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MPs&#39 report gives victory to mutuals

Building societies are toasting victory in the wake of a Treasury select

committee report which, if implemented, would dramatically increase their

ability to resist carpetbaggers.

The report means Money Marketing&#39s Save our Mutuals campaign has the

backing of the most influential select committee in Parliament. Money

Marketing staff gave evidence to the committee last month.

The committee&#39s “demutualisation report” proposes amending the 1986

Building Societies Act to increase the number of borrowers required to push

through a conversion vote from 50 per cent to 75 per cent, equalising the

position between borrowers and savers but requiring new legislation.

It also proposes changes that do not require legislation which would also

deter carpetbaggers.

The Building Societies Association says the proposals would plug a

legislative loophole and dramatically dec- rease the chances of societies

converting to banks. The select committee wants legislation in the next

Parliamentary session which runs from November 1999 to November 2000.

If the Treasury accepts the report, an amended Building Societies Act

could be in place before Bradford & Bingley holds its formal conversion

vote, which should take place in 2001 on its own estimates.

Mutuals are confident the Government will enforce the recommendations

after Treasury Economic secretary Pat-ricia Hewitt told the committee&#39s

last meeting on the issue she would seriously consider the proposals.

BSA director-general Adrian Coles says: “We are delighted the select

committee has recommended a change to protect the long-term interests of

borrowers which will plug a loophole in the legislation surrounding

conversion votes.”

Yorkshire Building Society chief executive David Anderson says: “I am

delighted the Treasury select committee has restored the checks and

balances in the conversion process.”

Five key recommendations

The number of borrowers required to push through a formal conversion vote

to be increased from 50 per cent to 75 per cent.

Use secondary legislation to increase the number of members required to

propose motions or special resolutions.

Windfall distributions or cash shares should only be available to members

of two years&#39 standing.

Building societies should introduce loyalty incentives to reward members.

Opposes policy of increasing minimum opening balances to deter carpetbaggers.


“The report marks the beginning of the end of the carpetbagging

nightmare.” – Save our Building Societies co-ordinator Bob Goodall.

“All the things we have been arguing for are included in the report.

Patricia Hewitt came to our last meeting and we are very hopeful the

Government will seriously consider the recommendations of the report over

the summer.” – Chairman of the All Party Building Societies Group, Andrew

Love, MP.

“It is a very good report with strong recommendations but the Government

has to act on it. It would have been a serious loss to the financial sector

if building societies were allowed to disappear.” – Driving force behind

the inquiry, LibDem committee member Dr Vincent Cable, MP.


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