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Thursday, January 7, 1999 Published at 11:41 GMT

Business: The Company File

Building societies rally defences

Are building societies an endangered species?

Leading building societies are looking at the legal avenues open to them to fend off the latest moves to force the mutals to convert to banks.

'Carpetbagger' Michael Harden and Adrian Coles argue the case
Six leading building societies met in London on Wednesday after Michael Harden, the former butler and a self styled carpetbagger, launched a campaign last week to force a members' vote on conversion.

The six are include the Britannia, Chelsea, Leeds & Holbeck, Portman, Skipton and Yorkshire building societies.

Director general of the Building Societies Association, Adrian Coles, said the meeting discussed how to ensure they meet legal obligations to their members in defence of mutuality status.

"What they have emphasised is that they remain absolutely convinced that their mutual status is the best for their members," he said. However, the mutuals would conduct separate campaigns to try and ward off each conversion move.

The societies are coming under increasing pressure from so-called carpetbaggers who are chasing windfall payments that will occur if the financial institutions float on the stock market.

Sent to Coventry

However the Coventry Building Society has thrown out demands that it should convert to a bank and rejected attempts by Mr Harden to get elected to its board.

Simon Gompertz: building societies at panic stations
The country's second biggest building society, the Bradford and Bingley, has been forced by some of its members to call a vote in April on whether it should convert to a bank.

The Bradford and Bingley has halted new account openings to try and prevent carpetbaggers forcing the society to lose its mutual status. Analysts estimate than two million members of Bradford and Bingley could receive a windfall of around £1,000 if it does convert to a bank.

Mr Hardern has told BBC Radio 4 in a debate with Mr Coles that society members would be financially better off if their institutions became companies because of the free shares to which they would automatically be entitled.

"Building societies exist to serve their members, and if members are better off getting £2000 now, £3,500 in the case of Britannia, it makes sense to me."

Mr Coles said that society members enjoy better interest rates which would far outweigh any one-off conversion windfall over the long term.

He said two independent surveys have confirmed that building societies across the board offer lower interest rates on mortgages and higher savings returns.

Big winners

Jeremy Batstone: building societies haven't made good banks
A wave of building societies have converted into banks since Abbey National first took the plunge in 1986. In 1997 £35bn was paid out to members after the Halifax, the Alliance & Leicester and Woolwich, among others, floated on the stock market.

The Nationwide, the largest remaining building society, narrowly avoided conversion after winning a recent vote from shareholders by a very narrow majority.

Mr Hardern said he hadn't given up on his campaign to force a change at Nationwide.

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