From high finance to the debacle: a tale of two wannabe banks

Abstract

This paper aims to examine the influence of neoliberalist deregulation on the rash of demutualisations of the 1990s. It explores the extent to which the demutualisation of two building societies – Northern Rock and Bradford & Bingley – and their subsequent demise in the wake of the credit crunch exemplify key features of the neoliberalist experiment, with a particular focus on their post-mutualisation business models. The paper argues that the demutualisation of Northern Rock and Bradford & Bingley was part of a broader neoliberal movement which had processes of financialisation at its centre. By converting into banks, former building societies gained greater access to wholesale borrowing, to new types of investors and to the unrestricted use of financial instruments such as securitisation. The collapse of Northern Rock and Bradford & Bingley is interpreted in the light of their access to these new sources of funding and their use of financial instruments which were either unavailable for, or antithetical to, the operation of mutual societies.