Policy background Introduction to building societies and the existing legislation
Building societies are providers of mortgage and savings products, mutually owned by their members (the depositors/borrowers). The 42 building societies in the UK make a valuable contribution to the UK financial services industry. According to the latest Building Societies Association (BSA) data, building societies collectively serve over 25.8 million members and hold over £352 Action of mortgage assets and £313 Action of savings from individuals 1 .
	The Building Societies Act 1986 sets out building societies’ distinctive model and other legal requirements. Under this Act, building societies are required to obtain at least 50% of their funding from individual retail (member) deposits, ensuring the members are the primary owners ("the funding limit calculation"). This is a key feature of the building society’s unique ownership model. Whilst the 1986 Act broadly remains fit for purpose, there is interest and rationale in making further updates to the 1986 Act to allow building societies to compete on a more level playing field with banks operating as Companies Act 2006 companies, promoting competition within the financial services sector.
	Additionally, the separate legal frameworks for companies and building societies have not always been updated at the same time.
	The policy aim is therefore to modernise the legislation to better align with the framework under which companies operate, while still maintaining the building society mutual ownership model.