§ Mr. George Rodgersasked the Chancellor of the Exchequer how many building societies there are in the United Kingdom; and how many of them have fewer than 5,000 depositors.
§ Mr. Denzil DaviesAt end 1977 there were 343 registered building societies in the United Kingdom, including four in Northern Ireland, of which 209—three in Northern Ireland—had fewer than 5,000 shareholders and depositors.
§ Mr. George Rodgersasked the Chancellor of the Exchequer what process of monitoring the financial well-being of building societies is in force; and if he anticipates any further steps being taken to protect the interests of depositors.
§ Mr. Denzil DaviesBuilding societies are subject to prudential supervision by the Registry of Friendly Societies under the Building Societies Act 1962. The Act requires all building societies to provide the registry with annual returns relating to their affairs. And the information which societies are required to provide in these returns is prescribed in 761W regulations made by the Chief Registrar, with the consent of the Treasury. The current requirements are set out in SI 1976 No. 1935.
The returns must be audited, in accordance with specified requirements of the Act, by qualified auditors appointed by each society. The accounts which building societies are required to prepare each year, copies of which are sent to the registry, must also be audited, and in preparing their report on the accounts the auditors have a statutory duty to consider, among other matters, whether a society's internal system of control and inspection is satisfactory, and if they think it is not, to note the fact in that report.
In addition, the Chief Registrar has for some years required all active societies to submit monthly financial statements which, in particular, enable cash flow and liquidity to be monitored on a systematic and continuing basis. These statements are provided on a non-statutory basis.
The question whether further steps may be necessary is under review but full consideration must await the outcome of the inquiries into the irregularities at the Grays Building Society.
§ Mr. George Rodgersasked the Chancellor of the Exchequer if he will encourage the rationalising of building societies in order to protect the funds of those investors whose money has been made available to mount rescue operations when a small building society faces financial difficulties.
§ Mr. Denzil DaviesBuilding societies are already encouraged to reappraise their resources for setting up and maintaining the highest standards of organisation and operation and of security. The Chief Registrar of Friendly Societies has reminded all societies of their statutory duty to maintain internal systems of control and inspection which provide the essential safeguards. Although the size of a society may not of itself be a decisive factor in its ability to provide the necessary safeguards, smaller societies are encouraged to seek appropriate mergers where this would best serve the interests of their members and of the movement as a whole.
762W
§ Mr. George Rodgersasked the Chancellor of the Exchequer if he will bring forward legislation to require the Chief Registrar to approve the auditors for building societies.
§ Mr. Denzil DaviesThis is one of the questions we shall be considering when the inquiries into the irregularities at the Grays Building Society have been completed.