7 The funding limit.

1

A building society shall secure that the difference between—

a

the value of X on any quarter day; and

b

the value of Y on that day or the value of Y on the immediately preceding quarter day, whichever is the greater,

does not exceed 50 per cent of that value of X.

2

For the purposes of subsection (1) above—

X = the aggregate of the following, namely—

a

the principal value of, and interest accrued on, shares in the society;

b

the principal of, and interest accrued on, sums deposited with the society or any subsidiary undertaking of the society; and

c

the principal value of, and interest accrued under, bills of exchange, instruments or agreements creating or acknowledging indebtedness and accepted, made, issued or entered into by the society or any such undertaking; and

Y = the principal value of, and interest accrued on, shares in the society held by individuals otherwise than as bare trustees (or, in Scotland, simple trustees) for bodies corporate or for persons who include bodies corporate.

3

The following shall be disregarded for the purposes of subsection (2) above, namely—

a

any sums or amounts which are own funds; and

b

to the extent that they are not included in the total liabilities of the society and any subsidiary undertakings of the society as shown in the society’s accounts—

i

any sums deposited with the society or any such undertaking; and

ii

any indebtedness created or acknowledged by bills of exchange, instruments or agreements accepted, made, issued or entered into by the society or any such undertaking.

4

The reference in subsection (3) above to anything being shown in a society’s accounts shall be construed—

a

in relation to a quarter day on which a financial year of the society ends, as a reference to its being shown in the accounts prepared by the society for that year;

b

in relation to any other quarter day, as a reference to its being shown in the accounts which would have been prepared by the society for the year ending on that day if that year were a financial year of the society.

5

If a building society fails to comply with the requirement imposed by subsection (1) above—

a

the powers conferred on the Commission by section 36 shall become exercisable in relation to the society; but

b

the failure shall not affect the validity of any transaction or other act.

6

Where an individual declares that he is acquiring any shares in a building society otherwise than as a bare trustee (or, in Scotland, a simple trustee) for a body corporate, or for persons who include a body corporate, he shall, unless the contrary is shown, be conclusively presumed for the purposes of this section to hold the shares otherwise than as such a trustee.

7

The Commission may, with the consent of the Treasury, by order—

a

modify subsections (2) and (3) above in their application to liabilities of subsidiary undertakings;

b

apply those subsections to corresponding liabilities of associated undertakings; or

c

modify those subsections in their application to such liabilities.

8

An order under subsection (7) above may make—

a

different provision for different circumstances;

b

provision for particular liabilities of undertakings to be disregarded; and

c

such supplementary, transitional and saving provision as appears to the Commission to be necessary or expedient.

9

The power to make an order under subsection (7) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.