Kent Reliance Building Society has confirmed it is to become a bank to support capital investment from JC Flowers.
The bank will become a subsidiary of Kent Reliance Provident Society Limited and building society members are entitled to transfer to the new body.
JC Flowers, a private equity firm specialising in financial services is set to provide £50m of capital immediately after the transfer.
The bank’s board will contain members from JC Flowers and KRPS.
Mike Lazenby, chief executive of the Society, says: “KRBS has an excellent opportunity to develop its business franchise in the current market to build on the profit it was able to declare last year. However, recent pressure on KRBS’s capital has proved challenging, particularly as building societies cannot currently raise capital in the way banks do. To meet this challenge, we have been working with a team of advisers to produce a structure that enables new capital to be introduced, whilst simultaneously providing a basis which can allow our members to remain as members of a mutual organisation.
“We firmly believe that businesses based on mutuality have a major role to play in protecting and promoting consumer interests, but, to play this role to the full, we now need to bring fresh capital into the business to take us forward into the future.”
Members savings, investments and mortgages will transfer to the bank in 2011 provided certain conditions are met including member approval, registration of KRPS and authorisation by the Financial Services Authority.
The shareholders an borrowers will need to approve the deal and an SGM of the Society is expected to be held in Autumn 2010.
Malcolm McCaig, chairman of KRBS, adds, “The Board has considered the new structure and believes it is in the best of interests of the Society’s members.”
And David Morgan, managing director Europe and Asia Pacific of J C Flowers, says: “We are very pleased to join forces with Kent Reliance. Our investment will enable members to benefit from a broader array of quality products and services with the support of a strong capital partner. We look forward to supporting the future development of the business.”