Building societies in £16bn merger

The merger of Skipton Building Society with troubled Scarborough Building Society will create a top-five institution with 860,000 members and £16 billion of assets.

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The credit crunch has had a substantial impact on the Scarborough, and the board feared that plunging house prices and the recession could lead to an "unacceptable reduction" in its capital resources.

Said chief executive John Carrier: "A merger will create a much larger, stronger business in North Yorkshire that offers real advantages to both organisations and their members going forward."

Under the terms of the deal, all Scarborough borrowers on the group's standard variable rate, currently 7.24%, will move to Skipton's SVR, currently 6.45%.

Savers with Scarborough will also have their accounts moved to the enlarged society, where they will have similar or better terms and interest rates.

The two are well matched, having similar business models and a strong geographical fit. The enlarged society will retain a significant presence in Scarborough, and no compulsory redundancies are planned.

It will also keep a branch in all the towns where the Scarborough is represented, and the group's purpose-built head office in Scarborough will continue to be a key operational centre.

Copyright © PA Business 2008

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