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's 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's “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
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's
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
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' 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
“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.