New legislation that would clear the way for the demutualisation of the Irish Nationwide building society will not be passed before the end of the current Dáil term and at best will be finalised in the autumn, writes Siobhan Creaton, Finance Correspondent.

The delay is a disappointment for members of the Irish Nationwide, who have already voted to demutualise the society and to trigger windfall payments.

A spokesman for the Department of the Environment confirmed yesterday that the legislation was stalled and that it was now hoped it would be completed during the next Dáil term.

The emphasis on passing legislation to grant further powers to the Irish Financial Services Regulatory Authority is the main reason for the delay, according to the Department.

Irish Nationwide's chief executive, Mr Michael Fingleton, has said the society would demutualise as soon as new legislation was in place but told its members that they would have to wait for the business to be sold before they would get a cash payment.

Its chairman, Dr Michael Walsh, has told members who hold qualifying savings and mortgage accounts that they could hope to yield windfall payments of at least €7,000 on each account in about 18 months. The delay in the passing of this legislation means that this process could take longer.

The legislation proposals, which also provide safeguards for building societies that wished to remain mutually owned, was being proposed by Minister for the Environment, Mr Cullen.

Irish Nationwide has been lobbying for legislative changes for years, specifically a relaxation of a five-year takeover protection clause. Such an amendment could precipitate a sale of the small building society in the future.

The EBS has been lobbying to ensure than any new legislation would put it on a level playing field with other financial institutions, giving it greater latitude to expand into more traditional banking and insurance activities.

The EBS has told its members that it has held "tentative discussions" with some of Europe's large mutual banks that could lead to a future link-up.

The new legislation would facilitate a potential takeover of the EBS by a European co-operatively owned bank, such as Rabobank, which has been mentioned as one of the institutions that has spoken to the EBS.

The Republic's other building society, the ICS, is owned by the Bank of Ireland group.