Societies close doors to speculators
The flood of so-called hot money now sloshing around the building societies has been caused by the flurry of merger deals involving Halifax and Leeds Permanent, and Cheltenham & Gloucester and National & Provincial. Societies are now moving to stop investors "betting" with modest sums at institutions they feel might be next on the merger list.
Woolwich building society, seen as a possible merger candidate, has increased its minimum balance from pounds 100 to pounds 500. Anyone wanting to open an Instant Options account at Chelsea must now deposit a minimum of pounds 1,000 instead of the previous pounds 100. Alliance & Leicester says the situation is under review. Nationwide says it would consider a change if it saw a marked upswing in the number of new accounts.
Justifying its 10-fold increase in its minimum deposit, Chelsea said: "We, like the rest of the industry, are concerned about the effect of a large number of inactive accounts. We would also underline the serious intention of our board of directors to remain independent."
At Yorkshire Building Society, up to 400 new accounts are being opened every week at its 134 branches - a much higher rate than normal. Nationwide says new accounts are being opened at three or four times the normal rate. Some building societies are concerned that the number of new, low-deposit accounts being opened is de-stabilising and costs too much to administrate.
Yorkshire said it took staff up to 15 minutes to open a new account, which could affect the service. Accounts with low balances can also cost building societies more to administrate than the value of deposit.
Another proposal that could stop the tide of "hot money" is to consider paying loyalty bonuses to members who stay with one society. Britannia says it hopes to introduce a system of loyalty schemes next year. Bradford & Bingley says it is "exploring all options" on bonuses while Alliance & Leicester says it will talk to customers to establish their preferences.
However, some in the industry remain dismissive of the outbreak of building society roulette. John Wriglesworth of Bradford & Bingley said: "It would be a complete waste of money for anyone to put pounds 100 in our society simply to take advantage of a possible merger, because we'd sooner die than convert. But if some poor deluded soul wants to, we're not going to stop them."
Money, Weekend page 23
Building society bid targets
Woolwich pounds 500 Chelsea pounds 1,000
Alliance & Leicester pounds 100
Britannia pounds 100
Bradford & Bingley pounds 100
Nationwide pounds 100
Northern Rock pounds 100
Yorkshire pounds 100
*to guarantee membership
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