DP2011-34

Be rnar do BATIZ-LAZO
Masayo shi N OG UCHI

December 14, 2011

* The Discussion Papers are a series of research papers in their draft form, circulated to encourage
discussion and comment. Citation and use of such a paper should take account of its provisional character.
In some cases, a written consent of the author may be required.

Accounting for dominance and submission: Disciplining building societies withaccounting-based regulation, circa 1960.
Abstract
This paper examines how accounting-based regulation modified the operation of one
type of participant in British retail finance. Specifically, the House Purchase andHousing Act, 1959 and Building Societies Act, 1960 gave the Registrar of Friendly
Societies new powers of intervention and these were used to discipline building
societies revealing inadequate use of their funds. Although only a tiny fraction ofexisting societies were ultimately sanctioned, they all observed important deviations
from specified accounting-based criteria that were generally recognized as financiallysound within the industry. Intervention, however, was also motivated by two otherfactors: the successful lobbying by the Building Society Association to discipline
non-members; and attempts by the Registrar to stop property developers from abusing
moribund London-based societies. Results provide enough evidence to suggest that
other studies’ assessment that managers of British retail financial intermediaries
disregarded accounting information in executive decisions need to be revised in light of
the fact that the accounting control of building societies was supplemented by thedisciplinary power granted to state regulators (as represented by the Treasury and theRegistrar of Friendly Societies).
Keywords: accounting-based regulation; House Purchase and Housing Act, 1959;
Building Societies Act, 1960; Chief Registrar of Friendly Societies; HM Treasury; theBuilding Societies Association; disciplinary power; reserve ratio; property developers.

1

1 Introduction
There is ample evidence of critical assessments of participants in the British market forretail deposits. First, these manifested themselves in a number of official documents: theMacmillan Report (1931); Radcliffe Report (1959); the National Board for Prices andIncomes’ Report on Bank Charges (1967); the Monopolies Commission ruling on the
proposed merger of Lloyds Bank, Barclays Bank and Martin’s Bank (1968); and, theCruickshank Report (2000). All criticized clearing banks, and perhaps by implication
other financial institutions, including building societies, for a systemic failure to provide
adequate venture capital to finance British industry. Furthermore, the more recent ofthese reports opined that these institutions had inadequate, if not poor, internal control
practices. To some extent clearing banks were responsible for the currency of theseaccusations as they failed to present successfully their case to the authorities (Billings
and Capie, 2004). Adequate internal controls are clearly necessary to prevent
misappropriations (e.g. Noguchi and Bátiz-Lazo, 2011; Bátiz-Lazo and Billings, 2012).
But as recent cases of rouge traders at Barings, Société General and USB have shown,
they are also necessary to curb undesirable risk-taking by financial institutions.
Secondly, similar views critical of the lack of sophistication in management accounting
in banks and building societies have been expressed in various academic studies(Bátiz-Lazo and Boyns, 2003; Drury, 1994 and 1998; Helliar et al. 2002; Innes and
Mitchel, 1997; Nigthingale and Poll, 2000; Soin, 2004; Soin et al., 2002). Anecdotal
evidence, through an informal survey of chief financial officers of building societies
documented in Perks (1977), suggested a very similar situation at these mutually owned,
depositary, financial institutions. Hence, with regard to managerial practices within
participants of British retail finance, it is not difficult to locate both implicit and explicit
accusations of ‘backwardness’ (Bátiz-Lazo and Wardley, 2007; Billings and Capie,
2004; Booth, 2001; Jeremy, 1998). Given this accumulation of views covering the more
and less recent past, most of which suggest poor accounting control, one is left towonder whether British retail financial intermediaries have always shown a limited use,or even worse, a complete lack of accounting information in executive decisions.
Moreover, it is unclear how widespread was the claim by Perks (1997) that accounting
controls were not effectively applied by building societies.
Evidence in this study will offer a partial answer to these questions by documenting
how accounting information was instrumental for state authorities, namely HM
Treasury and the Chief Registrar of Friendly Societies (CRFS), to discipline the2behaviour of societies suspected of irregularities. 1 By examining the disciplinary
powers of the CRFS we propose that prior studies need to be reviewed because thecontrol of building societies’ operations was supplemented by external supervision
relaying on accounting-based criteria.
As will be evident below, by 1960 the power and duty of the CRFS had gradually cometo expand and cover the entire life of a building society. These included the‘examination of the proposed rules of any society applying for registration’ (Sections 9
and 10 of the Building Societies Act, 1874); authorization of any amendment in its rules(Section 18 of the 1874 Act); certification of the termination of a societies by
dissolution (Section 7 of the 1894 Act); approval of amalgamation or transfer ofengagements (Section 56 of the 1960 Act); and ‘the power to cancel registration of asociety’ (Section 6 of the 1894 Act). Of these powers we focus on those relating to‘accounting-based regulation’, that is, the set of codified practices, enshrined into law,through which financial or accounting data provide the underlying criteria for
identifying a regulatory space or a set of subjects to be regulated. Chen and Wang(2007), Chen and Yuan (2004) and Lapsley and Llewellyn (1991) are all notable
exemplars of systematic studies on accounting-based regulation. This research examines
topics such as the effects, costs, issues (i.e. accounting manipulations) and measures inneed of improvement. But, with the exception of Miranti (1990), prior studies fail toprovide details of how such regulation came to be constructed. Evidence in this study
addresses this shortcoming by examining the process through which accounting-based
regulation was introduced and implemented through the passing of the House Purchaseand Housing Act, 1959 (HPHA59) and Building Societies Act, 1960 (BSA60)2; as wellas documenting their impact on the operations of the societies.
Although the interaction between state authorities and building societies is the focus of
this study, two other actors will also be of interest namely property developers and the
Building Societies Association (hereafter ‘Association’). The aim here is not only toenhance our understanding of the construction of accounting-based regulation but also
to provide support to the view that a group status cannot be assessed independently ofother groups in the same policy area (Marsh et al., 2009).
1

For a possible interpretation for the disciplinary powers of the state authorities documented in this study,
the application of ‘disciplinary perspective of accounting represented by Hoskin and Macve (1986; 1988;
1994a; 1994b; 1996; 2000) might be possible. For more recent research in this genre, in particular for thepatterns of knowledge expertise embodied in a form of accounting being exercised by those in powerful
positions to not only discipline the behavior but also mold the way of thinking, see Hoskin et al. (2006).
2
Reference to BSA60 is often substituted for the reference to the Building Societies Act, 1962 (BSA62)
because BSA62 consolidated all relevant legislation between 1874 and 1960.

3

Property developers are of interest because the return to power of the Conservative
government in 1951 saw the removal of controls and fiscal incentives for investment incommercial property as well as other measures to encourage private owner occupation.
This together with rising inflation resulted in a fast and sustained increase in property
prices (a ‘property boom’), particularly of commercial real estate in London as anumber of companies relocated their headquarters to the City (Marriott, 1967; Scott,1996). Real estate had for long associated with wealth in Britain (Rubinstein, 1981). A
number of individuals and families thus benefited from the property boom (as fiscal
measures foreclose similar opportunities to corporations). In this context, a common
theme of the interventions of building societies in the early 1960s was an attempt by theRegistry of Friendly Societies (RFS) to stop individuals who were trying to resuscitate
moribund societies to misuse them for personal gain in the London housing market.
Also of interest in our story is the role of the industry association of British building
societies. ‘Self-governing’ is an important feature of the not-for-profit sector. Thisfeature captures how as a group, organizations will voluntarily take part and adopt rules
and procedures that regulate their own behaviour (Basri and Khalid, 2011; Bátiz-Lazoand Billings, 2012). Understanding how rules of the Association interacted with theworking of the corporate governance of individual societies is interesting in itself but
also because the Association played a significant role in the design and implementationof specific accounting-based regulation. According to Grant (2000: 2), ‘[t]he second
half of the twentieth century might be regarded as the era of pressure groups in British
politics’. Indeed, consultations involve a wide variety of interested groups when aspecific policy is formulated for the government to draw out their commitments.
However, it does not mean that all groups have equal access to the executive part of thegovernment nor their counter-influences on the government were equal over the policy
making. Status depends, among other things, on the extent of the group’s goals
corresponding to those pursued by the government and the power and sanction that thegroup can exercise (May and Nugent, 1982: 7; Maloney et al., 1994: 33; Grant, 2000:
27-8), Grant (1978) originally proposed the distinction between insider and outsidergroups. Insiders ‘are regarded as legitimate by government and are consulted on aregular basis’ (Grant, 2000: 19) whereas outsiders ‘are unable to gain [such]
recognition’ (Grant, 2000: 19). 3 ‘[I]n return for privileged access, insider groups3

How best to frame the role of alternative groups and stakeholders in policy formulation is a contested

area. In particular, there is both positive support and criticism of Grant's (1978; 2000) distinction between
insider and outsider groups. These categories are said to be too broad and in need of refinement to4provide information to government and cooperate in implementation of policy, thus
reducing implementation costs’ (Marsh et al., 2009: 622). In the examination that
follows, it is evident that the Association was a typical insider group for the Treasury
and the RFS in discussing the matters concerning the establishment of theaccounting-based regulation. But of greater interest is the fact that the Association madesure that regulatory innovations were innocuous to its membership by promoting that
accounting-based criteria under HPHA59 and BSA60 matched practices at the largest
building societies (all of which but the biggest were its members). This not only
legitimized the activities of its members but preserved them from more adverse
regulatory changes. Yet the Association was not only effective in securing the statusquo, but it was also active in supporting the use of accounting-based criteria in thedisciplining of non-member societies by the RFS, thus strengthening its position andthat of its members in front of state authorities.
Fieldwork is based on the examination of surviving records, including minutes,
correspondences and other historical records of individual building societies, theTreasury, the RFS, the Board of Trade and the Association. To assess the validity andreliability of the source materials, a heuristic method of qualitative research, i.e. data
triangulation (the use of a variety of data sources for studying the same phenomenon), is
adopted to minimize the bias brought about by a single source.
The remainder of this study proceeds as follows: the next section offers a brief historyof building societies. It examines the process of the establishment of HPHA59 and
BSA60 with an emphasis on the introduction of accounting-based regulation and theextended powers of the RFS. This section also highlights the fact that the interests of the
Association and those of the RFS were fundamentally in agreement. They aimed toachieve financial stability in the operations of building societies and maintain the highstandard of probity identified with the sector. The third section examines in detailindividual cases of intervention by the RFS through the disciplinary powers recognizedunder BSA60. The final section provides discussion and conclusion.

distinguish between ‘core’, ‘specialist’ and ‘peripheral’ groups as well as the status that is accorded tothese groups by civil servants, rather than the strategies adopted by the group (Maloney et al. (1994, p.
30). Binderkrantz (2005) argues it is crucial to distinguish between ‘status’ and ‘strategy’ while Marshand Rhodes (1992) propose a link between the literature on insider/outsider groups and that on policy
networks, where a group’s status cannot be assessed independently of other groups in the same policy
area.

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2 The Formation of the Accounting Norm
2.1 Brief Business History of Building Societies, 1770-1960
Building societies are mutual financial organizations owned by long-term depositors
and borrowers while specializing in liquidity creation by turning retail deposits into
mortgage loans. The first society was formed in Birmingham in 1774 and societies soon
began to spread out across the Midlands and the North of England in the second half ofthe 18th century to enable working and lower-middle class people to purchase or build
their own houses. By 1825 there were at least 69 societies (Jeremy, 1998: 299). All theearly societies were ‘terminating’, that is, consisting of a limited number of members
and disbanded after their original members had all made house purchases or received
the agreed upon value of their shares.4
In 1836 the Benefit Building Societies Act gave them legal form by extending theprivilege of incorporation upon application, required general meetings of members‘from Time to Time’ (caps in original), exempted interest payments from usury laws
and required individual societies to draft, certify and submit to the RFS a copy of theirrules (which could include details as to how loans were advanced and interest toinvestors paid). Growth in the number of societies accelerated from the mid-19th
century as part of the Victorian thrift movement and following the materialization circa
1846 of ‘permanent’ societies. By 1895 there were 3,642 individual societies (Jeremy,
1998: 299).
The origins of their industry body date back to the same period. It was established in
1869 as the Building Societies Protection Association. One of the main objectives of therather small number of societies that came together was to observe and influence thedeliberation process of legislation related to building societies in Parliament andmaintain, and if possible expand, their privileges, rights and interests (Boléat, 1981: 58).
The first test of that aim came soon enough, when this association became involved in
the formulation of the Building Societies Act, 1874. Specifically, representatives of the
Building Societies Protection Association engaged in discussions with state authorities
which resulted in the Act of 1874 limiting the activities of building societies to set up afund to make advances to members upon security of a freehold, leasehold or copyhold
estate (Section 14) and to ‘building and owning land for the purposes of conducting
their business’ (Boléat, 1986: 2). These limits were to be controlled and implemented by
4

The last terminating society was wound up in 1980.

6

the RFS (Sections 4, 10 and 17). The RFS could also veto the content of any society´srules (Section 10).
The Act of 1874 was the first to define a ‘permanent’ society as one ‘which has not by
its rules any such fixed date or specified result, at which it shall terminate’ (Section 5).
It also was the first to require financial statements to be filed with the RFS a fortnight
after the annual general meeting (Section 40) and failing to do so resulted in a fine of £5(Section 43). This Act stated that societies could not hold funds for trustees of thedeceased. The society had to return funds and/or investments of investors who died,after making sure funds returned to the right person should the investor died intestate(Sections 29 and 30). The Act specified that investments of liquid funds were limited togovernment securities (Section 27).
In 1892 the Liberator Permanent Benefit Building Society collapsed after becoming
insolvent.5 At the time the biggest society in the UK in terms of assets, its directors had
long engaged in business other than financing house purchases by individuals. Its
demise not only led many depositors and investors to ruin but also led to theintroduction of the Building Societies Act, 1894, which was the first to outline thepurpose of the societies and to require full accounting disclosure and professional audits(Sections 1, 2 and schedules). It defined an auditor as ‘a person who publicly carries on
the business of an accountant’ (Section 3) and required the auditors to inspect mortgage
deeds and certificates of securities (Section 16).
More important in the context of this study, the 1894 Act broadened the power of theRegistrar. For instance, the RFS was recognized to prescribe a form of return to besubmitted by each society to it in order to report summarized data of the societies’annual accounts, in addition to details of investments, loans, etc. (Section 2 andschedules). Upon the application of ten members, the RFS could order an inspection of
the financial records of a society, though even individual members were not allowed tohave the right to inspect the documents (Section 4). Also, upon the application of
one-fifth of the members, the registrar could order an inspection into the affairs of asociety or investigate its affairs with a view to dissolution, and even in certain cases toproceed without an application from members (Section 5). The Act further gave theChief Registrar ample powers to deal with a society by removing it from the registry,when its investigations proved it insolvent or when the society failed to make a return(Sections 6), though the societies were given an opportunity to appeal.

5

http://www.thesharegallery.co.uk/1891_Liberator_Building_Society.htm (accessed 17 July 2011).

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As in the collapse of the Liberator society in 1892, the ‘Borders case’ in 1937 wasfollowed by the Act of 1939. The ‘Borders case’ was the common name for a lawsuit
launched and lost by Mrs Elsy Borders against the Bradford Third Equitable Building
Society.6 She claimed that the society and a property developer had formed a joined
venture and in their advertising, misrepresented the quality of the houses in order. The
case eventually reached the House of Lords, which ruled against Mrs Borders in 1941.
But it was deem that her case pointed to the risks of building societies linking withproperty developers as well as the hazard of misleading advertisement. As a result,during the process of litigation, legislation was passed in 1939 which restricted theforms of mortgage security that building societies could accept and provided thatsocieties ‘were deemed to warrant the reasonableness of the price of property unlessborrowers were specifically informed to the contrary’ (Boléat, 1981: 11).
One further case took place in June 1959, when the State Building Society collapsed asa result of its directors making mortgage advances, without proper security, for bridging
finance in take-over bids to a company in which the same directors also held board
positions. This episode became known as the ‘Jasper affair’ and led to the expansion of
the disclosure requirements in BSA60 (see further Batiz-Lazo, 2006; Bátiz-Lazo andBillings, 2011; Noguchi and Bátiz-Lazo, 2010). In particular, the requirement to present
a true and fair view, as the comprehensive and highest regulatory provision for the
information to be disclosed in the accounts of building societies, was introduced
following the same general requirement of the Companies Act, 1948. Under BSA60
auditors were also required to examine building societies’ system of internal control.
In summary, the above episodes of fraud and scandals, although rare, left a general
impression that important regulatory innovations were introduced following the demiseof a building society (Drake, 1989: 90). Moreover, that with some minor amendments
made in subsequent legislation, the 1894 Act remained the main statute regulating thedisclosure of building societies until changes were introduced in 1958 and 1960.
According to Boléat (1986: 3), ‘[t]he prudential supervision of the industry came under
scrutiny during the 1950s, partly as a result of…dubious practices’ found at somesocieties as exemplified in the case of the State Building Society. As a result, not only
did new legislation require building societies to establish tighter systems of internal
control than before but the faculties of the RFS, as the direct supervisory authority, werealso strengthened to afford it powers to discipline the behaviour of building societies
suspected of irregularities. The discussion now turns to these regulatory innovations
6‘Mrs. Borders Loses Her Appeal’, The Manchester Guardian, 10 November 1941, p. 5.

8while emphasizing the establishment of accounting-based regulation.
2.2 Achieving Trustee Status for Deposits in Building Societies, 1954-1958
Tory governments of the 1950s introduced a number of policies to encourage private
owner occupancy. Those of 1954 left at a disadvantage people who wanted to buy ahouse built before 1919. In order to address this, the government proposed making
advances through building societies. The societies agreed to take on the added risk but
in return they asked for the designation of their deposits as trustee investments.7 Trustee
status was important because, as mentioned above, without its guarantee and in theabsence of specific testamentary directions, the trustee of an estate was required todisinvest from a building society. But for the societies, designation meant more than anincrease in loanable resources.8 The societies first sought to overturn provisions of the1874 Act and gain trustee status for investments in their ‘shares’ and deposits in the
mid-1920s (Humphries, 1987: 335). Since then, trustee status was increasingly seen as apotential source of ‘competitive advantage’ (see Bátiz-Lazo and Billings, 2011). 9
Securing the long sought after goal of trustee status was one of the results of lengthy
negotiations between the government and the building societies’ industry body (which
had been renamed Building Societies Association, hereafter Association, in 1926).
Following these negotiations and the advance degree of agreement between government
official with representatives of the Association, on 5 November 1958 a new scheme forhouse purchase was put forward for public consultation. This document specified theconditions through which individual societies could achieve trustee status and the
response of building societies to it readily illustrates the distinction between insider andoutsider groups proposed by Grant (1978; 2000).
Immediately after the publication of the consultation document, considerable
correspondence arrived at the Association, the Treasury and the RFS from a number ofsocieties.10 On the one hand and in an example of an insider group were the council of
the Association and most large societies. These were supportive of the details within thegovernment’s proposal. In fact, the Association had already introduced its own
regulations for the membership to meet 2.5 percent of minimum reserve and 7.5 percent
liquidity ratios before the enactment of HPHA59 (Boléat, 1986: 146). Also, A. Denham,president of the Halifax (traditionally the largest of them all and at the time non-member
7

The Housing Act 1959 gave trustee status only to deposits in the societies but the Trustee Investments
Act 1961 then included ‘share’ investments.
8‘Building Society Deposits Given Trustee Status’, The Times, 06-Nov-1958, p. 16.
9‘Trustee Status for 130 Societies’, The Times, 19-Jun-1959, p. 19.
10
FS23/283, a letter from the Assistant Secretary of the Association, N.E. Griggs, to the CRFS dated 18
November 1958.

9of the Association), considered that his society could easy achieved the proposed
reserve ratio of 2.5 percent and in fact argued that 5 percent would be more
appropriate.11 Indeed, the reserve ratio of leading societies such as the Halifax, Abbey
National, Leeds Permanent and Provincial were all exceeding levels of 3 percent at theend of 1957.12
On the other hand, the concern of most small societies was how to comply with theproposed reserve conditions because reserve ratio and another related accounting
criterion, the liquidity ratio, had dwindled as the demand for private housing expanded
during the 1950s (see further Bátiz-Lazo, 2006; Bátiz-Lazo and Billings, 2011). Theview of Robert Stoddart, general manager of the Dunfermline, a Scottish society, wasrepresentative of that of many other small societies as he insisted that 2.5 percent was
too high and subject to change (if prices of government bonds fluctuated).13 But as an
exemplar of an outsider group, Stoddart’s and other similar views were disregarded as‘not officially supported by the Scottish [Building Societies’] Association’. 14 This
statement clearly illustrates the importance the regulatory authorities attached to theindustry body. Any representation by a society lacking such support was ignored oroverlooked. Evidence to this emerged in the same official rebuttal to the Dunfermline,
as the CRFS noted that ‘the conditions [for the purpose of trustee status]…are intended
to ensure that so far as is practicable a society is efficiently and prudently managed…theobservance of the conditions will go a long way towards establishing financial stability
and therefore general security to investors’. 15 The state authority argued for thenecessity of a reserve ratio ‘to protect trustees and other investors from embarrassment
and possible loss of capital’.16 The letter concluded that ‘Mr. Stoddart for obvious
reasons, over stresses the point about trustee status being placed at the mercy of stock
exchange valuations’.17
In deciding who would gain privileged access to policy making process and who would
not, the above episode concerning the introduction of reserve conditions for trustee
status illustrates that the Treasury and the RFS rate highly the technical information,
11

FS23/283, the minutes of a discussion with the CRFS held on 25 November 1958.
FS23/283, the data for reserve ratios of leading societies.
13
FS23/283, memorandum submitted to the CRFS dated on 3 February 1959.
14
FS23/283, a letter from D. Leigh to R.D. Cramond at the Department of Health for Scotland dated 18
February 1959.
15
FS23/283, a letter from D. Leigh to R.D. Cramond at the Department of Health for Scotland dated 18
February 1959.
16
FS23/283, a letter from D. Leigh to R.D. Cramond at the Department of Health for Scotland dated 18
February 1959.
17
FS23/283, a letter from D. Leigh to R.D. Cramond at the Department of Health for Scotland dated 18
February 1959.
12

10political sophistication and organizational coherence displayed by the Association.
Similar behaviour has been explored by Maloney et al. (1994: 20), who proposes that
one of the fundamental reasons why state authorities recognize specific groups as
insider ones is that such ‘interest groups supply the distinct commodity which will“meet a policy maker’s specific demand”’. Browne (1991: 500), Truman (1951: 334)
and Maloney et al. (1994: 23) commonly emphasize various organizational resourcesthat an interest group can wield in policy making process, which include: coherence,
strategic location, economic significance, size (membership), knowledge (not only
technical but also political) and implementation power. It is evident that in dealing withbuilding societies the RFS and the Treasury valued these features. Accordingly, the RFS
defended the proposed introduction of a reserve requirement grounding its argument on
the analysis of data summarized in Table 1 below.
[Insert Table 1 around here]
The core argument of the RFS analysis evolved around the six criteria offered in thetable above and summarized as follows: the ‘[p]ercentage of societies which [will]
qualify in all respects of the total assets of all building societies is 88.08%’.18 Sir Cecil
Crabbe, the then sitting CRFS, justified the introduction of his preferred criteria for
individual societies to qualify for trustee status using the percentage of the sum total
assets rather than the number of societies that could potentially benefit. Evidence that
the CRFS was more concerned with the size of the market rather than the number ofsocieties that would qualify is found when comparing exclusion based on‘unsatisfactory reserves’ (criterion 5) and ‘total assets less than 0.5 million’ (criterion 3).
Criterion 5 (‘Unsatisfactory reserves’) offered the maximum exclusion rate in terms ofsize among the six proposed exclusion criteria.19 As shown in Table 1, by applying thiscriterion 4.82% of the sum of total assets of building societies would potentially fail tobe granted trustee status but only 17 societies would fail to qualify. By applying
Criterion 3 (‘0.5 million pounds in total assets’) the RFS expected that only 2.83% of
the sum of total assets was excluded but more than a half the number of societies would
not qualify (63.2%, 476 of 753 societies).
The passing of the HPHA59 enacted both criteria by establishing a minimum reserve
ratio and a threshold of half a million pounds in total assets for individual societies to18

FS23/283, Analysis of building societies – qualification for trustee status.
Other conditions for qualification included: (1) not being a terminating society, (2) not being anunincorporated society (3) having total assets of more than £0.5 million, (4) having liquid assets of morethan 7.5 per cent of total assets.

19

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qualify as trustee.20 Given the information on Table 1 above, this could suggest that
there was an attempt to preclude a large number of small-sized societies (i.e. those withless than half a million pound in total assets) from achieving trustee status and therefore,
placing them at a competitive disadvantage. Indeed, even after some dispensations, ofthe 732 registered societies in December 1959, there were 218 societies (including four
non-members of the Association) whose assets had been designated as one in whichtrustees could deposit trust funds. The sum of total assets of these 218 societies wasestimated at £2,994,000,000, equivalent to 94% of the assets of all registered societies atthe end of 1960 (Registry of Friendly Societies, 1961: 6).
Here it is important to note that the introduction of a minimum net reserve ratio (of 2.5
percent of net assets at the end of 1960) and a minimum liquidity requirement (of 7.5
percent of total assets at the end of 1960) through the HPHA59 marked the first time
any British financial institution was subject to a statutory requirement for capital
adequacy.
2.3 Strengthening Powers of Supervision, circa 1955-1965
As noted above, the Act of 1894 was the first to give the RFS powers to investigate
potential deviant activities by directors of individual societies and as a result intervene
into the operations of these societies. During the 1950s, these powers were discharged
under Section 11 of the Prevention of Fraud (Investments) Act, 1939 (PFA39), which
was superseded in 1958 by a new Act with the same title and section (namely
Prevention of Fraud (Investments) Act, 1958 or PFA58). 21 Section 11 of PFA58
recognized the power of the CRFS to issue an order prohibiting the targeted society
from inviting people to make investments. It was ‘only to be invoked when there was noother means of protecting potential investors from unreasonable risk.’22
In this relation, Section 12 of PFA58 provided RFS staff with powers to investigate theaffairs of a society that was suspected of irregularities. The purpose of these probes wasto establish possible grounds for issuing an order under Section 11 of PFA58. Some 50
investigations were completed between 1939 and 1959, which resulted in orders being
imposed on 17 societies. Without exception all of such cases were non-members of the
Association and almost all were small-sized societies (i.e. with less than £0.5 million in
20 Details of which were published in the Building Societies (Accounts) Regulations 1960 (S.I. 1960 No.
1826) and the Building Societies (Annual Return and Auditors’ Report) Regulations 1960 (S.I. 1960 No.
1827).
21 According to Robb (1997: 34-36), PFA58 was virtually a re-enactment of the 1939 Act — the only
addition was the power given to the Board of Trade to appoint an inspector to examine the administrationof a unit trust scheme.
22
FS23/287, the CRFS’s letter to E. H. Boothroyd at the Treasury dated 16 March 1959.

12

total assets). Table 2 and 3 below show it was very difficult to revoke an order once it
was issued under Section 11 of PFA39 or Section 11 of PFA58. Only three weresuccessfully rescinded by 1959.
[Insert Table 2 and Table 3 around here]
Table 2 summarizes orders in force under Section 11 of PFA39 and Table 3 those for
Section 11 of PFA58 as of December 1965. As is evident in these tables, once an order
had been issued staff at the RFS had to oversee the process of termination and winding
up for many years. Indeed, between 1940 and 1959 it took an average of 14.6 years (9.9years st. dev.) for a society under an order to be either dissolved (11 societies or 69
percent) or merged by transferring engagements (6 societies or 35 percent). Thissuggests that the main effect of an order was to stop the society from growing and, as it
will be evident below in the cases of the Eagle and of the Lloyds Permanent, replace
directors with a new management team. As a depositary institution with a lengthy
duration of the asset portfolio, a society could not simply vanish unless some sort ofmalfeasance made it insolvent. The large number that dissolved suggest thatintervention chiefly averted a run on the society and that most were in need of anorderly winding down because a) depositors and investors were paid back asmortgagors met their obligations and b) the quality of their assets was unattractive toother societies.
Only one society in Table 2 (Royal Mutual Benefit) and three societies in Table 3(Alliance Perpetual, Lloyds Permanent, and State) had assets above half a million
pounds, supporting the view that mainly small-sized societies were the main target ofinterventions. The majority of the societies in Table 2 and Table 3 had their head officein London (12 or 71 percent) and all but five (namely Alliance Perpetual, President
Permanent, Preston & Blackburn, Royal Mutual Benefit and Second St James’s) had
been established a few years before the passing of the relevant legislation.
According to the annual report of the CRFS for 1958, 14 investigations were completed
between 1956 and 1959. The reasons for these investigations fell into one of thefollowing three categories: ‘(a) the unsatisfactory financial position of the society as
disclosed by its accounts, (b) the lending of the society’s funds on doubtful security, and(c) the use of the society’s funds for financing companies with which the Society’s
directors [were] connected’.23 Of the 14 cases, four resulted in orders issued under23

FS23/287, discussion at the House of Commons dated 6 March 1959. As documented below, theCRFS issued an order under section 11 of PFA58 prohibiting the Lloyds Permanent from inviting further
subscriptions. The principal grounds for the decision included: (1) the unsatisfactory reserve position in13Section 11 of PFA39 or PFA58. In other 10 cases, the RFS did not find it expedient tomake an order because either remedial action was taken by the society or directors gave
sufficient reassurances that appropriate action would be undertaken.
However, any society under investigation could still attract deposits, investments andissue mortgage loans while the public was ignorant of conversations between its
directors and the RFS. Even in the case of an order prohibiting advertisement being
issued, the building society could continue to accept term investments and on demand
deposits. Investors often continued to contribute, because the fact that an order had been
issued was not made public. This situation was unsatisfactory for members of the
Association, who strongly advocated its end through a revision of building societies
regulation. Representatives of the Association then lobbied the CRFS so that any
invitation by a society to invest funds should be prohibited if any of the following
conditions applied:(a) the reserves of the society are inadequate or it is technically insolvent,(b) the liquid funds of the society are inadequate,(c) the society receives any consideration for making advances, and(d) the society engages in undesirable activities (e.g. the making of heavy charges on theredemption of a mortgage). (FS23/287, the Association’s memorandum dated 2 May 1958)

This representation by the Association was also motivated by their perception that alarge number of small-sized, non-Association-member societies on the register were ‘toall intents and purposes moribund’.24 The problem was that, in their view, within thelatter there were an increasing number of cases in which ‘moribund’ small societies had
been ‘taken over by a new management and revived with the object amongst others ofusing their date of establishment – often in the 19th century – as a sign of their worth’.25
As revealed in the quote below, the Association was uneasy with the speculative natureof the activities of the newly formed and revived non-member societies:[the Association] is seriously concerned at the recent formation of societies which have been
established primarily to further the activities of building or property companies or professionalfirms and not in order to serve public needs. These new societies automatically acquire thegoodwill attached by the uncritical public to the words ‘Building Society’, which are almost

relation to the total assets of the society and (2) inadequacy of security for the advances in respect of the‘Oak Farm’ properties, resulting in a position of potential loss which would jeopardize the society’s
solvency.
24
FS23/287, A memorandum prepared by the CRFS dated 14 July 1958.
25
FS23/287, A memorandum prepared by the CRFS dated 14 July 1958, see also FS23/283, a letter from
P. Endbinder to the CRFS dated 17 February 1959.

14

automatically taken to imply absolute safety and a high standard of probity. (FS23/287, anadditional memorandum by the Association dated 13 June 1958)26

The Association not only proposed to stipulate the conditions for the advertisement but
also suggested that ‘[t]he Registrar should have power (subject to the approval of theTreasury) to prohibit the acceptance by a society of any investment from the public if heconsiders it expedient’.27 The Association added that ‘no society should be allowed toseek money from the public until it can…show that the affairs of the society have been
prudently conducted and that it has achieved financial stability’.28
The Registrar seems to have shared the concerns of the Association. This is evidenced
in his own memorandum to the Treasury, in which he stated that:the undoubted goodwill that attaches to the name ‘building society’ [is misused], to obtaincapital (which in view of the restrictions on borrowing it might be difficult to obtain otherwise)
to be employed in lending out on security of often very doubtful character and at a high rate ofinterest or in furtherance of the founders’ own business. (FS23/287, the Registrar’s
memorandum dated 14 July 1958)29

The CRFS thus proposed to amend PFA58 ‘so that the order which the Registrar isempowered to make would prohibit not [only] the making of invitations but [also] theacceptance of any monies by way of loan or investment’.30 He also requested to give his
office the power to petition for the compulsory winding up of a society directly rather
than through the courts.31
Once again the RFS and the Association made clear their agreement on the issue when
Treasury officials published for consultation what was to become BSA60. The
Association supported the CRFS’s proposal on the grounds that such power would
enable him ‘to deal effectively with a society which, although not contravening the law,is not carrying out the normal functions of a building society but is using the provisions
26

The Treasury regarded the purpose of the Association’s request as ‘to control the attraction of publicsavings to the less reputable societies’ (FS23/287, the Registrar s memorandum dated 14 July 1958).
27
FS23/287, the Association’s memorandum dated 13 June 1958.
28
FS23/287, the Association’s memorandum dated 13 June 1958.
29
It was also argued by RFS staff that ‘[i]t has always seemed to…be wholly objectionable that a society
should be able to accept fresh capital notwithstanding the existence of an order’ (FS23/287, amemorandum prepared by D. Leigh dated 13 June 1958).
30
FS23/287, the Registrar’s memorandum dated 14 July 1958.
31
FS23/288, the minutes of a meeting held between the Registrar and the representatives of the
Association on 27 October 1959. The Registrar assumed that ‘[s]ocieties which are subject to anorder…may act the detriment of investors for example by continuing to make advances out of monies intheir possession in preference to making repayments of shares and deposits in respect of which notices ofwithdrawal have been given’ (FS23/289, the Registrar’s proposal for amending legislation undated, circa
January 1960).

15of the Acts and the prestige attaching to the words “Building Society” to mislead the
public into investing in a speculative enterprise’.32 In its representations to the Treasury,
the Association added:
The fact that these proposals, which considerably tighten the Government’s control over the
Building Societies, are acceptable to the Building Societies Association, reflects the desire of
the reputable societies, most of which belong to the Association, to see a check on themalpractices of the few disreputable ones, which do not. (FS23/289, a memorandum preparedby E. W. Maude at the Treasury dated 8 January 1960)33

The passing of BSA60 saw the incorporation of the desires of the Association and the
RFS. It moved away from PFA58 and gave the RFS new powers through the possibilityof introducing orders to bar advertisements and limit the acceptance of new investments(detailed in Sections 6 and 7, later Sections 48 and 51 of BSA62). In particular, issuingan order under Section 6 (2) of BSA60 (Section 48 of BSA62) would prohibit the mostimportant activity, namely the acceptance of new investments, and thus, could be fatal,
as it would severely restrict the operations of the targeted society.34 Table 4 and Table 5
below summarize all societies subject to intervention under Sections 6 and 7 of BSA60
and Sections 48 and 51 of BSA62 (called ‘direction’ in the latter case, as distinguishedfrom ‘order’ in the former) in the five years subsequent to the passing of BSA60.
[Insert Table 4 and 5 around here]
Between 1960 and 1965 orders and directions were issued to 12 societies as listed above.
Again these were a small fraction of 726 societies in existence at the end of 1960 (701permanent and 25 terminating societies).35 As was the case of interventions under thePrevention of Fraud Act, the process of termination and winding up took many years
with a slightly lower average of 12.7 years (7.4 years st. dev.). Notably, two societies
were dissolved almost immediately following intervention (Whythensawe andVanguard). These two plus five others resulted in 58 percent of societies terminatedthrough dissolution as opposed to five or 42 percent merged. Indeed, for all the 29
societies intervened between 1939 and 1965, 18 (62 percent) dissolved and 11 (3832

FS23/288, the minutes of a meeting held between the Registrar and the representatives of the
Association on 27 October 1959.
33
The CRFS also indicated that: ‘[i]n principle we [the Association and the CRFS] are at one thoughdiffering in a number of details’ (FS23/287, the CRFS’s letter addressed to K. Whally at the Treasury
dated 14 July 1958).
34
In fact, the issuing of an order under section 6 (2) of BSA60 was generally regarded as ‘the drastic
step’ within the processes of disciplining the behaviour of the societies (FS23/287, a note prepared by E.
W. Maude at the Treasury for the Economic Secretary dated 7 April 1959). See also Boléat (1986: 152).
35
The report of the Chief Registrar of Friendly Societies for the year 1960, part 5 building societies, p. 2.

16

percent) merged.36
Table 4 and Table 5 also show that intervention continued to concentrate on areas ofhigh population growth and concentration of urban dwellings, namely London with 9
societies (75 percent); and to a lesser extent Manchester with 3 societies (25 percent).
Of all societies intervened between 1939 and 1965, 21 (72 percent) had their head officein London. Not one of the societies listed in Table 4 and Table 5 was a member of the
Association. Only two societies (County of London Permanent and Official andGeneral) claimed to have been established for many years. Only four societies (Eagle,
Official and General, Lloyd Permanent and Mancunian) had total assets above half amillion pounds, 37 that is, the list above mostly comprises small or very smallorganizations (with total assets averaging £693.5 thousand and 1.1 million st. dev.).
Only two societies had its order revoked, namely the Lloyds Permanent in 1963 and theLondon and Midland in 1968. All other orders were still in effect at the end of 1965 andmostly remained to the termination of the society as a going concern. Hence issuing of
the orders prohibiting important activities such as the acceptance of investments appears
to have been not only an instrument to discipline specific societies but also, a warning
to the broader constituency of non-members of the Association to abstain fromengaging in undesirable activities.
2.4 Limiting Deposits from Real Estate Developers
It is worth noting here another important feature of accounting-based regulation
introduced in BSA60, namely the limitation on the annual amount of special advances.38
Defined as loans that a building society could make to bodies corporate, BSA60 limit
them to 10 percent of a society’s total advances made during the year. This feature wasimportant because, first, it enshrined in law the purpose of the societies to finance thepurchase of dwellings by individual owner-occupiers. Second, once again the
Association was of one mind with proposal made by the Treasury and the CRFS.
36

Note that although relating to a small fraction of the societies, this evidence questions the perceived
wisdom (e.g. Barnes, 1985: 78, Barnes and Dodds, 1983) that it was common practice within the building
society sector that those in financial distress amalgamated with larger-sized, geographically close andfinancially sound societies through arrangements and recommendations made by the CRFS and/or the
Association. Ultimately, the validity of either view is open to future empirical investigation.
37
At the time of intervention the total assets of the Eagle were £1.024 million; £0.556 million for Official
and Geneal; £3.839 millio for the Lloyds Permanent and £1.054 million for the Mancunian.
38
The demise of the State Building Society caused the Treasury and the CRFS to regard the developmentof ‘societies…making a large proportion of their advances to companies, either on commercial properties
or on large estates’ as undesirable ‘not only because such properties tend to fluctuate in value and so do
not represent such a sound security, but also…it can easily lead to the wide scale abuse of the society’s
funds by an unscrupulous management’ (FS23/289, a memorandum prepared within the Treasury dated
around January 1960).

17

Evidence of this emerged in correspondence from Association that stated that:
The Council would favour legislation which would restrict the total amount of advances madeduring any one financial year on all properties other than private dwelling units forowner-occupation to such percentage of the total amount advanced during that year as theRegistrar may, with the approval of the Treasury, from time to time prescribe…The Council
would regard 10 per cent. as the appropriate percentage to be prescribed at the present time
(FS23/288, a letter from the Secretary of the Association, C. G. Garratt-Holden, to R. E.
Grindle dated 16 October 1959).39

The Association also suggested modifying the annual accounts of building societies.40
These were submitted annually by each individual society to the RFS as part of thecontents Form A. R. 11, which contained more analytical information than that recorded
in normal annual accounts.41 Through the analysis of the information available from
A.R. 11, staff at the RFS could understand the quality of operations and the substance offinancial positions of each society and in this sense the form was the main diagnostic
instrument to monitor their financial performance (Boléat, 1986: 152). In revising Form
A.R. 11 for BSA60, the RFS sought ‘to give an indication of any risk arising from thepolicy adopted by the directors of a society…[and]…to show advances which areoutside the category of those regarded as normal for building societies’.42 The review
was adopted as Schedule No.2 of A.R. 11, for which Accountancy reported that:
Schedule No. 2, of which Section A requires that ‘Special advances’ made during the year tobe summarised so as to show the total (analysed by amount) for persons other than bodies
corporate and the total for bodies corporate. Sections B and C of the schedule requires lists
with extensive details of the individual items making up these totals. The auditors are not
39

The most influential non-Association member society, the Halifax, also recognized the need for some
limitations to be put on advances made during a particular year on certain categories other thanowner-occupiers. They suggested that ‘[a]t least 80% of advances in any one year to be in respect ofdwellinghouses or parts of dwellinghouses’ and that ‘[t]he remaining 20% will have to cover advances inrespect of the non-occupier purposes’ (FS23/288, the Halifax’s letter addressed to the Registrar dated
around November 1959).
40
FS23/287, a letter from the Secretary of the Association, C. G. Garratt-Holden, to R. E. Grindle dated
16 October 1959.
41
Form A.R.11 encompassed: general information (name of the society, registered office, date ofincorporation, total membership at year end, name and address of the directors); a balance sheet (using
headings for capital and liabilities: shares, H.M. Government advances, other deposits and loans; and for
assets: mortgages and investments); revenue and appropriation account; mortgage losses account; otherprovision account; general reserve account; special schedules (providing statistical information on
mortgages, investments, special advances, etc.). Also several schedules detailing specific accounts wereattached. Each item was classified according to years, types, amounts and other particulars including
market values.
42
T233/1652, the Registrar’s draft form dated around October 1959. See also FS23/289, the Registrar’s
further proposal for amending legislation dated around January 1960.

18

required to deal with Sections B and C but Section A falls within the matters to be covered bytheir report on the annual return. (Accountancy 71:808, December 1960: 709)

In summary, the agreement between the overseer and the subjects of regulation played asignificant part in shaping the accounting norms established through BSA60. Morespecifically, regarding the introduction of the extended power of the CRFS recognizedunder BSA60, the Association expressed the view that ‘[t]he responsible Building
Societies are quite prepared to see the Registrar given these powers’.43 The case studies
that follow were all of those for which there were surviving records available for ourown inspection. They document in detail how the new power of the CRFS played apivotal role to regulate and discipline the conduct of ‘disreputable’ societies. These
interventions were normally triggered by low levels of the reserve ratio as a sign ofpotential financial irregularities.

3 Disciplining Individual Societies
3.1 Lloyds Permanent Building Society
The investigation into the affairs of Lloyds Permanent began in April 1960, when the
CRFS issued an order under Section 11 of PFA58 forbidding the society or anyone on
its behalf from inviting subscriptions to its capital.44 According to the sitting CRFS, Sir
Cecil Crabbe, ‘the directors of this society had found a way around the restrictive
provisions relating to building societies whilst at the same time continuing to takeadvantage of the “building society” appeal to the general public’ 45 by inviting
investments utilizing the disguise of a private finance company called ‘Freehold Land
Finance Company Limited’.
Deviant behaviour in four accounting-based criteria helped staff at the RFS to identify
the Lloyds Permanent as an object of potential concern, namely.46(1) the rapid expansion of asset size (from zero in 1954 to about £5 million in1959),(2) the excessive amount of advertising expenses (over £62,000 by the end of 1959
or nearly a third of its total management expenses),

43

FS23/289, a memorandum prepared within the Treasury dated around January 1960.
T326/17, CRFS letter addressed to E. W. Maude at the Treasury dated 24 October 1960.
45
T326/17, the CRFS’s letter addressed to E. W. Maude at the Treasury dated 2 November 1960.
46
T326/17, the interim report of the inspector appointed to investigate the affairs of Lloyds Permanent
Building Society dated 17 February 1961.
4419(3) considerably high rates of interest paid to shareholders, and(4) high interest rates charged to borrowers to cover item 3 above (ranging up to 8.5
percent per annum for owner-occupiers and up to 10 percent for builders).
Such information was obtainable from the contents of Form A.R. 11 submitted by thesociety. Items 1, 3 and 4 are perhaps self-explanatory in the context of raising suspicion
to any one society. Item 2 was of interested because, as noted above, HPHA59 adopted
the reserve ratio as one of the conditions for trustee status. At the time of its passing, theCRFS had recognized how management should improve financial figures in the annual
accounts by suggesting, as examples of the methods available to achieve trustee status, a‘consolidation of the financial positions’ by retarding the rate of growth and an‘economy in administration’ by reducing expenditures on advertisement.47
Between April and October 1960, the Lloyds Permanent received withdrawal notices forshares totalling £982,227; the repayments totalled £612,944, leaving £369,283 still to be
repaid. Despite of the prohibition under Section 11 of PFA58, the society continued toreceive substantial amounts of new investments as these were channelled through theprivate finance company. Crabbe described the conduct of Lloyds Permanent as a‘ponzi scheme’ where ‘current investments are being used to repay prior applications
for withdrawals and the new investments will be subject to a long delay, which would
not be anticipated from reading the brochure, if application for withdrawal is made’.48
A notice under Section 8 of BSA60 was issued by the CRFS on 17 November 1960.49
The purpose of which was to gather information that would warrant issuing an orderunder Section 6 (2) of BSA60, to forbid the acceptance of any share or loan money by
the society.50 Besides raising concerns regarding new investments and repayments, thenotice clearly pointed to the ‘[l]ow ratio of the reserves to the total assets of thesociety’.51 Indeed, according to estimates made by the Registrar, the sum total ofgeneral reserves at the end of 1960 for all societies was equivalent to five percent of47

FS23/283, a memorandum prepared with the Registrar on the reserve ratio as one of the conditions fortrustee status.
48
T326/17, the CRFS’s letter addressed to E. W. Maude at the Treasury dated 2 November 1960.
49
Section 8 (1) provided that ‘[t]he Chief Registrar may at any time serve a notice on a building society,or any person who has in his possession or under his control any books, accounts, deeds or otherdocuments relating to the business of the building society, requiring the building society or other person
to produce to the Chief Registrar such of them as he considers necessary for the exercise of the powers
which he has under the two last foregoing sections’.
50
T326/17, CRFS letter addressed to E. W. Maude at the Treasury dated 24 October 1960.
51
T326/17, Notice given to the Lloyds Permanent Building Society by the CRFS dated 17 November
1960.

20

mortgage assets. 52 Whereas the total reserves (including a ‘Mortgage Reserve’ of£10,000) at the Lloyds Permanent, as shown in the audited balance sheet at 31
December 1960, only amounted to £21,370 or 0.65 percent of mortgage assets.53 As
explained above, HPHA59 introduced a statutory requirement for reserves as one of theconditions for trustee status. This was to be awarded to societies regarded as financiallysound. These measures initially did not aim to penalize disreputable societies but to givea preferential treatment to those that satisfied the conditions. The case of Lloyds
Permanent, however, suggests that the RFS began utilizing accounting-based criteria set
in HPHA59 as a benchmark to exercise its new powers to discipline adverse behaviour.
An order under Section 6 (2) of BSA60 was in fact issued on December 1960. The
CRFS then appointed Dennis Leigh, then Executive Registrar at the RFS, as inspector to
oversee whether the conditions of different orders and notices were met as well as toseek a way of reconstructing the society’s operation. Leigh actually provided guidance
for business reform through regular interviews with the directors. He also pressed tohold a special shareholders’ meeting while expecting it to result in a merger withanother (probably larger and more liquid) society.54
A new management team was put in place in February 1960 and led by Ernest Partridge,
CBE. At the time an M.P. (Cons) for Battersea South (1951-64) and with industrial
experience, Partridge disregarded Leigh’s suggestion for considering a transfer ofengagements to a larger society.55 Instead he set to the task of improving the system ofinternal control because, in his view, one of the main factors affecting the low reserve
ratio was the negligent administration of loans in arrears. Indeed, at the end of 1960, of
the 1,181 mortgages outstanding, repayments were in arrear in no less than 223 (19percent) cases, of which 150 were more than two months overdue. 56 Partridge’s
complete overhaul of the mortgage department reduced the ratio of accounts with more
52

T326/17, the interim report of the inspector appointed to investigate the affairs of Lloyds Permanent
Building Society dated 17 February 1961.
53
T326/17, the interim report of the inspector appointed to investigate the affairs of Lloyds Permanent
Building Society dated 17 February 1961.
54
See for instance, ‘Special Meeting being called’, The Times dated 2 March 1961, when a special
meeting was in fact called without the need for the CRFS to exercise its powers. Note that a new board
was elected in February, though the AGM was adjourned from April until July.
55
T326/17, the final report of the inspector appointed to investigate the affairs of Lloyds Permanent
Building Society dated 18 October 1961.
56
In his report Leigh had indicated that ‘[t]here is little doubt that many of the arrears cases would nothave arisen if prompt action had been taken to remind borrowers of their obligations’ (T326/17, theinterim report of the inspector appointed to investigate the affairs of Lloyds Permanent Building Society
dated 17 February 1961). The Lloyds Permanent’s auditors, Calder-Marshall, Ibotson & Bound, also
pointed out that ‘the Society did not maintain a satisfactory system of control over its transactions andrecords’, which led them to conclude that ‘it failed to maintain a system of control and inspection of its
books of account’ (T326/17, the report of the auditors dated 2 June 1961).

21

than one month in arrear from 13 percent in August 1961 to 9 percent in May 1962.57
The reserve ratio also increased rapidly, reaching £86,675 or 3 percent of mortgage
assets by May 1962.
Partridge aimed to rebuild the society and achieve trustee status.58 For that the society
had to be free of regulatory intervention. The CRFS was, however, concerned with
Partridge’s scarce experience managing a building society and supported Leigh’s ideaof a transfer of engagements.59 As a result, Crabbe disregarded Partridge’s initial claimthat improvements in key accounting data were sufficient to revoke the orders.60 Abouta year later, however, Partridge’s continuing efforts paid off. In April 1963, Crabbe
recognized that the system of administration had been overhauled and effective internal
control set up. This together with a rise in real estate prices placed the society insounder financial position.61 Crabbe then requested the Treasury revoke the two orders
made on Lloyds Permanent.
This was the first case in which the CRFS rescinded an order made under BSA60
against a building society.62 However, in spite of the effort by the new management
team and the revocation of the orders, the lifting of restrictions saw excessive demands
for withdrawals of sight and term deposits. The society dismantled by transferring its
engagements to the Westbourne Park in January 1965.
3.2 Mancunian Building Society
This was another case marked by a conflict of interest between, on the one hand, theprudential management of the society and, on the other hand, directors’ activities in realestate sales and development. As in the case of the Lloyds Permanent, this society
expanded rapidly in the years that followed its incorporation in March 1956. This waspartly due to a high demand for mortgages. But growth also characterized by high levelsof spending in advertising, payment of investment rates above the industry average andthe suspicion of servicing borrowers rejected elsewhere (while asking for repayments atabove average rates).63 These deviant symptoms could not escape from the attention of
the CRFS.
Soon after A. E. Brook was appointed as inspector, under Section 11 (3) of PFA58, he
57

T326/17, a memorandum prepared by E. Partridge dated 7 May 1962.
T326/17, A notice to the Economic Secretary by J. Macpherson at the Treasury dated 23 February
1961.
59
T326/17, the CRFS’s letter addressed to J. Macpherson at the Treasury dated 23 May 1962.
60
T326/17, the CRFS’s letter addressed to Partridge dated 5 June 1962.
61
T326/227, A letter from Cecil Crabbe to J.I. Mck. Rhodes at the Treasury dated 1st April 1963.
62
The Times, 19 April 1963, p. 17.
63
T233/2269, the CRFS’s letter addressed to E.W. Maude at the Treasury dated 24 October 1960.
58

22

discovered evidence of advances to real estate companies where B. Green, the society’s
executive director, and his wife, another director, were directors and large
shareholders.64 Not only was the dominance by one man substantiated but Brook
pointed to the possibility of property being sold by companies, under the control of theGreens, at a mark up while the higher price was afforded by individuals receiving
mortgages by the Mancunian.65 The society was also willing to accept very old property(erected before 1919) as security but without employing criteria set by or funds madeavailable as a result of HPHA59.
In his communication with the Treasury, the CRFS noted that accumulated reserves
were not of concern nor placed the society at imminent risk but their level was still low
when considering that the Mancunian was paying higher than average interest rates toinvestors.66 The CRFS questioned not only the actual level of the reserve ratio but also
the way reserves were being accumulated. Treasury officials agreed that Crabbe had
enough evidence to justify making a direction under Section 7 of BSA60, prohibiting
the society to continue advertising. The direction was issued on February 1961 andnever revoked. However, new funds were attracted through personal introduction of
new members by the existing ones. Therefore, even with the prohibition ofadvertisement, the society did not immediately fell into a crisis, but growth of loanable
resources was, of course, strictly limited. This together with high variability of interest
rates and increasing difficulties to retain and attract new staff gradually led the directors
to recommend the transfer of engagements to the Cheshire. As a result, the Mancunian
was finally dismantled in July 1979.67
3.3 Eagle and Law Mutual Building Societies
The investigation into the business of the Eagle was again motivated by concerns about
inappropriate links between the society and a property developer;68 as well as offeringsof above market rates of interest and an ‘unhealthy rate of growth’69. Prompted by alarge press and postal publicity campaign (paid for to a large extent by the chairman, S.
A. Halsall), authorities soon discovered that the society was making a very large
64

T233/2269, the report of the inspector appointed to investigate the affairs of Mancunian Building
Society dated 6 October 1960.
65
Brook’s report also stated: ‘there seems little doubt that the society’s main raison d’être is to facilitate
the business of Green’s estate agencies and property companies’ (T233/2269, the report of the inspector
appointed to investigate the affairs of Mancunian Building Society dated 6 October 1960).
66
T233/2269, the CRFS’s letter addressed to E. W. Maude at the Treasury dated 24 October 1960.
67
FS 14/1489, annual report for the year of 1978 dated 25 March 1979.
68
T326/849, the CRFS’s letter addressed to E. W. Maude at the Treasury dated 24 January 1961.
69
T326/849, a report of an investigation made as a result of a notice served under the provisions ofSection 11 (3) of the Prevention of Fraud (Investments) Act, 1958 dated 11 January 1961.

23

number of loans to companies planning to develop hotels and reconvert Victorianhouses into flats, but companies which Halsall controlled or was a director.70
This was not only a case of a society lending to ‘speculative builders’ or the poor
diversification of the loan portfolio (as ‘its mortgages are too large, too few andconcentrated in too few hands’),71 but also one marked by poor collateral (i.e. grossly
overestimating the value of properties) and exorbitant administrative expenses. The
society was thus considered at risk by RFS staff. The considerably small amount ofreserves compared with total assets raised significant concerns about its financial
position.72 ‘As in other mushroom societies the [Eagle] has been unable to accumulateadequate reserves and at 31st December 1959 its total reserves amounted to less than
1/2 per cent of its total assets.’73
The CRFS informed of his intention to make a direction to the society under Section 7(1) of BSA60 based on the above considerations. He highlighted the society’s‘[i]nadequate reserve ratio’, ‘[v]irtual control of the society by the Chairman, who isassociated with companies to which large advances have been made’ and ‘[d]oubtful
adequacy of security in respect of certain advances’.74 The Eagle promptly appealed
stating they were in the process of negotiating a merger with the directors of Law
Mutual and, as a result, replacing Eagle’s board with the former.75 The CRFS, however,disregarded the communication and issued a direction on March 23, 1961.
Shortly after, and as planned, the directors of the Law Mutual took over control of theEagle. Formally, the two societies existed as separate entities but in fact they were run
as one. Little distinction was made between them for management purposes andexpenses were adjusted not so much in relation to who incurred them as to who could
best bear them.
The situation worsened for the amalgamated societies in December 1963. The newly
appointed CRFS, S. D. Musson, wrote to the Treasury asking for permission to issue an70

T326/849, a note prepared by A. Guthrie at the Treasury dated 14 February 1961.
T326/849, a note prepared by A. Guthrie at the Treasury dated 14 February 1961.
72
T326/849, the CRFS’s letter addressed to E. W. Maude at the Treasury dated 24 January 1961.
73
T326/849, a report of an investigation made as a result of a notice served under the provisions ofSection 11 (3) of the Prevention of Fraud (Investments) Act, 1958 dated 11 January 1961. Within thissource the term ‘mushroom societies’ appears as a generic to describe those societies being run whilepursuing personal interests of directors rather than serving the investing community. There is no mention
within this source nor any surviving record listing all the actual or potential ‘mushroom societies’.
Evidence suggests that a potential intervention by the RFS was decided on a case by case basis whilebuilding on information from the A.R. 11 and advertisements of unusually high rates paid to investments.
74
T326/849, the CRFS’s letter addressed to E. W. Maude at the Treasury dated 24 January 1961.
75
T326/849, the CRFS’s letter addressed to E. W. Maude dated 2 March 1961.
71

24

order for the Law Mutual under Section 48 of BSA62 (previously Section 6 of BSA60)‘to stop the society from taking further investments’.76 Musson considered that there
were: (1) insufficient reserves on mortgage assets and (2) insufficient liquid funds. In
addition, the RFS reckoned that ‘[s]ince 1960 not less than one-seventh and perhaps as
much as one half of all the society’s advances have been made either to finance sales ofproperties by certain companies whose directors are directly or indirectly associatedwith the directors of the society’.77
The Treasury confirmed Musson’s request while suggesting to apply Section 51(equivalent to Section 7 of BSA60) rather than Section 48. Before prohibiting theacceptance of investments, Treasury officials wanted reassurance that ‘the 39 properties
valued by the District Valuer should have been a true sample of the Society’s 182
mortgaged properties, rather than merely a selection of the bad causes’.78 It is not clear
from the record why RFS failed to purse a larger sample, but Musson complied with therecommendation and issued a direction under Section 51 to Law Mutual on 14 April
1964.
The situation was further aggravated by July 1967. The CRFS now regarded the twosocieties as ‘indistinguishable administratively having the same directors, staff andoffice’.79 Of greater concern, however, was the potential for financial losses:
As with the Eagle, the essence of the case against this [Law Mutual] society is that a large
proportion of its outstanding advances are secured on properties of less value than the advance,
the total difference in those cases being £41,932. At 31st December 1966 the society had
reserves of £8,664 and a provision for anticipated losses of £1,800. Taking this into account the
net total possible losses on these mortgages against which there is no reserve is £31,000,
involving a possible loss of 6% of shareholders funds…It seems inevitable therefore that in thecourse of time…losses will turn out to be in excess of the society’s reserves and the investors
will suffer some loss. In these circumstances the society should clearly be stopped from taking
further investments. (T326/849, the CRFS’s letter addressed to R. T. Armstrong at the Treasury
dated 18 July 1967)

Musson then served a notice of intention under Section 48 to both Law Mutual andEagle on 25 July 1967. The two societies made oral representations. After several
meetings, in October 1967, Musson informed the Treasury that directors had promised
to voluntarily stop taking deposits and making new advances for a period of time. For
76

T326/849, the CRFS’s letter addressed to J. I. McK. Rhodes at the Treasury dated 10 December 1963.
T326/850, a memorandum prepared by A. K. Stubbs at the Treasury dated 23 December 1963.
78
T326/850, in a letter from J. I. McK. Rhodes to the CRFS dated 24 December 1963.
79
T326/849, the CRFS’s letter addressed to R. T. Armstrong at the Treasury dated 18 July 1967.
77

25

Musson, these were equivalent to the effects of the proposed order and in light of this hedecided to postpone issuing an order. 80 At this point Musson expected ‘thesocieties…[to] gradually run down’.81
Contrary to Musson’s expectation, however, self-control exhibited by both societies
resulted in significant improvements in their financial accounts. In terms of net income
the improvement mainly responded to disposing of properties having doubtful values
and cutting down otherwise high interest rates paid to term investors.82 Both societies
survived until the early 1980s. In this process the level of reserves grew as much as 15
percent of the total assets and more than 31 percent of mortgage assets in the case ofEagle and much more for the sounder Law Mutual. But the original directions made toboth societies prohibiting advertisement were never revoked so that the level of total
assets remained close to £300,000 and that of mortgage assets to less than a half of thetotal. Then, in the early 1980s, other societies started to offer significantly higher rates
of interest to investments and deposits than those offered at the Law Mutual. As a result
the investment income quickly migrated and the scale of both societies rapidly shrunk.
The Law Mutual was thus dissolved in 1983 while its sister society, the Eagle, followed
in 1984.
3.4 Home Park Building Society
Incorporated in May 1958 with only the assets of ₤10,000, this society still remained
small at the end of 1963 having only ₤43,682 in total assets. The society did not seek
investment funds from the public until 1962, but during 1963 investments were
accepted from six new shareholders who were promised to receive interest at 4.5
percent. The possibility that the directors were seeking outside capital to replace theirown money (by offering investors an attractive return) together with, ironically, a very
high reserve ratio awoke the suspicions of the RFS. An investigation was launched inAugust 1963, the report of which was issued on April 1964 stating that:…this society possessed some unusual features. No interest was paid on either shares ordeposits until 1963 and the society was being subsidised in other ways – no directors’ fees orstaff salaries were being paid and office accommodation expenses were purely nominal.
Despite this, the society’s charge to borrowers were high, mortgage interest rates of 8 and 81/2
per cent being levied and entrance fees charged. (T326/229, Report of an investigation into theaffairs of the society dated 1 September 1964)
80

T326/849, the CRFS’s letter addressed to R. T. Armstrong at the Treasury dated 24 October 1963.
T326/849, the CRFS’s letter addressed to R. T. Armstrong at the Treasury dated 24 October 1963.
82
T326/850, the CRFS’s letters addressed to R. T. Armstrong at the Treasury dated 24 October 1967 and
27 May 1969.
81

26

Alongside their duties at the Home Park, the directors were found to have operated
mortgage finance company and real estate brokers whose properties no other building
society would accept as security (because these properties were very old and some built
before 1870). Whether directly or indirectly through their outside business, the Home
Park’s directors were personally interested in at least 80 percent of all mortgages
advanced by the society.83 It is worth noting how, as was the case of Mancunian, theinspectors’ report criticized the way the society accumulated capital reserves:
By the end of 1963, the society’s reserves had grown to 11.8 per cent of its total assets. This
was achieved by charging high mortgage interest rates whilst, at the same time, paying little orno interest on investment capital or deposits received… (T326/229, Report of an investigation
into the affairs of the society dated 1 September 1964)

In September 1964 the CRFS issued a notice of his intention to prohibit the society fromadvertising once it was clear the society pursued the business interest of its directors
rather that those of the investing public.84 The Treasury’s consent was obtained on 18
November 1964 and a direction forbidding advertisement was made on the same day.
As in the case of Mancunian, the Home Park did not face an imminent crisis because it
could still secure necessary, though limited, funds, through personal introduction by theexisting shareholders. The direction was, however, never revoked until the society’s
gradually shrunk in size and dissolved in 1975.
In summary, the case of Home Park exemplifies of why directions made under Section
7 of BSA60 (Section 51 of BSA62) were in place until the society dissolved. Cases
involving this type of intervention were all related to societies that were run whilepursuing personal interests of their top executives. A direction prohibiting
advertisement made it difficult for the societies to recruit new investors, which, in turn,reinforced the reasons why the sanction was introduced in the first place.
3.5 London and Midland Building Society
The investigation of the London and Midland85 started in February 1965 after its
secretary, A. L. Low, informed that £96,000 of the society’s funds (about one-quarters
83

T326/229, Report of an investigation into the affairs of the society dated 1 September 1964.
T326/229, a letters from S.D. Musson to J.I. Mck. Rhodes at the Treasury dated 4 September 1964 and9 November 1964.
85
There were two London &Midland Building Societies. One was established in 1936 and quickly
84

dissolved in 1938. The other was established in 1955, transferred its engagements to London Goldhawk in
July 1978 and after several more transfers, its engagements are now with Nationwide. Personalcommunication, Simon Rex (Building Societies Association), 28 July 2011.

27of the total assets) had been transferred to a company called Ducape Holdings Ltd.
without any security.86 The CRFS immediately requested to the Treasury and was
granted permission to act under Section 48 of BSA62 to stop the society from taking
further investments.87 An order was then imposed on 2 March 1965 while criminal
proceedings were initiated by the society against two of its three directors.88
On 10 November 1967 the solicitors of the London and Midland wrote to the CRFS
requesting for revocation of the order. The Registrar’s staff reinvestigated the affairs of
the society. On 22 April 1968 the order was revoked following a diagnosis revealingthat ‘no indication…[of] any of the present directors are subject to any other outside
influence by anyone in connection with the affairs of the society’.89 But the order’stermination was conditional for the London and Midland to observe two undertakings
namely: (1) ‘[t]he society will…maintain a ratio of reserves to assets of not less than
3.75%’, and (2) ‘[t]he society will not make any advances the making of which would
result in its liquid assets (cash and investments at market value less bank loans) being
reduced to below 15% of its assets’.90
But even after revocation, the London and Midland could not achieve full recovery. The
chairman, L.A.W. Noble, already noted this in a statement in the annual report for 1968.
There he said that ‘[i]n common with all Building Societies the attraction of new
investors is proving very difficult in prevailing conditions of high interest rates and theinflationary cost of living’.91 Indeed, total assets remained just over £300,000. The levelof reserves also remained relatively low in comparison with other small-sized societies
and close to 5 percent of total assets. The society dismantled in July 1979 bytransferring its engagements to the London Goldhawk. The case of London and Midland
illustrates how the level of reserves was central in the decision making of the RFS, theauthority supervising the operations of building societies, when considering to not only
to issue but also to revoke an order.

4 Discussion and Concluding Remarks
86

T326/711, the CRFS’s letter his letter addressed to J. I. McK. Rhodes at the Treasury dated 3 February
1965.
87
T326/711, the CRFS’s letter his letter addressed to J. I. McK. Rhodes at the Treasury dated 3 February
1965.
88
In April 1968 two former directors were convicted of conspiring to cheat and defraud the London andMidland society (T326/711, the CRFS’s letter to D. W. Thompson at Treasury dated 8 April 1968).
89
T326/711, the CRFS’s letter to D. W. Thompson at Treasury dated 8 April 1968.
90
T326/711, the CRFS’s letter to D. W. Thompson at Treasury dated 8 April 1968.
91
FS 14/1477, annual report for the year of 1968 dated 24 April 1969.

28

In an attempt to indicate the need to review what has been stated in the literature
relating to the limited use, if any, of accounting information within retail financial
service organizations, this study offers systematic empirical evidence of the use ofaccounting information by state authorities to discipline the behaviour of building
societies suspected of irregularities. Accounting-based regulation was defined in thisstudy as a form of codified practices, enacted into law, and which uses accounting
numbers as criteria for identifying spaces and subjects to be regulated. This study has
documented how accounting-based regulation was introduced through HPHA59 and
BSA60 and detailed how this regulation was put into practice and impacted on theoperations of individual societies.
Fieldwork first considers the introduction of HPHA59. The Act gave the RFS power toprescribe conditions for deposits (and later on share investments) at individual societies
being granted trustee status. These requirements were the first to detail minimum capitalrequirements for any participant in British retail finance. They included maintaining aminimum level of reserves and liquidity as per cent of total assets. It also specified halfa million pounds in total assets as the threshold to be considered for trustee status – thus
discriminating against a large number of small asset sized, non-Association-member
societies.
The Association fought to differentiate its members from those outside its realm andparticularly a number of small-sized societies regarded as financially unsound,moribund in the worst case, and under the potential influence of property developers.
These were undesirable for the promotion of thrift, contrary to widely accepted valuesof the building society movement as well as deviations from the purpose of a building
society to finance the purchase of dwellings by private individuals. The Association had
privileged access to the policy making process. This mirrors a typical insider group as
proposed by Grant (1978; 2000). State authorities, namely the RFS and the Treasury,
shared the same policy priorities with the Association, which in turn facilitated theestablishment of minimum reserve and liquidity ratios as model forms of prudential
supervision in the operation of the building society sector. The interdependent
relationship between the Association and state authorities was also instrumental tostrengthen the powers of the RFS in BSA60, particularly with regards to enabling the
RFS to forbid not only advertisement but also acceptance of new investments. These
new extended powers were used without delay to discipline societies suspected ofinadequate use of their funds. Specifically, the reserve ratio was set as the chief
accounting-based criterion to identify deviations from the industry norm.

29

BSA60 introduced the concept of special advances to limit loans of individual societies
to corporate bodies to a maximum of 10 percent of total advances made during the year.
In parallel with this, Form A.R.11, the main instrument to monitor the financial
performance of individual societies, was revised so that necessary accounting
information could be supplied for the CRFS to detect ‘disreputable’ societies at an earlystage.
Cases of intervention documented in this study tell how the RFS initially identified
societies suspicious of irregularities based on the behaviour of specific accounting
criteria, such as rapid expansion of asset size, extraordinarily higher rate of interest paid
to investors and a large sum of money invested in advertisement. The cases examined
document how the CRFS transformed the use of the levels of reserves from its originalfunction as a condition to approve trustee status to become a benchmark for its actions
when exercising its power of intervention (by issuing or revoking orders and directions).
As a result, the CRFS forced targeted societies to improve their level of reserves,
aiming at more financially sound position and increasing security to its depositors andshare investors (see Bátiz-Lazo and Billings, 2012 for a contemporary case of a large
society with a weak reserve ratio but which was not subject to intervention). Althoughwhen compared with the entire population of the UK building societies the number ofsocieties which in fact were subject to the intervention was small, the consequences ofsuch intervention and particularly the application of Section 6 of BSA60 (prohibiting
the acceptance of new investments), appear to have been a warning to the remaining
constituents to abstain from engaging in activities that could be contrary to servicing theinvestment community (including a reduction in the reserve ratio).
The cases examined in this study substantiate the view that the disciplinary powers of
the CRFS, founded on the accounting-based criterion, in particular the prohibition on
acceptance of investment exercised under 6 (2) of BSA60, were effective to guide
disreputable societies through the established norms and make them to discharge thestandards. Indeed, the improvement made in the systems of internal control at the
Lloyds Permanent was guided and backed up by the supervision from the RFS. The
self-control, rather than ordered prohibition, observed at Eagle and Law Mutual on
taking deposits and making new advances was surely the results of the intervention
made by the CRFS, which then contributed to the subsequent improvement in thequality control of advances made and their long-run survival of both by the early 1980s.
Similar type of self-control at the London and Midland on the ratios of reserves andliquidity, which were conditions for the revocation of the order once made, could have30

at least been useful to prolong its subsequent life for about ten years, though unable to
make full recovery.
Although penalizing the conduct of the Mancunian and Home Park with the prohibitionof advertisement, the RFS even questioned the way they accumulated reserves, i.e.
higher than the average rates of interest charged to borrowers, despite their financial
statements recorded high or at least not immediately risky levels in the reserve ratio.
The devise limiting funding from the outside, through the ban on advertisement, could
not necessarily press the improvement of accounting control at the targeted societies,
but it was at least useful, as normally expected function of regulation, to prevent
outsiders from being involved in potential risks existing in the targeted societies.
In summary, the evidence documented in this study suggests that the assessment madein prior studies needs to be reviewed in light of the fact that accounting information was
instrumental for state authorities represented by the Treasury and the RFS to externallydiscipline building societies having irregularities and it played a vital role to supplement
the societies’ own underdeveloped control.

31

Acknowledgements
We are indebted for the help and support granted by Simon Rex (Building Societies
Association) as well as very helpful comments from Mark Billings, staff at the
Universitat Autónoma de Barcelona, Universitat de Barcelona, participants at the
Association of Business Historians (Reading, 2011) and anonymous referees. Financial
support from the Institute of Chartered Accountants of Scotland (Small Project) and the
Accounting History Association, Japan, is gratefully acknowledged. The usual caveats
apply.

32

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37

Table 1:

Estimates for Qualification for Trustee Status (as of 8 December 1958)
Number ofsocieties

Building societies which qualify
in all respects

Percentage of
total assets

Sum of total
assets

170

88.06%£2,126,788,251(1) being terminating societies

28

0.02%

£409,343(2) being unincorporated
societies

8

0.20%

£4,869,969(3) having total assets less than
0.5 million (permanent &incorporated)

476

2.83%

£68,331,888(4) unsatisfactory liquid position

50

3.26%

£78,616,516(5) unsatisfactory reserves

17

4.82%

£116,445,613(6) both liquid & reserve position
unsatisfactory

4

0.79%

£19,125,993

Sum

753

100%

£2,414,587,573

Societies which fail to qualify

Source: FS23/283, Analysis of building societies – qualification for trustee status

Table 2: Orders in force by Chief Registrar of Friendly Societies at the end of 1965
(Interventions under Section 11 of PFA39)
Name

Head
OfficeEstablished

Order

Society

IssuedTerminatedRoyal Mutual Benefit*

London

1865

1940

1965

President Permanent

London

1869

1949

1965

Procedure for Termination
Registration cancelled. Deposits transferred overto Brittania and mortgages to Bristol & West.
Dissolved.
Dissolved. Order by the court to be wound up on

Second St James's

London

1876

1949

1955

July 1955 but it was still in process of being
terminated as of December 1965.

BlackpoolBlackpool

1937

1951

1980

Dissolved.

Willesden

London

1933

1951

1969

Transfer of engagements to Hastings & Thanet.

Southern Counties

London

1932

1955

1956

Dissolved.

London

1934

1956

1992

Dissolved.

Fleet

London

1955

1956

1965

Dissolved.

Moorgate

Swansea

1947

1957

1974

Dissolved.

CamdenLondon

1957

1958

1965

Dissolved.

Essex Mutual

Hornchurch

1935

1958

1962

Dissolved.

Westminster

London

1954

1958

1981

County of London
Permanent

Transferred engagements to Country.

Source: Report of the Chief Registrar of Friendly Societies (Building Societies), 1960-1965; ‘Mergers and Name Changes’ (Building Societies Association, 2010)
Notes: (*) Total Assets greater than £500,000 at the time of intervention.

39

Table 3: Orders in force by Chief Registrar of Friendly Societies at the end of 1965
(Interventions under Section 11 of PFA58)
Name

Head
OfficeEstablished

Order
IssuedSociety
TerminatedState

London

1931

1959

1970

Lloyds Permanent

London

1954

1960

1965

Alliance PerpetualLondon

1854

1960

1968

County Palatine

Manchester

1956

1960

1970

Preston

1952

1960

1983

Preston and BlackburnProcedure for Termination
Transfer of engagements to Abbey
National.
Orders under section 11 of PFA58 andsection 6 (2) of BSA60 revoked in
1963. Transfer of engagements toWestbourne Park in 1965.
Transfer of engagements to Leek &Westbourne.
Dissolved.
Order by the court to be wound up on
July 1955 but dissolved until 1983.

Notes

1

1,2

1

Source: Report of the Chief Registrar of Friendly Societies (Building Societies), 1960-1965; ‘Mergers and Name Changes’ (Building Societies Association, 2010)
Notes
1) Total Assets greater than £500,000 at the time of intervention.
2) Society was sanctioned under both PFA58 and BSA60.

40

Table 4: Orders and Directions issued by Chief Registrar of Friendly Societies, 1960-1965(Interventions under Sections 6 and 7 of BSA60)
Name

Established

Head
OfficeOrder
IssuedSociety
TerminatedCounty of London
Permanent

1934

London

1960(Sec 6)

1970

Transfer of engagements to Abbey
National.

Lloyds Permanent

1954

London

1960(Sec 6)

1965

1,2

Wembley

1955

London

1980

Eagle

1956

London1983

Dissolved.

1

Mancunian

1956

Manchester

1961(Sec 6)
1961(Sec 7)
1961(Sec 7)

Orders under section 11 of PFA58 andsection 6 (2) of BSA60 revoked in
1963. Transfer of engagements toWestbourne Park in 1965.
Dissolved.

1979

Transfer of engagements to Cheshire.

1

Notes
1) Total Assets greater than £500,000 at the time of intervention.
2) Society was sanctioned under both PFA58 and BSA60.

Procedure for Termination

Notes

1

41

Table 5: Orders and Directions issued by Chief Registrar of Friendly Societies, 1960-1965(Interventions under Sections 48 and 51 of BSA62)
Name

Established

Head
OfficeOfficial and General*

1850

LondonRefuge1958

Manchester

Wythenshawe

1958

Manchester

Home Park

1958

LondonLaw Mutual

1957

LondonLondon and Midland

1955

LondonVanguard

1960

LondonOrder
IssuedSociety
TerminatedProcedure for Termination

1962(Sec 48 & 51)

1981

Transfer of engagements to
London Grosvenor.

1962(Sec 48)
1963(Sec 48)
1964(Sec 51)
1964(Sec 51)
1965(Sec 48)
1965(Sec 48)

1977

Dissolved.

1963

Dissolved.

1975

Dissolved.

1984

Dissolved.

1979

Transfer of engagements to
London Goldhawk.
Dissolved

1966

Source: Report of the Chief Registrar of Friendly Societies (Building Societies), 1960-1965 and Building Societies Yearbook (1961).
Notes: (*) Total Assets greater than £500,000 as of 31 December 1960.