BUILDING societies could see their funding rules relaxed to boost their appeal as an alternative to major high- street banks under proposals unveiled by the Government.

The Treasury is considering allowing mutuals, such as the Newcastle, Nationwide, Chelsea and Yorkshire building societies, to raise more funding from so-called non-members.

Members include customers with mortgage borrowing and shareholding investors.

Building societies can currently only source 50% of their funding from non-members.

The Treasury’s vision for the sector, which will go to consultation, sets out how the recent recommendations of the Independent Commission on Banking (ICB) will apply to the building society sector.

The ability for societies to source increased funding from non-members would be an advantage if wholesale money markets became cheaper.

However, wholesale funding is currently expensive and building societies raise around 75% of their funding from members.

Adrian Coles, director-general of the Building Societies’ Association, said he welcomed the Government’s focus on building societies.

He said: “Our sector is diverse and provides services to around 25 million customers through a model that is very different both in structure and ethos to the plc banks.