This morning I received notification from the Yorkshire Building Society (I have a saving account) that they are considering merging with Chelsea BS. Which I think is fair enough and good thing for the mutual sector. Since bringing together the 2nd and 5th biggest mutual societies together will help bring some competition to the Nationwide BS (by far the biggest) and help it compete with the private (and nationalised!) banks.
While I accept the recommendation of the directors that this merger is in the best interests of the Yorkshire BS I am less impressed with the “information sheet” supplied that failed to make clear that the driver for the merger is due to a series of recent major financial “difficulties” experienced by Chelsea BS. Check out this BBC report "In August, Chelsea reported that it had set aside £41m to cover to mortgage frauds, which helped push the society into a half-year loss of £26m... In 2008, it reported a loss of £39m, the largest recorded by a building society. It had to write off £44m, which was the bulk of its investments in two failed Icelandic banks. Chelsea also wrote off a further £15m after buying a mortgage broker in 2007 whose business subsequently collapsed in the credit crunch”.
I think it is really important that the mutual sector is open and honest with their savers and does not treat them as children who cannot be trusted with grown up information. Neither was there any mention of any possible impact of the merger on staff jobs. As savers and policy holders we are the “collective owners” of Yorkshire BS and we should be concerned about what will happen to them.
The mutual sector must be at all times and in all ways ethically better than the private sector. I hope that the “more detailed” information to be sent out later this month before the Special General Meeting will be up to speed on these points.
3 comments:
I'm a Yorkshire member, also minded to follow the directors' recommendation, but I am a bit worried that the Chelsea's problems might be transferred to the larger society. Also, I prefer the idea of lots of smaller financial institutions - we have enough of them already that are "too big to fail". However, I suppose that even the merged society will be relatively-speaking a financial minnow.
Hi David
I think that the Yorkshire has carried out the necessary checks on the Chelsea and that it will not cause a problem (however...we do remember what happened to the Banks and their take over’s). What annoyed me is that the Yorkshire wasn’t in my view upfront and honest about the mess that the Chelsea got itself into in the documents they sent me. The new Society will still be small compared to the Nationwide never mind the private sector.
I wonder if Credit unions will be the future of mutually owned financial organisations. After all aren’t they just a reinvention of the wheel?
Yes, I think the merger probably is the best way forward. If nothing else, I'm motivated to vote YES after reading that some people are advocating voting NO to protest at the lack of windfall.
Interesting thought about credit unions. Given that no new building societies have been created since the Ecology, I've wondered about when the number of building societies will stabilise. However, if you count mutuals and include credit unions, I bet the number of mutuals has actually been rising in recent years.
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