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REPORT ON THE COSTS BENEFITS OF A BUILDING SOCIETY CONVERTING TO A PLC Introduction At the beginning of this century there were more than 2000 building societies fiercely independent mutual organisations formed in the spirit of Victorian self help There are now just 71 Some of these that have disappeared were terminating societies with a fixed wind up date The last terminating society was the Fist Salisbury which wound up in 1980 Other societies have been swallowed up in take-overs or converted into banks in the great 1997 demutualisation This assignment will discuss this trend with particular reference to the potential costs and benefits in the short and long term This assignment will examine the costs and benefits to the building societies as well as those to the members and staff The Costs and Benefits to the Building Society Conversion to plc status is seen as having the major advantage that there would be freedom from the limitations imposed by the Building Societies Act 1986 1997 the statutory framework for the Building Society industry The restrictions the Act impose include the following 1 75 of all lending has to be secured against residential property This means that Building Societies are limited in their participation in the more risky but more rewarding unsecured lending At the moment Societies can make unsecured personal loans up to a limit of 15000 per customer whereas there is no ceiling for Banks Building Societies with less than 100m of assets are not permitted to make unsecured loans 2 No more than 50 of funds may be raised on the wholesale markets This limit was previously 40 before the revised 1997 Building Societies Act Building societies have eagerly taken the opportunity to raise money in the wholesale markets which have frequently proved to be the cheapest source of wholesale funds Wholesale funds are large deposits placed
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