4. Financial Structure of the Building Society Sector

This chapter presents an analysis of the key issues faced by building societies in today’s financial markets. We discuss the key changes in the structure of the industry and how these have impacted on margins and profitability and have resulted in restructuring and consolidation in the sector. Although banks and building societies broadly compete in the same markets and are subject to the same regulatory requirements, there are key differences in their business model. A building society’s customers are also its owners. Recent studies highlight a higher degree of customers’ satisfaction and trust in building societies compared to banks. This is also reflected in the lower amount of fines levied against societies for misconduct. While the overall outlook is positive, challenges remain, particularly arising from regulatory changes and financial innovation.