The youngest building society is the Ecology Building Society which was established in 1980. Since then increasing regulation, in particular stringent capital requirements, has made the setting up of a new society much more difficult and financial institutions find it easier to establish businesses in other formats.
The requirements for establishing a building society are set out in Section 5 and Part 1 of Schedule 2 to the Building Societies Act 1986.
To establish a new society, ten or more persons must agree on a memorandum setting out the purpose (or principal purpose) and the extent of the powers of the intended society, in terms which comply with the 1986 Act and on rules for the regulation of the society which comply with the Act. All those persons (or at least 10), and the intended secretary, must then sign four copies of the memorandum and the rules and send them to the Prudential Regulation Authority (PRA) for consideration.
There are strict capital requirements for setting up a new society - it must have adequate capital resources commensurate with the nature and scale of its business and the risks inherent in its business. It must maintain own funds of at least £1 million. The new organisation would also have to have a proper business plan, funding and lending plans and robust information technology etc
The BSA is not in a position to provide advice or guidance on the formation of a building society. Those considering doing so should take their own legal and financial advice, and contact the PRA. However the PRA itself is unable to provide detailed advice unless you are clear why a new building society is the correct model for your new business. It may take up to two years of work for a management team to make a credible application to the PRA.