Lord Pitt-Watson (Lab)

I thank noble Lords for their consideration of this order. I have listened carefully to the interventions made and will try to respond to them, if I can. One was on the interest in common seals. Until I read this SI, I also had not realised that building societies were so constrained. There was then a series of questions about borrowing short and lending long, which is of course central to building society and bank operations; that is why you can have a run on a building society or a bank and why we have the Bank of England to deal with that and give confidence so that a run does not take place. Clearly, in the changes that are being made, which are relatively small changes associated with highly liquid instruments, deposits and dealings with the Bank of England, there is not a huge difference in the duration risk that we see today and the duration risk that we will see in future. The aim is to make building societies more equivalent and similar to banks so that they can be more competitive. As regards what the effects of this will be, the noble Baroness, Lady Neville-Rolfe, asked a good question about greater mortgage lending. I did in fact go back and ask whether a calculation had been made on that. The answer I got, which I thought was quite a good one, was that the reduction in constraint does not immediately mean that a building society will change what it does because there are many other considerations in how it expands its balance sheet. Therefore, there is not a number on that one. I feel quite comfortable that there is not a number, but we create a level playing field. As for a review in five years’ time, I do not know what would be included in such a review; I think that it might be impacted by events from now and going forward. In terms of the impact of interest rate volatility, as raised by the noble Baroness, Lady Kramer, the changes have been designed to help with periods of market instability, including interest rate volatility. I did inquire about the additional mortgage lending. I did not get an answer, but I think that I did not get an answer for quite a good reason. As I set out my opening speech, this order should make targeted and practical changes to the Building Societies Act, modernising requirements and specifying certain sources of funding to be exempt from the wholesale funding limit calculation. It should ensure that the legislative framework for building societies remains proportionate and aligned with wider company law and prudential regulation, while preserving their fundamental mutual model. I hope that I have answered the questions raised.