On 6 December 2021, HM Treasury issued a consultation setting out proposals to update the Building Societies Act 1986 with regard to building societies’ funding model and corporate governance requirements. It also requests views on future trends which may impact building societies’ funding models.
The government proposes:
- excluding funding from liquidity insurance facilities within the Sterling Monetary Framework from counting towards the funding limit calculation;
- that cash received from repurchase agreements of level 1 High-Quality Liquid Assets, as defined in the PRA rulebook, be excluded from the funding limit calculation;
- that the senior non-preferred debt instruments held for Minimum Required Eligible Own Funds and Liabilities purposes are also excluded from the funding limit;
- raising the SME turnover limit for building societies from £1 million to £6.5 million to help to establish greater parity with ring-fenced banks and promote competition in the SME market;
- altering the requirement for the balance sheet to be signed by two directors and the CEO to allowing one director to sign the balance sheet on behalf of the board. As companies also only require one director to sign their accounts, this would reduce a small but unnecessary burden for building societies; and
- that the requirement to affix a seal to execute deeds is updated in line with companies. The Companies Act 2006 states that to execute a deed, companies may either affix a seal or obtain the signatures of directors. However, building societies are not afforded the same flexibility and must affix a seal. Updating this would provide societies with equal flexibility as companies and other mutual societies such as co-operatives with little risk.
The deadline for comments on the consultation is 28 February 2022.