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Britannia and Co-operative Financial Services unveil plans for super-mutual

  • Britannia and Co-operative Financial Services Boards recommend merger to create new super-mutual as an ethical alternative to shareholder-owned banks

  • Combined business to be the most diversified customer-owned business in UK financial services, strongly capitalised and with scale and strength in product, distribution and service

  • Strong strategic and cultural fit between the two organisations with expected efficiency and revenue benefits of £60 million a year by year three

  • Customers will continue to share profits and have a say in running the business

The Boards of Britannia Building Society and Co-operative Financial Services (CFS) - two of the biggest customer-owned financial services businesses in the UK - today confirm they have agreed to merge to create a super-mutual as a unique, ethical alternative to shareholder- and Government-owned banks.

The new business will combine CFS's strong personal and corporate banking, insurance and investment expertise with Britannia's extensive high street presence and savings and mortgage product strength.

Combining CFS, part of the world’s biggest consumer co-operative, with Britannia, the UK’s second biggest building society, will create a business with £70 billion of assets, nine million customers, more than 12,000 employees, more than 300 branches and 20 corporate banking centres. The business will be strongly capitalised, with a pro forma Tier 1 ratio of 9.8% as at 31 December 2008 - calculated on the same basis as if the combined businesses remained standalone.

The business will be led by current Britannia group chief executive Neville Richardson. Bob Burlton, the current CFS non-executive chairman will chair the new board. CFS chief financial officer Barry Tootell will become the new chief financial officer. After supporting the integration process, CFS chief executive David Anderson will leave the business.

Britannia chairman Rodney Baker-Bates commented: "The combined and complementary strengths of our businesses will offer customers a strong, fair and ethical alternative to banking plcs. Customers will be owners and will have available all the services they would expect from a major financial provider, together with a real say in setting strategy combined with a share of the profits."

CFS chairman Bob Burlton added: "This move will accelerate the momentum within the co-operative and mutual sector. Both businesses have been pursuing successful strategies independently and are strong in their own right but we recognise we could be even more successful by coming together to create the UK’s most trusted financial services business."

The new business will be a wholly owned subsidiary of The Co-operative Group, one of the world's largest and most successful consumer co-operatives with core business interests in financial services, food, travel, pharmacy and funeral care.

Britannia members will become members of The Co-operative Group and will need to approve the deal in a vote at a general meeting expected to take place on 29 April 2009.


Press release published on 3 November 2008 by Scarborough Building Society

The boards of Skipton Building Society and Scarborough Building Society today announce that they have agreed heads of terms for a merger. It is anticipated that the merger will be completed in the first quarter of next year.

This is a real opportunity for the North Yorkshire based societies to create an enlarged Society that is even better placed to deal with any future uncertainties in the financial marketplace. The two societies are well matched, having similar business models, a strong geographical fit and shared commitment to mutuality, their members, their people and their local communities.

Scarborough Building Society has seen difficult trading conditions leading to a substantial impact on profit and a resultant weakening capital position. In addition, the board of Scarborough has considered the possible impacts of continuing house price falls and the impending recession in the UK, and has concluded that the effect would be an unacceptable reduction in its capital resources and that, to fully protect the interests of its members, it should approach Skipton Building Society as its preferred merger partner.

David Cutter will become chief executive of the enlarged Society, which will be called Skipton Building Society and will be headquartered at The Bailey, Skipton. As previously announced, the current chief executives of both societies, John Goodfellow and John Carrier, will continue with their planned retirements on 31 December 2008.

It is anticipated that the enlarged Society will be a top 5 building society with approximately 860,000 members and over £16bn of assets.

Summary of the merger process

The merger will proceed under section 42B(3)(b) of the Building Societies Act on the basis of a board resolution of Scarborough as permitted by a direction given by the Financial Services Authority (FSA). The FSA has also consented to Skipton proceeding by a resolution of its board of directors. As such, this means that a vote by Skipton and Scarborough members will not be required. The merger is also subject to confirmation by the FSA and approval by the Office of Fair Trading (OFT).  

Merger Terms

The merger terms are subject to final agreement by both societies, and it is the intention that the terms of the merger will include:

  • All Scarborough borrowers currently making payments at or linked to Scarborough's standard variable rate (SVR) (currently 7.24%) will benefit from Skipton’s lower SVR (currently 6.45%). There is no guarantee as to what Skipton’s SVR will be in the future.
  • All Scarborough savings accounts will move to the enlarged Society and will be on similar, or better, terms and interest rates to those applying prior to the merger.
  • To preserve the reserves of the enlarged Society, the merger will not involve any distribution to the members of either society.
  • The enlarged Society expects to retain a significant presence in Scarborough and no compulsory redundancies are planned.
  • The enlarged Society will keep a branch presence in all towns where Scarborough is currently represented and the modern, purpose-built head office, in Scarborough, will continue as a key operational and administrative centre.
  • Two non-executive directors of Scarborough will join the board of the enlarged Society. It is expected that the executive directors of Scarborough will take up positions in the enlarged Society, with the exception of John Carrier, who will, as previously announced, retire in December.

Yorkshire to merge with Barnsley 

On 22nd October 2008 we announced our plans to merge with Yorkshire Building Society. The proposed merger is an extremely positive development for the members of both the Barnsley and Yorkshire Societies, which share a commitment to mutuality, staff and their local communities.

About Yorkshire Building Society

The Yorkshire, which has its head office in Bradford, is the UK’s third largest building society with 1.9 million members, 136 branches (44 in Yorkshire), 64 agencies (11 in Yorkshire) and total assets of over £20bn*. It has a low risk business model with excellent capital strength, high levels of liquidity and a solid retail funding base.

About Barnsley Building Society

The Barnsley is the UK’s 34th largest society with around 60,000 members, 8 branches and total assets of £376m*. The Barnsley has a very high quality mortgage portfolio and a strong retail funding base.

About the merger

We are a well managed, solid building society with a strong level of reserves. We have, however, an exposure to two Icelandic banks that may require a write-off of up to £10m. The current exceptional situation in Iceland, and the full extent of the repercussions, were beyond anticipation and whilst the amount of the exposure could be fully absorbed by our general reserves, the board has determined that the long term interests of members will be best served by a merger with the Yorkshire.

Steve Mitchell, Acting Chief Executive of Barnsley Building Society said “The board has been consistent in pro-actively managing its exposure to the financial markets by spreading risk across a variety of institutions and countries. The global crisis of recent weeks has seen governments taking positive measures to support their financial systems. However, the current exceptional situation in Iceland and the full extent of the repercussions were beyond anticipation.

“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. In response, the board has made a very positive decision to lead the Society into a more secure future as part of a larger society, through merger with Yorkshire Building Society, which shares our values and has a strong commitment to members, staff and local communities. This will provide the very best in terms of financial stability and expected future benefits for our members”.

What does this mean for members?

The Yorkshire recognises the strengths of the Barnsley Building Society franchise and the loyalty of our members. Therefore, it is intended that the terms of the merger, which are subject to final agreement by both societies, will include:

  • The combined society will be called Yorkshire Building Society, but the Barnsley’s local identity and name will be retained (subject to Financial Services Approval (FSA) approval)
  • Retention of all the Barnsley's branches under the Barnsley name
  • The merger will not involve any distribution to the Barnsley members
  • Barnsley’s mortgage borrowers who currently make payments based on its Standard Variable Rate (SVR) will transfer to Yorkshire’s SVR. (SVRs at 22/10/08: Barnsley - 7.19%; Yorkshire - 6.90%, but there can be no guarantee on what Yorkshire’s rate will be at the time of or after the merger)
  • The accounts of Barnsley savings members will move to the Yorkshire, but will remain under the Barnsley brand and will be on similar, or better, terms and interest rates than provided by the Barnsley prior to the merger
  • Yorkshire is committed to retaining the Barnsley’s strong community connections through its sponsorship and affinity arrangements

The Yorkshire intends to pursue the two Icelandic banks (Kaupthing Singer & Friedlander and Heritable) for recovery of the monies that had been deposited with them by the Barnsley. Should this be successful, the Yorkshire will consider an ex-gratia payment from the proceeds, net of recovery costs and tax. Any such payment will be made to those members who were saving or borrowing members of the Barnsley on 21 October 2008 and who meet certain conditions, including continuing as members of the Yorkshire to the date of any payment. The terms of any payment will be determined by the Yorkshire at the time of recovery and may take into consideration the size of balances (in the case of savers) maintained at the Barnsley over the intervening period. The Yorkshire cannot guarantee, however, that a payment will be made.

What happens next?

The merger will proceed under section 42B(3)(b) of the Building Societies Act on the basis of a board resolution of the Barnsley as permitted by a direction given by the FSA. This means that there will not be a vote on the merger by the Barnsley members. The FSA has also consented to the Yorkshire proceeding by a resolution of its board directors.

Full details of the proposed merger will be communicated to all eligible Barnsley members in a pack containing, amongst other things the Merger Notification Statement. This should be received by the end of November. It is anticipated that the merger will complete on 31st December 2008, subject to the merger being confirmed by the FSA.

Britannia confirms talks with Co-operative

In light of forthcoming legislative changes that will make it easier for different types of mutuals - building societies, co-operatives and friendly societies - to work together, Britannia Building Society has confirmed it is in exploratory talks with Co-operative Financial Services (CFS).

Britannia said the talks were at a very early stage and would cover a wide range of options as to how the two organisations could work together, including a possible future merger.

This would be enabled through the introduction of measures contained in the Building Societies (Funding) & Mutual Societies (Transfers) Act - known as the Butterfill bill, after its sponsor Sir John Butterfill MP. The legislation should be in place by the end of this year. A merger would also have to be approved in a vote by Britannia's members.

The organisations - two of the UK’s leading member-owned businesses - have similar values and share a mutual ethos, so there would be a strong cultural fit and it would represent a merger of strong equals.

Britannia - the country's second biggest building society - has an extensive branch network and a strong savings and mortgage franchise. CFS - part of the Co-operative Group, the world’s largest consumer co-op - has a strong personal and business banking franchise and life and general insurance expertise.

The combined and complementary strengths of the two businesses could offer customers a real ethical, customer-owned alternative to the plc market, with the combined organisations having around £70 billion of assets and six million customers.

Britannia Group chief executive Neville Richardson said: "As two like-minded, forward-thinking and financially strong mutuals, we’re talking with CFS about how we can work together to create an exciting proposition for our members.

"Both businesses have been pursuing successful strategies and don’t need to merge, but we recognise we could be even more successful by coming together and creating the UK's most trusted financial services business.

"Talks are at an early stage and no decisions have been taken, so it’s too soon to talk about what changes might arise for our customers and employees. We can say that we remain committed to our Leek, Staffordshire base, our extensive branch network and our strong Britannia brand."



More building society mergers are inevitable, industry analyst warns.10/09/2008

Truth or Lies? Where will your building society be in a year's time?

Catholic Building Society Payouts.
Savers (account balance)
£100-£2200 payout £100
above £2200  2.2% of balance upto a max of £500
Borrowers payout £100
Cheques subject to merger being approved to be sent out January 2009.

Article about Nationwide/Cheshire/Derbyshire from This is money

The housing downturn is likely to trigger a wave of mergers among building societies, as bad debts from mortgages rise and profits from lending fall, according to a senior analyst at KPMG. 25/08/2008

Crunch forces societies together for mutual benefit. Article from press.24/08/2008

Special Report: Building societies braced for acquisitions and consolidation.29/07/2008

The FSA is also trying to arrange a series of rescue deals for large building societies to take over their beleaguered smaller rivals. 20/07/2008

Small building societies to resist merger pressures 25/06/2008

Windfalls in the air for society savers 21/06/2008

Was the fad for demutualisation to blame for the mess we are in now? 13/06/2008

The cost of regulation has pushed building society minnow Catholic into merger talks with Chelsea Building Society.09/06/2008

Chelsea and Catholic Building Societies to Merge. 07/06/2008

Societies ponder swoop for Derbyshire. 27/03/2008

Mutual mergers on the horizon.07/01/2007

The 'plagued' societies that face takeover. 8 are mentioned and one has just gone!!!! 24/09/2006

Mergers Since 1980

Mike Lazenby, the chief executive of Kent Reliance building society. In five years there could be a handful. Only the most efficient will be viable."

Building society windfalls in the air 27/05/2006

Eligible membership numbers for each building society.


13 October 2008

Treasury statement on financial support to the banking industry

With continuing exceptional instability in the global financial markets, the Government is today taking decisive action, by implementing the comprehensive set of measures it announced on 8 October, to make commercial investments in UK banks and building societies to help stabilise their position and support the long term strength of the economy.

The overall aim of these measures is to support stability in the financial system; to protect ordinary savers, depositors, businesses and borrowers; and to safeguard the interests of the taxpayer. In summary, the measures intend to:

  • provide sufficient liquidity in the short term;
  • make available new tier 1 capital to UK banks and building societies to strengthen their resources permitting them to restructure their finances, while maintaining their support for the real economy, through the recapitalisation scheme which has been made available to eligible institutions; and
  • ensure that the banking system has the funds necessary to maintain lending in the medium term through the credit guarantee scheme available to eligible institutions in relation to new short and medium term debt issuance.

The authorities have continued their detailed discussions with the institutions who confirmed their participation in the recapitalisation scheme last week. These institutions committed in aggregate to increase their total tier 1 capital, either through their own actions or, where requested, through support from the Government’s recapitalisation scheme in the form of preference and ordinary share capital.

The Government is making capital investments to RBS, and upon successful merger, HBOS and Lloyds TSB, totaling £37 billion.

Following the completion of these capital investments, each of the above institutions will have a Tier 1 capital ratio in excess of 9%, well above international minimum standardsand at a level that should put them on a strong footing for the future.

All participating institutions are eligible to take advantage of the Government’s credit guarantee scheme. The Debt Management Office is today announcing the general arrangements for operating the scheme. Further details relating to fees, the period under which guarantees will be issued and the application process can be found in the Market Notice which is being published by DMO at: .

As part of its investment, the Government has agreed with the banks supported by the recapitalisation scheme a range of commitments covering:

  • maintaining, over the next three years, the availability and active marketing of competitively-priced lending to homeowners and to small businesses at 2007 levels;
  • support for schemes to help people struggling with mortgage payments to stay in their homes, and to support the expansion of financial capability initiatives;
  • remuneration of senior executives - both for 2008 (when the Government expects no cash bonuses to be paid to board members) and for remuneration policy going forward (where incentive schemes will be reviewed and linked to long-term value creation, taking account of risk; and restricting the potential for "rewards for failure");
  • the right for the Government to agree with boards the appointment of new independent non-executive directors; and
  • dividend policy.

The recapitalisations are designed to enable participating banks to achieve prudent but efficient capital structures. The Government intends to create a new arms length body to manage the Government's shareholdings in recapitalised institutions on a professional and wholly commercial basis, and seek to effectively realise value to the taxpayer. Transparent arrangements will be put in place to ensure that any role for the Government in relation to investment decision-making is clearly defined. The Government is not a permanent investor in UK banks. Its intention, over time, is to dispose of all the investments it is making as part of this scheme in an orderly way. To reflect the implementation of the scheme, the government will tomorrow announce a revised debt remit for the Debt Management Office. Further information is available at: .

The measures the Government is announcing today support stability in the wider financial system, and protect the interest of taxpayers, depositors and savers.

The Government has informed the European Commission of the schemes. The Government stands ready to provide support through the schemes to all eligible institutions, on the basis of the conditions set out in its announcement last week.

The Government is continuing to collaborate internationally to stabilise and strengthen the global financial system, following the meetings of G7 and G20 Finance Ministers and the IMF on Friday and Saturday. Other countries have announced measures to stabilise their own financial systems.

In parallel with other central banks, the Bank of England is today announcing expanded swap lines with the US Federal Reserve and that the Bank will supply dollar liquidity to the banking system against collateral at a pre-set price with no fixed limit on the amount. The Bank will continue to take all actions necessary to ensure that the banking system has access to sufficient liquidity.

With the first successful implementation of the schemes announced last week now completed, the Government has taken decisive and extraordinary action to support the banking system during this period of exceptional financial turbulence, and to strengthen the system for the future as markets stabilise.

H M Treasury
29 September 2008
Bradford & Bingley plc
  • Today, the Chancellor of the Exchequer, announced that by order under the Banking (Special Provisions) Act 2008, Bradford & Bingley's UK and Isle of Man retail deposit business along with its branch network has been transferred to Abbey National plc. This transfer follows a competitive auction process for this part of the business, conducted by Morgan Stanley on behalf of HM Treasury. The remainder of Bradford & Bingley's business will be taken into public ownership.

  • This action by the Tripartite Authorities, protects savers' money by transferring their money to Abbey. Bradford & Bingley's branches, call centres and internet operations will be open for business as usual to provide continuity of service to customers. 

  • Following recent turbulence in global financial markets, Bradford & Bingley has found itself under increasing pressure as investors and lenders lost confidence in its ability to carry on as an independent institution. The FSA determined on Saturday morning that the firm no longer met its threshold conditions for operating as a deposit taker under the Financial Services and Markets Act 2000 and FSA rules.  

  • The Government, on the advice of the FSA and the Bank of England, acted immediately to maintain financial stability and protect depositors, while minimising the exposure to taxpayers. It has worked over the weekend to bring about the part public, part private solution which best meets those objectives. 

  • For savers and borrowers of Bradford & Bingley it will be business as usual. Customers should continue to use their normal branches to access their accounts. The transfer of the retail deposit book has been backed by cash from HM Treasury and the Financial Services Compensation Scheme. Further details about these arrangements are set out below.  

  • Branches will be open this morning as usual, and internet, call centre, and all other transaction services will operate as normal. Although some of those employees are now employed under Abbey, they should all attend their workplace in the normal way. Savers' money remains absolutely safe and secure. Borrowers should continue to make their payments in the normal way. 

  • The remaining assets and liabilities of Bradford & Bingley - principally comprising its mortgage book, personal loan book, headquarters and relevant staff, and treasury assets and its wholesale liabilities - will be taken into public ownership through the transfer to the Treasury of the company's shares. HM Treasury and the Financial Services Compensation Scheme will recover payments in the wind-down of the remainder of Bradford & Bingley. To provide assurance to wholesale depositors and borrowers, and to preserve financial stability in this case and maximise proceeds in the wind-down, the Government has put in place guarantee arrangements for six months to safeguard certain wholesale borrowings and deposits with Bradford & Bingley. It is the Government's current intention to seek state aid approval from the European Commission to extend these guarantee arrangements as part of the restructuring of Bradford & Bingley.  

  • The FSCS has been triggered following the failure of Bradford & Bingley to meet its regulatory requirements, prior to the making of the Transfer Order.  

  • Under the Transfer Order, the FSCS has paid out approximately £14bn to enable retail deposits held in Bradford & Bingley and covered by the FSCS to be transferred to Abbey. The Treasury has made a payment to Abbey for retail deposit amounts not covered by the FSCS, amounting to approximately £4bn, to be transferred to Abbey. In return, the FSCS and the Treasury have acquired rights in respects of the proceeds of the wind-down and realisation of the assets of the remaining business of Bradford & Bingley in public ownership.  

  • The FSCS has financed its payout through a short-term loan from the Bank of England, which will be replaced with a loan from the Government after a short period of time. The repayment terms of the loan for the first three years provide for repayment of interest at a rate of one-year LIBOR plus 30 basis points, plus the repayment of any recoverables accruing to the FSCS from the wind-down of the business against the principal outstanding. The first payment, for interest from the period from now until end-March 2009, will take place at end-September 2009 and subsequent payments will be made annually thereafter. It is currently estimated that the first payment required in September 2009 by the FSCS under the loan will be approximately £450 million. After the first three years, it is intended that the loan will be refinanced by the Treasury, repayments of the principal to be made over a period of years in the light of prevailing market conditions.  

  • The Chancellor of the Exchequer today confirms that the Government stands behind the FSCS, so it can be relied on to be able to play its role in meeting future claims that arise.  

  • In the initial period of public ownership the senior management team of Bradford & Bingley will remain in place to manage the transition. The Chief Executive will continue to be Richard Pym.  Over time the Government will look at the management of the residual assets to ensure that this is being done in the most efficient manner.  

  • In the Transfer Order, the Government has varied the terms of Bradford & Bingley's dated subordinated debt in order to allow for the wind-down.  The Transfer Order also, among other things, extinguishes existing share options and provides for rights and obligations of lenders, bond holders, swap counterparties, suppliers and other counterparties which would otherwise be triggered by the transfer not to be triggered.

  • The Treasury with the other Tripartite Authorities, acting in their respective capacities, sought a range of private sector solutions before taking this action. However, with its financial advisor, HM Treasury concluded that this option best delivered its objectives of maintaining financial stability, protecting consumers and protecting taxpayers.

  • The listing of Bradford & Bingley's shares has been cancelled.  

  • The Banking (Special Provisions) Act 2008 also provides for a compensation Order to be made. This order - relating to compensation for shareholders and others whose rights may have been affected by the transfer into public ownership - will be laid in due course. 

In due course the Government will set out further information on the operational management of the residual part of Bradford & Bingley which has been taken into public ownership


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