What Is A Building Society?

Throughout the UK you can find branches of large, multinational banks on
almost every High Street. These banks are well known, well recognised
and generally well understood. Alongside them, though, you will often
find a Building Society. Traditionally, these only offer their services
to people who live within a local catchment area and the societies are
regional rather than national. As time has gone on this is not so much
the case and many building societies accept customers...

Throughout the UK you can find branches of large, multinational banks on
almost every High Street. These banks are well known, well recognized
and generally well understood. Alongside them, though, you will often
find a Building Society. Traditionally, these only offer their services
to people who live within a local catchment area and the societies are
regional rather than national. As time has gone on this is not so much
the case and many building societies accept customers from anywhere in
the country, offering services by telephone and internet to help those
who do not live near to a branch.

So, what is the difference between a bank and a building society? Well,
banks are generally listed on the stock market and as such are run by
shareholders. Building societies are not on the stock market and so do
not have to pay shareholders any dividends as they do not have
shareholders. The societies claim that this enables them to pay more
money directly to their customers by way of higher interest rates on
savings accounts and cheaper mortgage rates for borrowers.

When a building society is first set up, it is done so as a mutual
institution. This means that every single account holder is also a
member of the institution and as such has certain rights when a decision
is made. In some circumstances an issue can be put to a vote. At times
such as these every customer gets a vote, whether they have one pound or
a million pounds in their account. Each vote has the same level of
importance as the next and so customers truly feel that they have the
opportunity to be involved in the running of the business.

Many building societies now have sold off their mutual institution
status, giving their members a lump sum instead. These companies have
then been listed on the stock market and morphed into traditional banks.