Treasury to recommend building society shake-up

Click to follow
The Independent Online
BUILDING societies face their biggest shake-up since the Building Societies Act was passed eight years ago. In the next fortnight, the Treasury is due to publish its long-awaited review, which is expected to be more radical than was first thought when it was announced last spring.

The review was prompted, at least in part, by Lloyds Bank's pounds 1.8bn takeover bid for the Cheltenham & Gloucester building society. This is going through legal hoops but has raised wider questions about how building societies should be managed and supervised.

The most startling recommendation in the Treasury review is expected to be a move to make it easier for savers to be nominated to the board of their society. At present, the directors can place a variety of hurdles in the way of a group of savers who want to put one of their number on the board.

This will be part of a move to wider accountability, which many societies see as a necessary sacrifice in return for greater financial freedom to compete with banks.

Peter Birch, chief executive of Abbey National, which has already converted from a building society into a bank, made a pre-emptive strike last week when he warned: 'Board members (of societies) may well feel comfortable as a mutual building society, but I believe they need to become more accountable to their members who are, after all, their owners - with little say.'

But a director of a leading society pointed out: 'The skills required to be a director of a large, complex financial organisation - which is what many societies have become - are more onerous every year. But we would want to avoid a two- tier board.'

The answer, he suggested, could be a form of halfway house, enabling lay people to become directors without having to get immersed in too much of the detail.

(Photograph omitted)

Comments