N&P members will not gain cash windfall from merger announced the day after it is ordered to pay out �52.4m
There will be no cash windfalls for the 423,000 members of the Norwich and Peterborough Building Society (N&P) after it agreed a merger this week with the Yorkshire Building Society. The announcement came 24 hours after regulators ordered N&P to pay a fine and compensation totalling �52.4m over mis-sold investment products.
Yorkshire, the UK's second largest building society, says there is "virtually no overlap" between the two organisations, and will keep N&P as a separate brand. It also guaranteed to keep N&P's existing branch network intact for at least the next two years.
Interest rates for savers and borrowers at N&P will stay the same, although 7,500 of the society's 30,000 mortgage borrowers will see a 0.36% cut in N&P's standard variable rate as it is aligned with Yorkshire's 4.99% rate.
Savers with both societies (including the Yorkshire's brands such as Chelsea and Barnsley building societies) when the merger completes will be limited to one Financial Services Compensation Scheme maximum of �85,000 per individual, or �170,000 for joint accounts.
The Yorkshire said: "Consideration will be given to allow savers who, as a result of the proposed merger, exceed this amount to reduce their combined balance without notice or any loss of interest on the amount withdrawn."
The merger will have to be approved by a vote of N&P members on 22 August, but the proposed new management has already made it clear there will be no windfall payouts. "The merger will not involve any distribution payments to either membership," it says.
The joint society will create a mutual with assets of more than �30bn. Gordon Horsfield, chairman of N&P, said the opportunity to merge with the Yorkshire was "right" for the mutual and the deal was needed to give the business the investment it needs.
"The necessary resources for this continuing investment can only come from the economies of scale, organisational depth and financial strength associated with size," he said.
N&P has been in talks with the Yorkshire for some time. In March it reported a �48.9m loss as it made a provision of �57m to cover mis-selling of investment bonds in the now-collapsed Keydata to 3,200 customers.
Kevin Mountford, head of banking at moneysupermarket.com, said: "This news has been rumoured for a while and the FSA's recent fine on N&P effectively put the final nail in the coffin in terms of its ability to survive on its own.
"It is no surprise that in current market conditions we are seeing further mergers and acquisitions between building societies. Savers must keep their wits about them and a close eye on the details, but this should generally have a positive outcome for consumers. With N&P and Yorkshire branch networks combined, we should see a stronger national presence in the savings and mortgage markets. This will also be good news for N&P customers as they'll now be part of the country's second largest building society ? giving them more financial security."
Source: http://www.guardian.co.uk/money/2011/apr/22/nandp-yorkshire-building-society-merger
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