Explanatory note

These Rules, which replace the Building Societies (Aggregation) Rules 1990, set out how certain assets and liabilities of bodies associated with building societies are to be attributed to societies for the purposes of the limits in section 7 (power to raise funds and borrow money and limit on non–retail funds and borrowing), 8 (proportion of liabilities to be in the form of shares) and 20 (commercial asset structure requirements) of the Building Societies Act 1986.

The Rules cover the assets and liabilities of bodies corporate which are subsidiary undertakings of societies or in which a society holds (directly or indirectly) 15% or more of the shares or corresponding membership rights. Assets and liabilities are attributed according to the percentage of shares or corresponding membership rights so held by the society. Section 838(4) to (10) of the Income and Corporation Taxes Act 1988 is applied for the purposes of determining the size of the percentage.

Assets are attributed according to the class into which they fall (as described in Part III of the 1986 Act) except that if the amount of class 1 assets to be attributed exceeds 15% of the total commercial assets of the society (after attribution) the excess is to be treated as class 2. Societies must satisfy themselves that assets attributed as class 1 or 2 would be so classified if they had made the advances constituting them themselves. Assets representing the fund or funds maintained by an insurance company in respect of its long term business are excluded from attribution.

The Rules also exclude intra–group assets and liabilities from attribution, and provide that in determining whether the limits in section 7, 8 and 20 have been complied with liabilities and assets of societies which are represented respectively by assets and liabilities of associated bodies are to be disregarded. However, assets of a society represented by liabilities of an associated body are disregarded only to the extent that an equal or greater amount of the associated body’s assets are attributed under these Rules, and in case of any shortfall class 3 assets are disregarded in priority to class 2 assets.

The 1990 Rules and the Building Societies (Aggregation) (Amendment) Rules 1992 are revoked.