Explanatory note

This Order amends the Building Societies (Prescribed Contracts) Order 1988 which prescribes certain contracts as types of contract which a building society with a qualifying asset may enter into under section 23 of the Building Societies Act 1986 for the purpose of reducing the risk of loss arising from changes in interest rates, currency rates or other factors of a prescribed description which affect its business.

The Order opens up certain of the contracts to currencies other than sterling, in relation to swap contracts removes the requirement that the cash flow for which a substitute is made must relate to specific assets and liabilities, and widens the permitted scope of and clarifies the nature of permitted interest rate forward and futures contracts.

There is a transitional provision to ensure that the validity of existing contracts is preserved.

The opportunity has been taken to remove from the 1988 Order cetain provisions in article 3 which are no longer required following removal of the requirement that certain liquid assets may be held only by societies with a qualified asset holding. (This was effected by S.I. 1991/2580).