View from City Road: Tension mounts over building societies

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The Independent Online
The prospect that the Treasury might stop banks from gobbling up building societies has doubtless sent a shiver down the spines of the many corporate financiers busying themselves with plotting such lucrative potential marriages. They should take cheer, however. All is far from lost.

Undoubtedly the Building Societies Commission has been lobbying hard, arguing that the mutual society movement should be 'protected' from the predatory likes of Lloyds - loftily ignoring that it was Cheltenham & Gloucester that approached the bank about a takeover in the first place.

Publicly neutral but privately horrified by the prospect that at this rate building societies (and their jobs?) will disappear within a few years if the banks are allowed to bribe society members to agree to such deals with big cash payments, the BSC is keen to have a second line of defence if Monday's court case on whether the payments are illegal should fail. A legislative block sponsored by the Treasury would do nicely.

But how firm a friend the Treasury would prove in such an event - especially given the likely determined opposition from the deregulatory, pro-competition members of the Cabinet, remains to be seen. Especially given that it is not only the members of C&G, looking forward to windfalls of up to pounds 10,000, who would be disappointed with a 'no' decision or a legislatively overruled 'yes'.

More than 10 teams of corporate financiers have been hard at work concocting similar deals. For years the City has cast its eyes longingly on the societies' pounds 14bn of reserves, although it took Lloyds and C&G to set the process in motion.

If it is true that the Treasury has been persuaded by the BSC's line, it should think again. The members of C&G, who own the society, should be the people to decide what should happen to it.

This does not necessarily mean that the floodgates should be opened for every conceivable takeover deal. The existing hurdles, already onerous, should be kept in place. The prospect of punters moving hot money into any and every potential target is not a happy one.

But if an institution wants to buy a society, and the members agree, why not?

It is strange indeed to see the Treasury apparently lining up on the side of the interventionists. Perhaps the thought of the Bank of England adding the building societies to its bailiwick is simply too much for it to stomach.