The ‘Code of Ethics’ was formulated as part of the Rules of the Building Societies Association (BSA) in 1936. The Code (more formally ‘The Code of Ethics and Procedure’) detailed how each member Society was to act in relation to its administration; advertisements; disputes between members; business ethics; commissions; and rates of interest paid and charged.
Many of the aspects of the ‘Code of Ethics’ of the BSA was not applicable to the BMB’s operations, but in the Bank's Annual Report to the City Council on June 8th 1937, the Management Committee stated that “the present terms and conditions governing advances made by the Bank are reasonably comparable with the ‘Code of Ethics’”. This comment related to the following section of the ‘Code of Ethics’:
STANDARD TERMS AND CONDITIONS ON WHICH ADVANCES ARE TO BE GRANTED IN RESPECT OF ALL ORDINARY MORTGAGE BUSINESS.*
MAXIMUM PERCENTAGE FOR NORMAL ADVANCES (ie WITHOUT COLLATERAL SECURITY).
1 Where the purchase price exceeds £500 the maximum advance shall be 80 per cent of the purchase price or valuation, whichever is the lower.
Where the purchase price exceeds £350 but does not exceed £500 the maximum advance shall be 85 per cent of the purchase price or valuation, whichever is the lower, and
Where the purchase price does not exceed £350 the maximum advance shall be 90 per cent of the purchase price or valuation, whichever is the lower.
NOTE (1) - Legal and other charges are frequently included in the purchase price. These form no part of the value of the house and must be disregarded when valuing for mortgage purposes.
NOTE(2) - It is intended to grant a general dispensation to Members to make normal advances up to 90 per cent of the valuation on properties in the Counties of Durham and Northumberland. When loans in excess of the normal are granted in these Counties by reason of deposit pools, insurance policies or other collateral security, the basic figure for the normal advance shall not exceed 85 per cent of the valuation.
TERM OF YEARS FOR ORDINARY REPAYMENT MORTGAGES.
2 The maximum term of repayment shall be 21 years, except in the following circumstances, when the term may be extended to a maximum of 23¼ years:-
(i) Advances not exceeding 75 per cent of the purchase price or valuation, whichever is the lower, or
(ii) Advances where the purchase price or valuation or valuation does not exceed £550.
RATES OF INTEREST TO BE CHARGED TO BORROWERS ON ORDINARY REPAYMENT MORTGAGES.
3 The minimum rate of interest to be charged shall be 4½ per cent. It is strongly recommended that power shall be reserved either to call in the mortgage or to increase the rate of interest should circumstances render such a course necessary.
MINIMUM PERSONAL STAKE.
4 Where the purchase price exceeds £750, the minimum personal stake shall be 10 per cent of such purchase price; where the purchase price exceeds £500 but does not exceed £750, 7½ per cent of such purchase price, and where the purchase price does not exceed £500, 5 per cent of such purchase price.
* The term "ordinary mortgage business" used above includes all ordinary repayment mortgages, but does not include advances made where there is a margin of security of at least one-third of valuation. The term does not apply to advances made under the provisions of special legislation, nor to advances made on property in possession sold by the member.