Page "Building society" Paragraph 15

Instead of deploying their margin advantage as a defence of mutuality, from 1980 building societies, in behaving like profit maximising banks, set mortgage rates with reference to market clearing levels.

Thus, according to the Bank of England's Boxall and Gallagher ( 1997 ), "... there was virtually no difference between banks and building society ' listed ' interest rates for home finance mortgage lending between 1984 and 1997.

This behaviour resulted in a return on assets for building societies which was at least as high as Plc banks and, in the absence of distribution, led to rapid accumulation of reserves ".

As Boxall and Gallagher ( 1997 ) also observe ; "... accumulation of reserves in the early-1990's, beyond regulatory and future growth requirements, is difficult to reconcile with conventional theories of mutual behaviour ".