Siobhán Creaton,

Finance Correspondent

New legislation that would clear the way for the demutualisation of the Irish Nationwide and allow a change of ownership at the EBS building society will be passed by the end of the year.

A Department of Environment spokeswoman told The Irish Times that the legislation, which has already been delayed, is on the Government's legislative programme and will be dealt with before the end of 2004.

The decision to move ahead with these legislative changes is positive for members of the Irish Nationwide building society who have already voted to demutualise the society and to reap windfall payments.

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

In June, the society said that members who hold qualifying savings and mortgage accounts could hope to yield a windfall payment of at least €7,000 on each account. It said it would take between 12 and 18 months to complete the demutualisation and sale process.

To qualify for a cash payment members must hold a share deposit account or a mortgage. The legislation stipulates they must have a minimum balance of €125 in their deposit account from July 1st of the previous year and up to the day on which the members formally sanction the conversion.

The EBS has also been lobbying for the legislative changes and it has been specifically focused on securing a relaxation of a five-year protection clause. This would have the effect of precipitating a sale or joint-venture of the society with a mutual bank.

It has held lengthy discussions with Dutch co-operative Rabobank about a joint-venture and has retained NCB Corporate Finance to advise it on this transaction. KPMG are working for Rabobank on this deal.

Rabobank, which owns ACCBank, has also expressed an interest in purchasing National Irish Bank and Northern Bank from National Australia Bank. Some sources suggest that this does not scupper a joint venture deal with the EBS. Under such a structure, members of this society are unlikely to reap a cash windfall. The society's preference in linking with Rabobank is to use its resources to broaden its product range and compete with the big Irish financial institutions in retail banking.

The new legislation will also grant further powers to the Irish Financial Services Regulatory Authority, including the power to fine and name and shame financial institutions where they are found to have breached its codes and the law. This aspect of the legislation was said to have delayed its adoption.