QUESTIONS have been raised by bewildered members of the Scarborough Building Society following last week's announcement of a merger with the Skipton Building Society.
As directors at both the Scarborough and the Skipton plan their amalgamation, members have been left wondering why they were kept in the dark.
The following comments, posted on the Evening News website, are an example of just a few of the queries voiced by readers:
Tideman, Old Town – Why were members not told of any merger, take over, call it what you want? There are so many unanswered questions.
Peregrine, Ashton – If the Scarborough is a mutual, shouldn't all the members have a say or vote on whether it should merge?
So why were members not informed about the merger and where do they now stand?
Prior to the merger of two mutual societies a vote is usually cast by the members of each society, before the plans are submitted to the Financial Services Authority (FSA).
However, in this case, the FSA decided to apply its powers, under the 1986 Building Societies Act, to allow the merger to be approved by the societies' boards only, effectively bypassing the members' vote, because it wanted to resolve the matter "as quickly as possible".
The Scarborough approached the Skipton seeking a merger after its finances were dealt a blow as trading conditions deteriorated. If members of either society are opposed to the merger they will be given the right to make representations to the FSA.
The merger announcement came as a surprise to many, as the Scarborough Building Society recently received positive media coverage.
Just last month, John Carrier, chief executive of the Scarborough, told the Evening News the society had "no excessive exposure to any individual lending type".
He blamed the demise of other building societies on "an over-concentration on one form of lending and an over-reliance on funding from the money markets", and said: "We remain vigilant to ensure we respond appropriately to the current, uncertain market conditions."
One theory regarding the difficulties faced by the Scarborough is linked to the society's 300 million portfolio of buy-to-let and self certification mortgage assets, which it bought from GMAC-RFC, a firm specialising in finding home loans and selling them on to lenders.
Other lenders that dealt with GMAC included the ill-fated Bradford & Bingley, and Britannia.
What happens next?
- The boards of the Scarborough and the Skipton building societies have now agreed initial terms for the merger
- Information about the merger will be sent to members, who will then be given a chance to make representations to the FSA.
- For the merger to be finalised it will have to receive confirmation from the FSA as well as the Office of Fair Trading.
- Both societies are hoping for the merger to be complete early next year, subject to the FSA's confirmation.