TAPPING THE WORLD'S CAPITAL MARKETS
ONE FORECAST OF BUILDING societies' future wholesale funding requirements suggests that, by 1990, their total worldwide capital market borrowings will have increased tenfold to over 60 billion pounds.
It is an extreme forecast, based on assumptions of an annual compounded growth rate of 15% over the next four years -- taking the industry's total assets beyond 240 billion pounds -- and a rise from 6% to 25% in the average level of their wholesale balances. Yet, if past evidence provides any pointer to the future, it is the extreme forecasts that come closest to the mark when attempting to chart the societies' progress.
Five years ago, the societies were only just beginning to discuss the possibility of supplementing their inflows of retail deposits by tapping the wholesale money market. They were concerned about maintaining their position as the primary source of home loans in the UK in view of the sharply rising cost of raising retail funds and the seemingly insatiable demand for mortgage finance. Forecasts at the time suggested that mortgage demand could rise to as much as 19 billion pound a year by the mid-1980s. Those figures were widely viewed as exaggerated and were treated with some scepticism.