SHY GIANTS ENTER THE EUROMARKETS
When 25 million people are willing to lend you their money at less than market rates, there's really no need to trouble about commercial borrowing. Until the beginning of the 1980s, Britain's building societies were in that happy position.
The 273 societies active at the time conducted a 50 billion circle of savings and home purchase loans isolated from the rest of the financial world by interest rates two, three and, for a brief stretch in the mid-1970s, six points below the rest of the market.
Now, with total assets of over 115 billion, 56% of which are in the hands of the top five of the remaining 190 societies, these formerly shy financial giants are being forced by competition for savings to come out of hiding and tap the world capital markets for funds.
Legal restrictions dating back to their formation as local thrift societies, grounded in principles of Victorian prudence, didn't even allow building societies to pay interest gross on wholesale loans until three years ago. Within weeks of being allowed to pay interest gross, the societies were a major force in the domestic capital market with a steady flow of Certificates of Deposit issued at a discount, or pitched with coupons as keen as any major bank's.