The Yorkshire and Barnsley building societies are to merge by the end of the year as the Barnsley seeks protection against the possible loss of up to £10m, deposited with two Icelandic banks.
The Barnsley along with some local authorities and charities had more than a billion pounds between them on deposit with Icelandic banks, which are not covered by the Financial Services Compensation Scheme. The Barnsley said it had reserves large enough to absorb a £10m loss, but had decided that the merger was in the best long-term interests of its members.
The UK and Icelandic governments are currently in negotiation to see how much money, if any, will be returned to UK institutions. The Yorkshire has said it will try to recover the Barnsley's money, and if successful, it may hand the cash back to the former Barnsley savers and borrowers as an "ex-gratia" bonus payment, minus any legal expenses and tax. Barnsley borrowers on the standard variable rate could benefit from the tie up, as they will transfer to Yorkshire’s svr, which is currently 0.29% cheaper.
News of the merger follows last month’s announcement that Nationwide is to takeover the Cheshire and the Derbyshire building societies.
With the number of mergers and takeovers growing, savers should check the total they hold with the merged lender, as following completion of the deal they will all share the same banking license. This means savers will only be able to claim one £50,000 compensation payment from the FSCS.