by business editor Trevor Sturgess

Kent Reliance Building Society has confirmed today that it aims to become a bank by 2011.

Members will be asked to vote on plans by the Chatham-based mutual to create a new type of financial institution in a link-up with J C Flowers, a private equity firm specialising in financial services.

Under the deal, J C Flowers will inject £50m into the UK's 12th largest building society and one of its oldest, with origins going back 150 years.

They are setting up a Kent Reliance Provident Society Limited and the society will transfer its business, assets and liabilities to a new bank with the trading names Kent Reliance Banking Services, Kent Reliance and KRBS.

Members of the society, who will be asked to vote on the plan at a special meeting this autumn, will be entitled to become KRPS members.

The society will cease to exist when the transfer is completed. Savings, investment and mortgage accounts will transfer to the new bank, with members able to do business with the bank direct or via its agency network.

Mike Lazenby, Kent Reliance chief executive, said: "This is really good news for members.

"It creates an organisation that is stronger, not weaker, in a very difficult market and will enable to go forward, not stand still or go backwards."

Audio: Mike Lazenby on the switch

Recent pressure on the society's capital has proved challenging, particularly as building societies cannot raise capital in the way that banks do.

The new structure would enable new capital to be introduced, "whilst simultaneously providing a basis which can allow our members to remain as members of a mutual organisation".

The arrangement could create more jobs in Kent, he added.

David Morgan, J C Flowers' managing director Europe and Asia Pacific, said further capital injection was likely and the firm was committed to a long-term relationship.

"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."