Building societies face wide review

Anthony Nelson, economic secretary to the Treasury, will today announce a comprehensive review of the Building Societies Act 1986, which could have a big impact on two proposed deals in the sector.

The Government's findings come at a crucial moment in the proposed takeover by Lloyds Bank of Cheltenham & Gloucester and in the merger between Halifax and Leeds Permanent building societies.

C&G is drumming up support among customers for its deal, which requires a high vote in favour. Any shift in legislation governing changes of ownership could have a critical impact.

Sources suggest, however, that these measures are unlikely to be changed. The Government is more likely to change the powers societies have to raise money in the money markets.

An extension of these powers would enable societies to lessen their dependence on deposits for raising funds.

Banks such as Abbey National have launched a campaign calling for more accountability for societies, on the basis that these extensions of their powers make them more like plcs than mutual organisations.

The banks suggest that societies should have to pay a dividend to customers, and that they should extend customer representation on society boards.