The Building Societies (Prescribed Contracts) Order 1988

• Citation: S.I. 1988/1344
• Sections: 9

Section 1 Citation and commencement

This Order may be cited as the Building Societies (Prescribed Contracts) Order 1988 and shall come into force on 1st October 1988.

Section 2 Interpretation

(1) In this Order—

“ the Act ” means the Building Societies Act 1986,

“participant” means a party to a prescribed contract to which a society is also a party,

“prescribed contract” means an agreement or a series of agreements the terms of which include terms having the effect of—

the terms set out for swap contracts in Part I of the Schedule hereto,

the terms set out for sterling interest rate option contracts in Part II of the Schedule hereto,

the terms set out for swap option contracts in Part III of the Schedule hereto, or

the terms set out for sterling interest rate forward and futures contracts in Part IV of the Schedule hereto,

“security”, except in Part IV of the Schedule hereto, means an asset which is of a character which societies, or societies of particular descriptions, may hold under section 21 (liquid assets) of the Act or which comprises rights under a prescribed contract whose terms include terms having the effect of the terms set out for sterling interest rate forward and futures contracts in Part IV of the Schedule hereto, and

“society” means a building society.

(2) Where reference is made in this Order to any matter within the terms of a prescribed contract being specified, that matter shall be treated for the purposes of this Order as so specified if it is specified or referred to within or can be implied from the terms of that contract, or if it is to be determined in a manner which is set out in that contract.

Section 3 Prescribed contracts

(1) Subject to paragraph (2) below, a society may, for the purposes of section 23(1) of the Act (which empowers societies with qualiftying asset holdings to hedge), effect prescribed contracts.

(2) Where the security specified in a prescribed contract to which Part II of the Schedule hereto relates is an asset which is of a character which only societies of a particular description may hold under section 21 of the Act, the power to effect that contract is available only to a society of that description.

Section 4 Revocation of previous Orders

The Building Societies (Prescribed Contracts) Order 1986 and the Building Societies (Prescribed Contracts) (Amendment) Order 1987 are hereby revoked.

Section 5 Transitional provision

Nothing in this Order shall be taken to invalidate any contract effected by a society as a prescribed contract in accordance with any Order in force under section 23(2) of the Act at the time when the contract was effected.

Section 1

A society agrees with a participant (whether by a single agreement with him or by a series of agreements to at least one of which he is a party) that each will pay money to or to the order of the other on terms which are calculated to substitute for a cash flow relating to assets or liabilities, or a combination of assets and liabilities, of the society, (without affecting the terms of any rights reflected by such assets or any obligations reflected by such liabilities), a different cash flow, whether the difference lies in the number or frequency of the payments or receipts (or combination of payments and receipts) comprising the cash flows, in the interest rates by which such payments or receipts are calculated, in the currency in which such payments are made or receipts are taken, or in any combination of those factors.

Section 1

A society agrees with a participant (whether by a single agreement with him or by a series of agreements to at least one of which he is a party) that one party to the agreement will at specified times pay sums of money in sterling or transfer gilts to the other, where the liability (if any) for making such payment or transfer, the amount (if any) to be paid, and the value of gilts (if any) to be transferred are to be determined by reference to the extent to which specified rates of interest or specified prices in sterling differ as between the beginning and the end of specified periods or at specified times or fall outside a specified range of interest rates or prices at specified times.

Section 2

In this Part of this Schedule, “cash flow” means payments, receipts, or any combination of payments and receipts.

Section 2

In this Part of this Schedule, “gilts” means securities issued in the United Kingdom by Her Majesty’s Government.