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Building societies to agree capital deal with regulators

Building societies are close to agreeing a deal with regulators for a new investment instrument that would allow them to meet stringent capital rules without losing their mutual status.

The Financial Times reports that the building society sector is close to reaching an agreement on the creation of “mutual ordinary deferred shares”.

Mods would be like bonds with a capped coupon but be loss-bearing from a regulatory perspective.

The new instruments would allow building societies to meet European capital requirements, which is problematic because they are owned by members and not shareholders, meaning they cannot convert debts into equity in hard times.

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Comments

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  1. Scott Taylor-Barr 15th February 2010 at 2:22 pm

    It’s be nice to give an instrument to the mutual sector that would allow a more equal footing with the banks – they are forced to play to the same rules but with very different business models

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