Proposals that could lead to the demutualisation of the Irish Nationwide building society will be considered by the Cabinet today, writes Siobhán Creaton, Finance Correspondent
Minister for the Environment, Mr Cullen, will bring the proposals, that will also provide safeguards for the EBS building society, which wants to remain a mutually owned financial institution. If approved by the Cabinet, legislation to enforce the changes could be adopted by next summer. The proposals have been prepared following wide-ranging and lengthy consultation with the mutually owned building societies.
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.
One of the key instruments sought by the EBS was that the legislation would allow it to raise money through the issuance of member certificates to fund its expansion. This practice is widespread among European co-operative banks, which the EBS is trying to emulate.
The adoption of the legislation could be the trigger for windfall payments for Irish Nationwide account-holders if it were to be sold. To qualify, savers must have a minimum balance of €15,000 in a qualifying deposit account for two years before the conversion of the building society is completed. The amount of money attached to these accounts would depend on the purchase price and the structure of the deal.
Some analysts have suggested Irish Nationwide savers and borrowers could stand to gain as much as €5,000 on each qualifying account.
The removal of the takeover protection could make Irish Nationwide more attractive for another financial institution. Irish Nationwide would have found it difficult to convert to a public company in the way that Irish Permanent and First Active did because it is relatively small.
