Building societies are near to agreeing a deal with regulators for an investment instrument to allow them meet Solvency II capital rules without losing their mutual status, according to reports from the Financial Times.
The building society sector wants to create “mutual ordinary deferred shares” (Mods), which behave like bonds, with a capped coupon. They would have a target fixed return.
They would allow building societies to meet European capital requirements, which is hard for them as they are owned by members and cannot replicate bank-style instruments.
A spokesperson for the Building Societies Association (BSA), said that building societies have been attempting to adapt their capital structures to comply with the European capital requirements directive for the last few months.
