Building societies Bill faces the axe

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The Independent Online
Angela Knight, the Treasury minister, is considering scrapping plans to introduce new building societies legislation in the current parliamentary session.

It has been made clear to her that she will not secure the industry consensus she requires as a condition of introducing a new Building Societies Bill.

One industry source said: "The proposals are creating problems which Mrs Knight had not envisaged or intended. The societies have given her a way to abandon the bill, and I think she will take it."

Senior building society executives met with her last week to point out that the legislation she has outlined could hold up plans of several societies to demutualise. That would delay the pounds 20bn windfall that members of the Halifax, Woolwich, Alliance & Leicester and Northern Rock are due to receive next year as part of the process of converting into plcs.

Mrs Knight's revised plans to introduce new legislation, which was originally dropped from the Queens Speech, have been welcomed by the Building Societies Association, which rep- resents mutual societies.

However, it has been opposed by the four converting societies, which will need to reflect any new legislation in communications with members about conversion. Some are also concerned about a proposal which would remove their five-year immunity from takeover if they acquired another financial institution after conversion.

Both the Woolwich and Alliance have indicated that if new legislation differed dramatically from that mooted at the time the decision to convert was taken they would be forced to review their strategy.

When the draft plans for legislation were first put out for consultation in March, there was no suggestion that the five-year protection for converted societies enshrined in the 1986 Building Societies Act would be put in jeopardy. Mrs Knight admitted there was no clear consensus during the consultation process on whether protection should be removed or maintained.

The aim of the proposed amendment to the protection provisions is to defend the position of remaining mutual societies relative to those that have chosen to convert. However, the proposals would not protect mutual societies from takeover by established banks and other financial institutions and would merely inhibit the expansion ambitions of converting societies.

Mrs Knight is due to meet with Mike O'Brien, the Labour Party's financial services spokes- man, this week to establish if the cross-party support she is demanding as another condition of a new Bill being introduced can be secured.