What the marriage of Yorkshire and Chelsea means for you
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by: Simon Read
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The Yorkshire building society announced on 2 December that it is merging with the Chelsea building society, in what some believe is a bail out. The Gloucester-based Chelsea has made massive losses in the last 18 months leaving it with no choice but to take drastic action to ensure its survival.
What's happening and will I get a windfall?
The decision to merge with the larger Yorkshire building society is being seen by many in the financial services industry as a sensible one, as it will leave the larger joint mutual as the second biggest building society in the UK after the Nationwide. But savers and borrowers may feel short-changed as they will not be in line for any windfall. On top of that, the merger will mean less competition which, in theory, could lead to fewer good deals.
But members of either society should not feel angered or saddened by the proposed merger. It will lead to an "enlarged society which has one of the strongest capital positions of any major UK bank or building society and a secure funding base," Yorkshire boss, Ian Cornish pointed out.
In other words, it should go some way towards securing a longer-term future for the society.
What you need to know
What does the merger actually mean? It will lead to the creation of a larger mutual to be known as the Yorkshire Building Society with around 2.7 million customers, 178 branches and assets of £35 billion. The Chelsea brand will be kept, the society says, but for how long, no-one knows.
It's entirely possible that it could be phased out sooner or later and would be a sensible move from the Yorkshire's point of view as there would then be cost-savings.
The society says no branches will be closed as a result of the merger. That's mainly because there is very little overlap in branch locations of the two separate societies. But that, too, could change down the line to save the unnecessary expense of having two branches in close proximity.
Are my savings safe?
From savers' point of view there is good news in the short term for those with accounts with both societies. They will continue to be covered for up to £50,000 with each society under the Financial Services Compensation Scheme, until 30 December 2010. At that time the limit will revert to £50,000 in total which would mean, for safety's sake, transferring savings above £50,000 into another financial institution.
For workers at the two societies, the merger won't be good news: there will be job cuts. There are no details of where the cuts will happen to date. The Yorkshire will only say: "Redundancies will only be considered after full consultation with staff and after other options, including redeployment, have been considered." So fingers crossed for society staff, then.
Do I have a say in this merger?
Is that it? Is there anything you can do to stop this? You can try and stop it if you're a member of either society. You can do so by voting "no" to the merger proposal. If enough members vote against it, it can't happen. However, if it doesn't happen it could put the Chelsea's future in jeopardy.
Voting packs are being sent to both society's members in the next few weeks, with Chelsea's special general meeting to discuss the proposal on 22 January 2010 and Yorkshire's on 26 January. The merger - if approved - will become effective on 1 April 2010.
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