Society bonanza may broaden

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The Independent Online

Millions of building society current account holders, who are presently barred from receiving free shares when their societies demutualise and convert to banks, may soon win the right to join in any future flotation bonanza under government proposals to be published next week.

Building societies would also have to inform depositors of serious proposals they receive, such as takeover bids, as part of a Treasury move to make them accountable to all members.

However, societies would also receive a broader range of powers under the proposals, likely to be published in a draft bill next Monday. They come at a time of massive change in the building society movement. Three of the top four societies, including Halifax, Woolwich and Alliance & Leicester, are seeking bank status.

Members of building societies are entitled to a vote on this issue, but those with current accounts, such as the 1.2 million Maxim depositors at Halifax and more than one million Alliance & Leicester account holders, are not.

Despite the new proposals, building societies could still exclude existing current account holders from having voting rights and benefiting from future demutualisations. Treasury sources indicated they believed this was unlikely.

Another change is that of letting building societies include rented accommodation for the first time in the 75 per cent of their loans that must be secured on property, permitting them to become large-scale landlords.

The draft Bill would also extend the role of the Building Societies Ombudsman to cover most or all financial services activities normally overseen by other watchdogs.