§ Mr. HeddleTo ask the Chancellor of the Exchequer what recommendation he has received from the Building Societies Commission on the building societies' request that the limit on their wholesale funds be raised; and what decision he has made.
§ Mr. LilleyThe Building Societies Commission has considered the submission put to it by the Building Societies Association and accepts the case made for an increase in the limit on wholesale funds. The commission accepts that the present limit adversely affects the ability of building societies to compete for mortgage business with other financial institutions which have no restrictions on their acceess to wholesale funds. The limit is at present a constraint on the operation of only a few societies, but it hinders the planning of many more. Although the submission from the association only proposed an increase in the limit to 30 per cent., the commission has concluded that it would be right in the circumstances to raise the limit direct to 40 per cent., the maximum permitted by the 1986 Act. Setting the figure at 40 per cent. now should give societies a more certain basis for their longer-term planning.
In addition to observing the statutory limit, each society is already required to agree with the Building Societies Commission an operatonal limit on its wholesale funding. That limit is set after taking account of each society's management expertise and systems and the types of funding instrument used. That system will continue.
I have agreed that Treasury consent be given to the necessary order which will be laid before the House shortly. That order will also give effect to a number of minor changes to the definition of wholesale funds requested by the Building Societies Association.