Ans1.A building society is a mutually owned organization whose prime business is to offer mortgages and savings accounts. Building societies generally offer a better deal to the consumer because they do not have to pay dividends to shareholders. Abbey National Building society was formed with the merger of Abbey Road and the National Building Societies on 1 January 1944.In 12 July 1989, Abbey National converted to plc and floated on the London Stock Exchange. The share price on conversion was 1.30.
Abbey National is the sixth largest bank by assets (as at July 2002) in the UK, the 16th largest in Europe, and the 30th largest in the world. It is the second largest provider of mortgages and savings in the UK. To covert to a Plc. Abbey National passed a resolution enabling it to convert to plc, and bank, status. This was an option given under the Building Societies Act 1986.
The banking industry is growing. Building societies currently account for about 20% of all outstanding residential mortgages in the United Kingdom and about 18% of all personal sector deposits held by building societies, banks and National Savings. A number of societies also offer related products such as offshore deposit accounts, cheque
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also sell a range of insurance products. One society owns its own life insurance subsidiary, but most of the remainder sell or arrange the provision of products ‘manufactured’ by life insurers, acting as independent financial advisers, tied agents or introducers under the polarization provisions introduced under the Financial Services Act 1986. Societies also typically sell house and contents insurance to home buyers. Outside the personal sector, societies are active in lending to housing associations and a number also have small commercial loan portfolios; on the other side of the balance sheet they raise about 20% of their funds from the wholesale money markets, rather than individual investors.
Banking industry witnessed dramatic changes in the past decade. Banks and Building societies concentrated more on SME(small and medium enterprises ) with competitive offers like Unsecured lending. Entry of foreign lenders made the industry highly competitive.Credit card issuers like Capital One,MBNA etc play a major role in the Industry. Base rates have remained stable for a long time. Indeed the Bank of England’s Monetary Policy Committee has not moved rates since November 2001 – a number of institutions, both banks and building societies, have reduced their savings rates.
Yet Building societies offer cheaper mortgages, high interest savings accounts and a range of other attractive products. They have a strong share of both the savings and mortgage markets and continue to win awards from independent bodies for both service and interest rates. Abbey National operates in a highly regulated industry. The Group’s principal regulator is the Financial Services Authority. The Group participates in the relevant ombudsmen schemes and is a signatory to the codes of practice issued by the British Bankers’ Association, Council of Mortgage Lenders, Association of British Insurers and Finance and Leasing Association.
The culture of an organization refers to the unique configuration of norms,values,beliefs,ways of behaving and so on that characterize the manner in which groups and individuals combine to get things done. In simple words ‘it is how things are done there’.It is typical of the organization ,the habits, the prevailing attitudes,the grown-up pattern of accepted and expected behaviour. Many believe that Abbey National’s decision to convert to a public limited company as opportunistic because Abbey National was UK’s second largest building society in 1989 with assets of more than GBP 18 billion and reserves of GBP 750 million. Service to the community had been reduced to the extent that over a thousand of Abbey National’s community branches had been closed by 1996.
But if we consider Abbey National’s culture we can realize that Competition was the catalyst for change . In response to the highly competitive nature of the financial services marketplace, Abbey National have made a strategic decision to convert to a public limited company. Abbey National was committed to creating a culture of equality, opportunity and diversity among its staff. This is based on the fundamental belief that all employees should be treated with equal openness, honesty and respect. At Abbey National, they regard all their employees as partners in the business. They recognise, respect and value individual differences, acknowledging the distinctive contribution that each person makes to the success of the business. This commitment to valuing people as individuals underpins their desire to be the financial services employer of choice in the UK.
The most important aspect of Abbey National is the absence of so called ‘Confined Role Culture’ ie Working solely within one’s specialist role – not crossing boundaries or disturbing existing role structure. Every individual has its own identity above the defined authority, relationship, rules, procedures, job outlines and descriptions. Each and every staff is exposed to constant skills development to solve new and more complex problems.This drives standards higher.
Competitive culture within Abbey National always faced problems from BSA(Building societies Assosiation). Even after the Building Societies Act was passed in 1986, limits were still being placed on the services building societies could offer customers and the way in which they could raise funds to finance expansion.This hindered Abbey National’s potential growth. At this time, the market in general was becoming increasingly deregulated and fiercely competitive. The ‘Big Bang’ in 1986 had broken down the traditional barriers and, as a result, banks, centralised lenders and even high street retailers were offering a range of financial products and services.
Abbey National had already shown its independent nature in 1983 by leaving the building societies cartel which fixed basic mortgage rates. Abbey National Management have decided we are not going to waste our valuable work force potential.Thus in 1985 Abbey National announced that it has plans to convert to a plc and it did in 1989. Abbey National’s competitive task culture was one the main reason for its conversion to a PLC.
Abbey Nationals task culture allows its employees to develop and apply own abilities and skills to the full.The Competitive task culture within Abbey National is the main reason for its conversion. It is said that belief and expectations produce norms. Abbey national took advantage of those competitive expectations and beliefs that powerfully shaped the behaviour of individuals and groups in the organization.