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Society tries to slip free-share punch

THE unwelcome approach from Abbey National has led National & Provincial Building Society to close the book on new savings accounts in the attempt to defend itself.

New deposit accounts with similar terms will be announced this week, to try and continue to attract new funds which will sustain the lending business. But customers holding deposit accounts are reminded that only borrowers and investors with share accounts have membership rights.

Deposit accounts, new or old, do not qualify for membership and would not be entitled to the free shares which a predator such as Abbey National would offer to win the vital support of members in securing an agreement for a takeover.

But Abbey National's decision to break with protocol and precedent and go over the heads of the National & Provincial board to appeal direct to the members is a significant move. Unlike quoted companies, where shares, not heads, count in a vote, the fate of building societies is equally in the hands of all its members, large and small.

The annual meeting of the National & Provincial in Bradford last Wednesday loudly applauded local councillor Eric Sunderland when he said his main concern was that the society should stay in the city.

But the 150 mainly elderly members in attendance were generally Bradford locals. The bulk of the membership of 1.7 million lives outside the city, and the outcome of the votes at Cheltenham & Gloucester on the merger with Lloyds has shown that loyalty to an institution now ranks behind the prospect of cash or free shares with most society members.

On a flat-rate basis, the inducements that a small-scale member of a building society now expects to receive are far more generous than a small shareholder in a quoted company could hope for, and will be be much harder to resist.