Yorkshire Building Society has announced that it has agreed a deal to merge with Chelsea Building Society.
It is hoped the takeover, which is expected to be complete on 1 April 2010, will help reinforce Yorkshire's position as the second-largest building society in the UK, behind Nationwide with assets in excess of £35billion.
Explaining the reasons behind the merger, Iain Cornish, chief executive of Yorkshire Building Society, said: "Chelsea has an excellent reputation, particularly in the savings market, and a strong network of branches in the south.
"Combining forces with them will strengthen our ability to deliver value to members through good value products and excellent service, underpinned by our significant financial strength. Together our combined expertise will deliver a competitive, member-owned organisation, which will provide real choice to consumers across the UK."
However, for the merger to get the go-ahead, it will require confirmation from the Financial Services Authority (FSA).
Commenting, Kevin Mountford, head of banking at moneysupermarket.com, urged caution saying that the merger still "needs to be ratified by the members of both societies".
Following the news of the proposed takeover, Mr Mountford claims this highlights that there are "still some skeletons lurking in the cupboard" for the banking industry, before stating that since Lehman Brothers collapsed last year, one in eight building societies have since either folded or been "swallowed up by a larger player".
"The really sad thing about this is building societies have, in the past, been a symbol of great regional pride, forming a pivotal part of high streets up and down the country," he said.
Before warning, that the agreed merger will result in one less player in the market, "meaning less competition and ultimately less competitive products".
"In the past both these building societies have offered customers some great deals. However the immediate impact should be minimal on existing customers, as savings held with Chelsea Building Society will still be protected separately from savings held in Yorkshire Building Society, following temporary FSA legislation which allows merged banks and building societies to trade under separate banking licenses into 2010.
"Customers concerned about the merger should keep a close eye on their saving and mortgage rates to make sure they remain competitive and shop around if necessary to get the best deal," he added.
© Fair Investment Company Ltd