Page 4: Making decisions
Abbey National realised that if it was going to thrive in the 21st Century it would need the freedom of action to diversify and make more use of wholesale funding. Building societies might be left behind if they remained essentially ‘one product’ home loans businesses when banks were moving into their market. Abbey National wanted the freedom to compete with the big banks on a level playing field – which it could not do as a building society.
Historically Abbey National had been ready to break new ground and find new ways of doing things - it was one of the first institutions to pay interest on current accounts, for example, and the first to set its mortgage rate independently of other societies. So it was natural for Abbey National to lead the way by converting to a plc – seven years later it is still the only society to have done so, although Halifax (now merged with the Leeds) intends to follow suit, and other building societies also plan to convert.
Going public would mean that people could own a stake in Abbey National simply by buying shares. It would give the company access to more capital to support the new activities it intended to branch into, such as life assurance, financial planning services and overseas expansion. In addition, plc status would enable Abbey National’s Treasury operation to raise more funding at cheaper rates on the wholesale money markets.
After numerous boardroom discussions the directors at Abbey National agreed that, while the company would still concentrate on providing financial services for people in the UK, it should become a public limited company and move into other financial markets.