Yorkshire Building Society and Chelsea Building Society are in advanced talks over a possible merger.
For a merger to proceed, the boards of both societies would need to be satisfied it will be for the benefit of each society's members.
Any merger would also require the formal approval of both the Yorkshire and Chelsea savings and borrowing members. The merger would be subject to confirmation by the Financial Services Authority (FSA).
By joining forces, the new entity would have the potential to create a second major force in the building society sector, with assets in excess of £35bn.
Yorkshire, which has its head office based in Bradford, is the UK's second largest society with 143 branches and assets of over £20bn.
Chelsea Building Society has its head office in Cheltenham and is the UK's fourth largest society with approximately 700,000 members, 35 branches and assets of £14bn.
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