Curbing conflicts of interest in UK building societies: Rogue building societies in the late 1950s and the Building Societies Acts of 1960,1962 and 1986

Abstract

This article examines some of the issues relating to, and cases of, the conflicts of interests involving directors of UK building societies during the late 1950s and how the issue of “undesirable lending” by societies was resolved by Parliament by means of the Building Societies Act 1960 and the introduction of accounting-based regulations and the concept of “special advances”. The article examines the effectiveness of these regulations both in terms of the cessation of these “rogue” societies and the ways in which others continued the practice either unnoticed or by circumventing the special advances’ regulations. The article also examines the deficiencies of mutuality (compared with profit-making entities) which it was considered at the time would lead to inefficiency and “managerial diversion”, the conversion of its power into personal gains of some form. Finally, it is shown how the problems of conflicts of interest ceased to be an issue as a result of deregulation in 1986.