Office of Public Sector Information
PART II continued
Conduct of the business with adequate professional skills.
(4) Nothing in this section implies that it is improper for a determination for any purpose of the Commission’s relevant prudential powers to take account of other factors than the criteria in subsection (3) above.
(5) A failure to satisfy any of the first six criteria in subsection (3) above shall be treated, for the purposes of this section, as a failure on the part of a society’s directors prudently to conduct the affairs of the society.
(6) A failure on the part of the society to comply with the conditions to which its authorisation is subject shall be treated, for the purposes of this section, as a failure on the part of the society’s directors prudently to conduct the affairs of the society.
(7) The following provisions apply for the interpretation of the list of criteria in subsection (3) above in their application to a building society, that is to say—
“adequate”, except with reference to liquidity, means adequate having regard to the range and scale of the society’s business;
“adequate”, with reference to liquidity, means of such proportion and composition as will at all times enable the society to meet its liabilities as they arise and “liquid form”, in relation to assets, shall be construed accordingly;
“business” includes business the society proposes to carry on and references to the business of the society include, where it has connected undertakings, references to the business of those undertakings;
“requisite”, with reference to the arrangements for assessing the adequacy of securities, means such as may reasonably be expected to ensure—
that any person who assesses the adequacy of any security for a loan to be secured on land will have furnished to him a written report on the value of the land; and
that any person who assesses the adequacy of any security, or reports on the value of any land, will be competent to perform that task, and will not be subject to any conflict of interest or potential conflict of interest;
“requisite”, with reference to the arrangements for assessing the ability of borrowers to repay loans, means such as may reasonably be expected to ensure that any person who assesses the ability of any borrower to repay a loan—
will be competent to perform that task; and
will not be subject to any conflict of interest or potential conflict of interest;
“requisite”, with reference to accounting records and systems of control, means such as are required by section 71;
“sufficient”, with reference to the number of directors and officers, means sufficient having regard to the range and scale of the society’s business.
(8) In determining for the purposes of the seventh criterion in subsection (3) above whether a person is a fit and proper person to hold any particular position, regard shall be had, in particular—
(a) to his probity;
(b) to his competence and soundness of judgement for fulfilling the responsibilities of that position;
(c) to the diligence with which he is fulfilling or likely to fulfil those responsibilities; and
(d) to whether the interests of shareholders or depositors of the society are, or are likely to be, in any way threatened by his holding that position.
(9) The Treasury may by order vary subsections (3) to (8) above by adding to or deleting from them any provision or by varying any provision contained in them; and an order under this subsection may make—
(a) different provisions for different descriptions of building societies; and
(b) such incidental, supplementary and transitional provision as appears to the Treasury to be necessary or expedient.
(10) The power to make an order under subsection (9) above is exercisable by statutory instrument; but no order shall be made under that subsection unless a draft of the order has been laid before and approved by a resolution of each House of Parliament.
(11) Nothing in this section shall give rise to any claim against a building society or its directors, or afford a defence to any claim made by a building society.”
After section 45 of the 1986 Act there shall be inserted the following section—
(1) The Commission shall, as soon as practicable after the coming into force of this section, publish in such manner and in such detail as it thinks appropriate a statement of the principles in accordance with which it is acting or proposing to act—
(a) in exercising its powers of control; and
(b) in interpreting the criteria of prudent management.
(2) If in the course of a financial year the Commission makes a material change in the principles in accordance with which it is acting or proposing to act as mentioned in subsection (1) above, the Commission shall include in the report made by it for that year under section 4 a statement of the change in such detail as it thinks appropriate.
(3) The Commission may, at any time, publish in such manner and in such detail as it thinks appropriate, either or both of the following, namely—
(a) a statement of the principles in accordance with which it is acting or proposing to act as mentioned in subsection (1) above; and
(b) a statement containing additional guidance as to the exercise of its powers of control and its interpretation of the criteria of prudent management.
(4) In this section “powers of control”, in relation to the Commission, means—
(a) the powers conferred on it by sections 36, 36A and 37; and
(b) its powers to grant or revoke an authorisation, to impose conditions on an authorisation or to direct the making of an application under section 41.”
For section 46 of the 1986 Act there shall be substituted the following section—
(1) A building society which is aggrieved by a decision of the Commission—
(a) to refuse to grant authorisation;
(b) to revoke authorisation;
(c) to impose or vary conditions or as to the conditions imposed or varied; or
(d) to give a direction,
may appeal against the decision to a tribunal constituted in accordance with section 47.
(2) Any person in relation to whom the Commission, in deciding to refuse to grant or to revoke authorisation, to impose or vary conditions or to give a direction, makes a determination that a person is not a fit and proper person to hold, or as the case may be, to remain in an office in the society or imposes a requirement that he be removed from an office in the society, may appeal against the decision so far as it relates to that determination or requirement.
(3) The revocation of a society’s authorisation, or a direction under section 36(3), (5), (6), (7) or (10), shall not have effect until—
(a) the end of the period within which an appeal can be brought against the Commission’s decision to revoke the authorisation or give the direction; and
(b) if such an appeal is brought, until it is determined or withdrawn.
(4) Subsection (3) above applies in relation to the expiry of a society’s authorisation on a refusal to grant authorisation under section 41 as it applies to the revocation of a society’s authorisation.
(5) Subject to subsection (3) above and any order of the tribunal made under section 47(5), an appeal under subsection (1)(c) or (d) or (2) above shall not affect the operation, pending the determination of the appeal, of any condition or direction which is the subject of the appeal; and no determination of an appeal by any person under subsection (2) above shall affect the revocation or direction for the purposes of which the Commission made its determination or requirement in relation to that person.
(6) In this section and section 47—
“conditions” means conditions to be complied with by a building society and imposed on the grant of authorisation under section 9, on the renewal of authorisation under section 41, on reauthorisation under section 44, or under section 42, or imposed or varied under section 42A;
“direction” means a direction under section 36(3), (5), (6), (7) or (10), section 42B(1) or section 43A;
“grant” includes renew;
“revoke” means revoke under section 43(1).”
(1) For subsections (5) to (8) of section 47 of the 1986 Act (determination of appeals) there shall be substituted the following subsections—
“(5) The tribunal may, on the application of the building society concerned, order that the operation of—
(a) any condition or variation of a condition; or
(b) any direction under section 36(3), (5), (6), (7) or (10), section 42B(1) or section 43A,
which is the subject of an appeal by the society be suspended pending the determination of the appeal.
(6) The tribunal may confirm or reverse the decision which is the subject of the appeal but shall not have power to vary it except by directing the Commission—
(a) in the case of an appeal against a decision to refuse to grant authorisation, to determine the conditions to which the grant of authorisation is to be subject;
(b) in the case of an appeal against a decision to revoke authorisation, to determine the conditions or different conditions subject to which the authorisation is to continue in force, as the case may be;
(c) in the case of an appeal against the imposition of conditions or as to the conditions imposed by the decision, to determine different conditions subject to which the authorisation is to be granted or is to continue, as the case may be;
(d) in the case of an appeal against the variation of conditions or as to the variation imposed by the decision, to determine different variations of the conditions subject to which the authorisation is to continue;
(e) in the case of an appeal against the giving of a direction under section 36(3), to give a direction under section 36(5) or (6);
(f) in the case of an appeal against the giving of a direction under section 36(5), to give a direction under section 36(3) or (6);
(g) in the case of an appeal against the giving of a direction under section 36(7), section 42B(1) or section 43A, to give a direction imposing different requirements.
(7) Where by virtue of subsection (6) above the tribunal directs the Commission to determine conditions or different conditions or to determine different variations of conditions—
(a) the Commission shall by notice to the society concerned impose such conditions, or such variations of conditions, to be complied with by the society as it considers expedient in order to protect the investments of shareholders or depositors;
(b) Part III of Schedule 3 to this Act shall apply subject to the modifications made by paragraph 9 of that Schedule; and
(c) the society concerned may appeal to the tribunal against any of those conditions or variations;
and on any such appeal the tribunal may confirm or reverse the Commission’s decision with respect to the conditions or variations which are the subject of the appeal or may direct the Commission to determine different conditions or variations.
(7A) Where by virtue of subsection (6) above the tribunal directs the Commission to give a different direction under section 36—
(a) the Commission shall by notice to the society concerned give such direction as it considers expedient in order to ensure compliance with the relevant statutory requirements within the meaning of that section;
(b) paragraphs 2 and 3 of Schedule 7A to this Act shall apply subject to the modifications made by paragraph 4 of that Schedule; and
(c) the society concerned may appeal to the tribunal against that direction;
and on any such appeal the tribunal may confirm or reverse the Commission’s decision with respect to the direction which is the subject of the appeal or may direct the Commission to give a different direction.
(7B) Where by virtue of subsection (6) above the tribunal directs the Commission to give a different direction under section 43A—
(a) the Commission shall by notice to the society concerned give such direction as it considers desirable in the interests of shareholders or depositors; and
(b) the society concerned may appeal to the tribunal against that direction;
and on any such appeal the tribunal may confirm or reverse the Commission’s decision with respect to the direction which is the subject of the appeal or may direct the Commission to give a different direction.
(8) Where by virtue of subsection (7), (7A) or (7B) above the tribunal, on an appeal against any conditions or variations of conditions or any direction, directs the Commission—
(a) to determine different conditions or variations; or
(b) to give a different direction,
the other provisions of that subsection shall apply as they apply where the tribunal gives such a direction by virtue of subsection (6) above.”
(2) In subsection (10) of that section, for the word “conditions” there shall be substituted the words “conditions, variations or directions”.
Building Societies Act 1997