Proposed changes introduced by Julie Elliott MP will allow building societies in the UK to remove certain types of wholesale funding from being counted against retail funding limits.
This bill does not propose to change the funding limit imposed on building societies, but will exclude funding from specific Bank of England Liquidity Insurance Facilities which is accessed in stress scenarios and senior non-preferred debt instruments which is raised to meet minimum requirement for own funds and eligible liabilities (MREL).
Funding from repurchase agreements of high quality liquid assets will also be excluded from the retail funding limit.
Currently, the act states that mutuals at least 50 per cent of funding should come from members’ savings accounts while high street banks do not have to adhere to this. The Building Societies Association (BSA) said the existing limit restricted the ability of mutuals to lend and welcomed the proposed change.
Updating ‘archaic legislation’
Robin Fieth, chief executive of the BSA, said: “I would like to thank Julie Elliott MP for bringing forward this important piece of legislation to help to level the playing field between building societies and banks. Building societies provide a vital service to the communities they serve but are currently prevented from doing more by archaic legislation.
“The changes proposed in this Bill will help societies to help more people buy a new home and save for the future.”