Answers for Tutorial Questions due Week 11

Answers for Tutorial Questions due Week 11 - Answers for...

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Answers for Tutorial Questions due Week 11 13.2 Why have building society numbers declined in recent years? There are several reasons for this: 1. Intensive competition within the sector placing pressure was brought to bear by securitisers and international financial institutions that sought market share. 2. Building societies have also diversified their product base to a full range of products including deposit accounts, credit cards, investment savings accounts, mortgages, business loans and internet banking services. This has enabled them to better compete with banks across the entire financial services product range. 3. To achieve critical mass, and therefore economies of scale, many societies have merged. 4. The adoption of technology to improve costs efficiency (such as internet banking and electronic transfers as opposed to the relatively expensive branch networks) has put pressure on smaller institutions due to the significant investment required in the technology 5. For some institutions this change led them to transform into corporations and then to banks. This has contributed to the decline in the percentage of sector assets that building societies represent over time. This has been exacerbated by the larger building societies generally being the ones to transform into banks. (Suncorp-Metway, St George Bank and Bendigo Bank for example all used to be building societies). These forces have led to a decline in the number of building societies operating in Australia. The building societies have used their regional locations and customer service focus to their advantage where the banks have been perceived as less customer focused and unable to service small rural communities. This has translated into maintained growth in assets and profits within the remaining building societies despite the highly competitive trading conditions.
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