§ Mr. Michael Forsythasked the Chancellor of the Exchequer, if he will make a further statement about the proposed building society legislation referred to in the Gracious Speech.
§ Mr. Ian StewartI announced the main proposals at Eastbourne in June. Decisions have now been reached on the main outstanding matters.
The Government have decided to create a new Building Societies Commission which will have responsibility for the prudential supervision of the societies. The present Chief Registrar of Friendly Societies will be chairman of the new commission. The names of the other commissioners will be announced in due course.
Like the Registry of Friendly Societies at present, the registry and commission will together constitute one of my right hon. Friend's departments.
The Bill will introduce new provisions governing mergers between building societies. One society will be able to apply for access to the register of another's members for the sole purpose of circulating merger proposals. But new regulations will be introduced governing bonus payments to members and compensation to outgoing directors on mergers; and a new requirement will be introduced in mergers between societies of very different sizes to the effect that at least 20 per cent. of members of the smaller society eligible to vote on the special resolution in question should vote in favour. The Government will be publishing at the same time as the Bill a consultative document about the procedures under which building societies could be converted into companies with the approval of their membership.
Further proposals include the introduction of a statutory investor protection scheme along the lines of that under the Banking Act, 1979; a procedure for independent appeal against supervisory decisions of the commission, again broadly reflecting that under the Banking Act; limits on loans to directors and connected persons as for recognised banks under the Companies Act; new requirements on directors to disclose interests along the lines of those applying to company directors, with additional requirements for directors with interests in firms with which borrowers from the society may be doing business as part of the transaction; there will be a new requirement for each society to have a memorandum which will be the basic source of its adopted powers, alongside the rules which govern its internal management; new procedures under which the commission will be able to determine whether an activity is within the powers of a society; and restriction of the present exemption from the Consumer Credit Act 4W of building society mortgage lending to loans made on first mortgage only for the purchase, improvement of repair of property.
Details of these further proposals are contained in my speech made at Little Wymondley on 1 November, a copy of which has been placed in the Library.