building society

Traditionally, a financial institution that accepts deposits, upon which it pays interest, and makes loans for house purchase or house improvement secured by mortgages They developed from the Friendly Society movement in the late 17th century and were non-profit-making with mutual status. These institutions can be found in the UK, Australia, South Africa, Ireland, and New Zealand. The US savings and loan associations are broadly similar organizations. In the UK, the Building Societies Act (1986) greatly widened the range of services they are permitted to offer; this has enabled them to compete with the commercial banks in many areas. They offer cheque accounts, which pay interest on all credit balances, cash cards, credit cards, loans, money transmission, foreign exchange, and valuation and conveyancing services. The distinction between banks and building societies is fast disappearing; indeed many building societies have obtained the sanction of their members to become public limited company This means that they become profit-making banks, owned by their shareholders, instead of non-profit-making societies owned by subscribing members. These changes have led to the merger of many building societies to provide a national network that can compete with the Big Four banks. Competition is well illustrated in the close relationship of interest rates between banks and building societies as they both compete for the market's funds. Moreover, the competition provided by the building societies has forced the banks into offering free banking services, paying interest on current accounts, and Saturday opening. Similar changes have taken place in all the other countries that have building societies. The UK building societies are now regulated by the Financial Services Authority