the
competition posed by large conglomerates,
such as the Santander group – of which
Alliance & Leicester has just become a part.
These large conglomerates, even with the
credit crunch, are in a position to offer
excellent value deals on
bank accounts and
loans in a way that other groups are
not. If you are looking to open a bank or
savings account Alliance & Leicester is a
good place to start your search.
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