Offshore Building Societies

Victoria Hartley charts the progress of building societies that became banks and
those that retained their mutual status

The word mutual has always had a nice ring to it and considering the enduring popularity of the humble building society, it seems the appeal hasn’t begun to fade. Combined with the gravitas of history, mutual or building societies also have a natural advertising advantage with the sort of reliable brand image banks try extremely hard to cultivate. Building societies haven’t essentially changed their mission statement much since the early days.

Offshore Building Societies - First Recognisable Building Society

Nowadays, the raison d’etre of building societies is still savings and mortgages and demand is stronger than ever. Mutual societies in total hold over £160 billion of British householders’ cash. Deposit accounts are the final destinations for £110 billion, or the vast majority of those funds.

Business for building society type products and services is clearly also flourishing in the offshore world. And why not, with product providers consistently offering the highest interest rates to customers on their savings?
Regardless of the form of these institutions - whether building societies, building society wholly owned subsidiaries or demutualised institutions with a historic commitment to these product lines - consistently competitive rates on deposit accounts remain the uniting factor. (see the 2001 Offshore Deposit Takers Award winners - Box one).

Offshore Building Societies - Definition Of A Building Society

“These are the big numbers on our balance sheet, alongside island based mortgage lending,” says Chris Bradshaw, managing director of Bristol & West International. The 1986 Building Societies Act, however, was also the modernising catalyst for many institutions, as it empowered UK building societies to broaden out into banking services.

And broaden they did. In recent years many offshore providers have diversified into current accounts, credit cards, insurance and estate agency services, with the majority also offering these over the internet. However, many building societies have never attempted to occupy the same territory as their banking competitors. Many resolutely remain savings banks through and through. The Derbyshire Isle of Man is one example that was recently lauded for consistently high returns on its Sterling Instant Access account in the Investment International deposit-taker awards.

Offshore Building Societies & The Deposit-Taker

Statistics from the Building Society Association indicate that the extra cost of dividend payouts to shareholders shouldered by banks or demutualised institutions catapult up their running costs by
40 per cent.