Thursday, February 6, 2014

The Decline of Britain's Not-for-Profit Mutual Banks

200px-Nationwide.svgThe Economist reports that Britain's mutually owned, not-for-profit banks are increasingly converting to shareholder owned, for-profit institutions or collapsing.  These "building societies," which dominated the residential mortgage market in the 1970s, have suffered from a variety of ailments, including poor management, high-risk lending, and a push for demutualization.  Interestingly, the Economist appears to regret this development, noting the continuing success of Nationwide Building Society and commenting that "The model is worth preserving. Mutuals have tended to offer better customer service; on average, they generate fewer complaints than other lenders. The fate of British mutuals notwithstanding, studies by the Bundesbank and the IMF suggest that, overall, mutual banks are more stable than their more commercial counterparts."

Lloyd Mayer

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