REGULATORY IMPACT ASSESSMENT

Electronic communication for building societies


Introduction and summary

1.	This assessment estimates the costs and benefits of making an 
order under the Electronic Communications Act 2000 (the 2000 
Act) that would facilitate the use of electronic communications by 
building societies when discharging requirements under the 
Building Societies Act 1986, by clarifying the conditions which 
apply when they communicate electronically with their members.

2.	The building society sector through its trade association, the 
Building Societies Association (BSA) has asked the Government to 
use the power under the 2000 Act to make provision to this effect, 
particularly since an equivalent order was made amending the 
Companies Act 1985 to facilitate the use of electronic 
communications by companies, including banks.

3.	Building societies have a number of statutory obligations to 
communicate in writing with their members, for example to notify 
them of Annual General Meetings or member ballots.  The cost of 
sending written communication to members is significant, 
especially for larger societies – Nationwide, the largest building 
society, has over 9 million members.  

4.	The facility to use electronic communications in order to 
discharge such statutory obligations could enable building 
societies to reduce these costs.


Purpose and intended effects of the measure

5.	Once in force, this order would enable building societies to fulfil 
by electronic means the statutory obligations to communicate in 
writing with their members which are dealt with in the Order, by 
making clear the conditions which must be satisfied if electronic 
communications are used to meet those obligations.  At present, 
while societies are free to communicate with customers by, for 
example, email on any matter, where there is a statutory obligation 
to inform a member in writing, there is some uncertainty whether 
that obligation is properly discharged if the society informs the 
member using electronic communications.  As a general practice, 
therefore, the society will also send the information by post, at 
considerable cost, particularly when the statutory obligation 
requires the society to write to every one of its members.

6.	Electronic communications may only be used by societies to 
discharge such statutory obligations if the individual member 
receiving the communication agrees, either by notifying the society 
of an electronic address for that purpose, or by agreeing that 
information which must be sent to him will instead be accessed by 
him on a web site.  Members or societies that wanted to maintain 
traditional methods of communication could do so.

7.	The intended effect is to reduce operating costs for building 
societies.  It is a modest liberalising measure that would help put 
building societies on an equal footing with banks in this respect, 
since, as companies, banks are already able to use electronic 
communications when complying with obligations under the 
Companies Act 1985 to send information to their shareholders. We 
do not anticipate that the Order will significantly impact on the 
competitive environment of the market for products provided by 
building societies.

Benefits

8.	This measure would enable building societies to reduce costs 
by giving them the flexibility to choose cheaper means of 
communication with their members. 

9.	 The statutory obligation that building societies are under to 
keep their members informed on key issues relevant to them 
would be maintained, so this order would not have a detrimental 
impact on members' rights.  

10.	It is difficult to quantify how much building societies will save 
as a result of this bill.  Many variable factors will have an influence 
on this amount – the relative cost of sending electronic and 
conventional communication; the number of members who take up 
this option; the number of extra occasional communication 
requirements. Benefits will also depend on the number of building 
societies that choose to take advantage of the Order's provisions. 
Consultation revealed that several building societies were 
interested in taking forward the measure.


Compliance cost estimates

11.	There is no compliance cost associated with this measure as 
it is permissive for both building societies and members.  Possible 
costs in setting up electronic communication include securing 
agreement with members, training staff and upgrading technology.  
However, any society that chose to invest in order to facilitate 
electronic communication would be doing so in order to make 
future savings.

Declaration

I have read the Regulatory Impact Assessment and I am satisfied 
that the balance between cost and benefit is the right one in the 
circumstances.

Signed by the responsible minister


Ruth Kelly
Financial Secretary to the Treasury