Commentary on Sections Central banks Section 251: Financial assistance to building societies
556.This section provides HM Treasury with power to make amendments to the Building Societies Act, 1986 and certain consequential amendments with regard to the provision of financial assistance to building societies.
557.Subsection (1) provides a power to modify the Building Societies Act 1986 and that the financial assistance under the section may be provided by HM Treasury, the Bank of England, and other central banks (including the European Central Bank).
558.This section concerns the facilitation of those listed in subsection (1) to provide liquidity assistance to building societies where necessary.
559.The Building Societies Act 1986 (c.53) includes various provisions that deal with the ability of building societies to grant floating charges and other provisions which impose limits on what building societies can lend and how they fund themselves.
560.Section 11 of the Banking (Special Provisions) Act 2008 (c.2) makes similar provision to this section, but in relation to financial assistance provided by the Bank of England, the new provisions applies in addition to the Treasury and other central banks (including the ECB) and removes the reference to financial assistance provided for the purpose of maintaining financial stability, which in the context of a provision which removes restrictions where there is a public interest in providing financial assistance to building societies may be too narrow.
561.Subsection (2) sets out the purpose of the modifications of the 1986 Act, which is to modify provisions which would be capable of preventing, impeding or affecting the provision of financial assistance under the section. The subsection sets out examples of the matters which may be modified in the 1986 Act, which include provisions about establishment, constitution or powers, restrictions on raising funds or borrowing, provision about security and the application of insolvency law and other legislation concerning companies to building societies.
562.Subsection (3) provides that the order may disapply or modify the provisions referred to in subsection (2). The provisions can be by way of textual amendment or modification of the effect of a provision. An order to modify the Building Societies Act 1986 under this section is subject to the affirmative resolution procedure.
563.Subsection (7) provides that the Treasury may, by order, make further provision to modify or disapply the prohibition on floating charges in section 9B of the Building Societies Act 1986 beyond provision in relation to the institutions listed in subsection (1), if the Treasury think it is likely to help building societies to use, give effect to or take advantage of financial assistance offered by one of the institutions listed in subsection (1).