Building Society Mergers
8 September 2008
Today, the boards of Nationwide, The Derbyshire and The Cheshire have announced their intentions to merge. The decisions behind these commercial transactions have been outlined today by the three societies.
Discussions have taken place between the Financial Services Authority (FSA) and the three societies regarding the process for the proposed mergers and all parties believe it is in the best interest of shareholders and depositors to expedite the process. For this reason, the FSA has decided that it will apply its powers under the 1986 Building Societies Act to allow these mergers to be approved by board resolution.
Members of each society will have the right to make representations to the FSA with respect to the proposed mergers. Information about the process and timetable, as well as details about how to make a representation will be issued to eligible members, by The Derbyshire and The Cheshire, in a Merger Notification Statement.
The mergers will be subject to statutory confirmation by the FSA and approval by the Office of Fair Trading.
Notes to editors
- Under the 1986 Building Societies Act (the 1986 Act), the FSA has powers that it can apply in certain circumstances in relation to building society mergers. Section 42B of the 1986 Act provides that if the FSA considers it expedient to do so in order to protect the investments of shareholders or depositors of a building society, it may direct that a transfer may proceed by board resolution only rather than by seeking the approval of the members of the society.
- In respect of the proposal of The Cheshire and The Derbyshire to merge with Nationwide, the FSA has directed The Cheshire and The Derbyshire under Section 42B(3)(b) of the 1986 Act. The result of this direction is that, instead of resolving to transfer their engagements to Nationwide by a vote of their shareholding and borrowing members, they may resolve to do so by resolutions of their boards of directors.
- The FSA has also, under section 94(5)(b) of the 1986 Act (and having regard to the criteria set out in paragraph 2.4.41 of the Building Societies Regulatory Guide – BSOG), given consent to Nationwide to undertake to fulfil the engagement of The Cheshire and The Derbyshire by a resolution of its board of directors.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.