§ Mr. McCrindleasked the Chancellor of the Exchequer if he will introduce legislation to allow flexibility in the required reserve ratio of building societies; and if he will make a statement.
§ Mr. Ian StewartThe Building Societies (Authorisation) Regulations 1981 prescribe a scale of minimum reserve ratios for building societies, depending on their size, measured by reference to total assets. Those ratios are minima. Almost all societies keep reserves substantially in excess of them. It is for the board of each society, in the first instance, to consider what is the appropriate level of reserves in relation to the particular characteristics of that society's business and in particular in relation to the structurre and quality of its assets. It is 291W also for the board to satisfy the Chief Registrar of Friendly Societies on the adequacy of those reserves if he is concerned about the safety of investors' money in the society.
The Chief Registrar has told the Building Societies Association informally that he wishes to develop a dialogue with it on the criteria for the capital adequacy of societies and he will be initiating discussions in the coming year.
§ Mr. McCrindleasked the Chancellor of the Exchequer if he will introduce legislation to define the types of gilt-edged securities in which a building society may invest; and if he will make a statement.
§ Mr. Ian StewartThe investments, including gilt-edged securities, in which a building society can invest are prescribed by the Building Societies (Authorised Investments) (No. 2) Order 1977, as subsequently amended. The order was made under section 58 of the Building Societies Act 1962.
It is for the board for each society, in the first instance, to decide what pattern of authorised investments is best suited to that society's needs. It may have to satisfy the Chief Registrar on this if he is concerned in the interests of investors. All societies now have a significantly shorter portfolio than is allowed by the order, reflecting the increased volatility of gilt-edged prices since the basic pattern of the regulations was first set in 1960.
The Chief Registrar has had preliminary discussions about possible changes with the Building Societies Association. It is envisaged that these will be followed in due course by a thorough dialogue between the Chief Registrar and the association on the appropriate criteria for liquidity for building societies in present conditions, before a revised order is prepared.
§ Mr. McCrindleasked the Chancellor of the Exchequer if he will introduce legislation placing restrictions on the percentage of building society shares offering high returns on immediate withdrawal which a society may issue.
§ Mr. Ian StewartNo. I do not consider that such an inflexible prudential control would be appropriate.