THE decision by members of Nationwide Building Society, Britain's largest, to remain a mutually owned financial institution has upset the hitherto-smooth demutualisation trend sweeping the British banking sector.
Nationwide chief executive Brian Davies called last week's decision to stay mutual 'a clear turning point', and British Prime Minister Tony Blair said 'the right decision was made'.
In opting not to become a publicly listed bank, members have rejected short-term greed, in the form of a one-off free-shares bonanza, in favour of retaining the mutuals' market niche.
Building societies usually charge lower interest rates than banks on mortgages and pay higher rates on deposits.
A key argument against demutualisation has been that the benefits would be paid out as dividends to shareholders.
The Nationwide vote, however, is not expected to stem significantly the tide of building societies which want to convert to banks. The prospect of windfalls of free shares and huge cash payouts has created 'carpet baggers', who deposit GBP1,000 (about HK$12,950) or more in every society tipped to become a bank.
Demand for conversion remains strong in this group, and building societies themselves are attracted by the capital infusions a flotation would provide.