The Barnsley Building Society has been forced to merge with larger rival Yorkshire after it identified a potential loss of up to £10m from two Icelandic banks.
While Barnsley admits its cash reserves can cover the lost deposits from the Kaupthing Singer & Friedlander and Heritable banks, its board determined a merger would be in the best interests of its members.
Yorkshire, the UK's third largest society, has more than 1.9m members, 136 branches and over £20bn in assets – while Barnsley has 60,000 members, eight branches and £376m in total assets.
The combined entity will be called Yorkshire Building Society but Barnsley's name and all its branches will be retained.
Barnsley savings accounts will move to the Yorkshire, but on “better terms and interest rates” than provided by the Barnsley prior to the merger.
The merger will not involve any distribution to Barnsley and its members will not vote on the deal.
Following completion, Yorkshire intends to pursue recovery of Barnsley's deposits with the Icelandic banks and will consider an ex-gratia cash payment from the proceeds should it be successful.
Barnsley acting chief executive Steve Mitchell says Yorkshire shares its commitment to members, staff and local communities.
"The society's reserves are sufficient to absorb our potential losses to Icelandic banks, but the board considered that their reduced level would restrict its ability to provide members with the security and benefits associated with mutuality,” he says.
“This (merger) will provide the very best in terms of financial stability and expected future benefits for our members".
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