Not so very long ago the public had limited yet clear-cut choices in coping with life's major financial decisions. Need a mortgage? Best steer clear of banks with their usurious rates of interest, opt instead for a savings account at one of the many friendly (in every sense) building societies, whose raison d'etre was to altruistically advance loans to members at preferential rates of interest. Need a more modest loan? The credit union, also operating on the principle of members' mutual interest was, and still is, the most cost-effective lender. Now, when possession of a piece of plastic allows instant access to easy credit and a simple phone call will unlock substantial finance with minimum formality, the lines of demarcation between banks and the multiplicity of other lenders are increasingly blurred. With some supermarket multiples providing financial services, such as current accounts, life insurance and pensions, alternative banking facilities can be picked up along with the weekly shopping.
How long, one wonders, before the still user-friendly credit union movement set up a treasury division and start dealing in pork bellies and copper futures?
This week the First National Building Society ended months of conjecture by formally indicating its intent to follow the Irish Permanent onto the stock market. Good news, it could be argued, for the quarter of a million borrowers and savers who will benefit from a windfall of free shares and cash next year when the society goes public in an offering which could carry a price tag of up to £400 million. Of course high-principled members can reject payment for their votes and, unlike Saul on the road to Damascus, say `no' to conversion, as has happened in Britain. First National, however, believes that the blinding light of inexorable market forces can no longer be resisted, the business requiring fresh capital to support its foray into broader-based financial services.
Spilling a little rain on the First National parade is the Consumers Association of Ireland who this week annoyingly pointed out some of the pitfalls associated with conversion. The association believes that, while some members, directors and the pantheon of professional advisers will do very nicely thank you, it is long-term members who will lose out. Short-term cash windfalls are ultimately paid back by customers with a post-conversion tendency for higher interest rates on mortgages and lower rates for depositors. Saul, blinded by the light, meditated for months before becoming the born-again Paul. FNBS members have until the extraordinary general meeting, likely to be called early next year, to mull over their decision. Paul met a disagreeable end. Tradition has it that Emperor Nero had him beheaded sometime between 62 and 68 a d. Not a good long-term return on personal investment.
