The feeling is not mutual

THE BUILDING society 'movement', as many of its leaders still like to call it, will be on tenterhooks until the middle of June. Not because Sir Donald Nicholls, the Vice-Chancellor of the High Court, is likely to take that long to decide on the legality of Lloyds Bank's bid for Cheltenham & Gloucester - he should deliver his judgment this week.

No, the big teaser for most societies is the outcome of the Treasury's review of the Building Societies Act. That is due to be published soon after Parliament returns from its Whitsun recess on 16 June.

Although it is only eight years old, the Act has been rendered obsolete by the speed at which the mortgage market has changed. The high street banks have elbowed their way into home loans as competition has whittled away profit margins in corporate lending and they have been forced to write off billions in bad debt.

The Building Societies Association submission to the Treasury stressed two points designed to strengthen their defences against the banks.

The first is to protect their sacred mutuality, an item that is not unrelated to the C&G case but also protects them from all manner of marauders and company promoters - while, incidentally, preserving the entrenched control exercised by the managements on behalf of their members, the rank-and-file savers and borrowers.

Secondly, the BSA wants the Treasury to increase - from 40 per cent to 50 per cent - the proportion of funds societies can raise from the wholesale money markets, as opposed to savers' deposits.

A spokesman for Abbey National, which gave up mutual status and converted to a plc in 1989, claimed last week that any society that obtained as much as half its funds from the markets could not truthfully call itself mutual.

The underlying fact is that the larger societies feel increasingly hampered by the requirements of the 1986 Act, particularly in competing for funds. They also face additional regulatory costs in offering certain types of facility to personal customers, including life assurance and credit.

In what has become an intense game of hide-and-seek up and down Whitehall corridors, it is clear that traditional building society directors have been outflanked by a new breed of more ambitious and more politically aware lobbyist.

For several years Andrew Longhurst, chief executive and managing director of C&G, has set the pace in the still-stodgy building society movement, making little secret of the scale of his ambition, both for himself and for C&G.

But, as many insiders have suspected for some time, the real power player is turning out to be Jon Foulds, the former chief executive of the 3i investment group who became chairman of Halifax Building Society in 1990.

In the four years since he became chairman, Mr Foulds has played a straight bat to questions about Halifax's mutual status. However, behind the scenes he has been formulating the daring plan to lobby for the freedom that goes with Bank of England supervision, while retaining the advantages of being a building society.

As Mr Foulds told his members at their annual meeting last week: 'Societies have proved their great value to savers and borrowers. We are undoubtedly seen in a better light by our members than are the banks - all our customer research supports this.'

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