Commentary on Clauses and Schedules Building Societies Section 11: Modification of legislation applying in relation to building societies
42.Subsection (1) gives the Treasury a power to make modifications of the Building Societies Act 1986 (c.53) to facilitate the provision of relevant financial assistance by the Bank of England to building societies. “Relevant financial assistance” is any financial assistance provided for the purpose of maintaining the stability of the financial system in the United Kingdom (subsection (2)).
43.Subsection (3) specifies particular provisions which may be modified under this section. These include provisions of the Building Societies Act 1986 which require building societies to hold at least 50% of their funding in the form of individual members’ shares (in effect deposits); and which prohibit the creation of floating charges by building societies. If the Bank of England were to give relevant financial assistance to a building society, it might be appropriate for it to receive a floating charge as security for its loan. Other provisions which might inhibit the provision of such assistance may also be modified. The subsection also includes the provisions of the Building Societies Act 1986 which apply insolvency legislation in relation to building societies.
44.The Treasury intend to use this power to modify the application of building society legislation generally, so the changes would apply to any building society which needed to seek relevant financial assistance from the Bank of England.