Yorkshire voters to back merger with Chelsea Building Society

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The Independent Online

The merger of the Chelsea and Yorkshire building societies is expected to be completed this week in a deal that will see the formation of Britain's second-largest society.

Members of the Yorkshire Building Society will vote on the merger at a special general meeting in Bradford tomorrow and are widely expected to back the deal, following a comprehensive yes vote from Chelsea Building Society savers and borrowers on Friday.

The new organisation would be second in size only to Nationwide, and would have combined assets of £35bn, some 2.7million members and 180 offices around the country. Members of the two societies are not entitled to receive a windfall under the deal, but it has been heavily promoted by the management of both. The merger will be formally enacted at the beginning of April, once the Financial Services Authority gives its approval.

Consolidation has become a prominent theme in the building-society sector, with the pace of deals picking up during and since the financial crisis. While the mutual sector is seen as having weathered the storm better than many in the banking industry, there have been several casualties, with a series of rescue deals brokered by regulators that have seen smaller players subsumed into larger operations.

The smallest societies have also begun banding together in the face of mounting regulatory and information technology costs that have required economies of scale in order for organisations to remain competitive.

Nationwide has also seen its dominance increase, having bought several smaller players. However, the merger of Chelsea and Yorkshire will increase competition, while, in addition, a merger between Britannia Building Society and Co-operative Financial Services has created another serious player.