A BUILDING society with roots in Huddersfield is riding to the rescue of one of its rivals.

The Yorkshire Building Society has agreed a merger with the Barnsley Building Society, which faces a £10m write-off due to its exposure to two Icelandic banks.

A joint statement issued by the societies said the move was “an extremely positive” development for the future of the Barnsley and its members.

It said: “The proposal follows swift, pre-emptive action from the board of the Barnsley in approaching the Yorkshire to seek a merger after the identification of possible losses of deposits with Icelandic banks.”

The joint statement said the Barnsley has exposure to two Icelandic banks that may require a write-off of up to £10m.

This sum could be fully absorbed by the building society’s general reserves, but its board had determined that the long-term interests of its members would be best served by a merger with the Yorkshire.

Details of the proposed deal will be sent to members by the end of November. The merger, which is subject to confirmation by the Financial Services Authority, is expected to be completed on December 31.

The combined society will be called Yorkshire Building Society, but the Barnsley’s local identity and name will be retained and all existing branches will continue to operate under the Barnsley name.

The statement said that following completion of the merger, the Yorkshire would try to recover the Barnsley’s deposits with the Icelandic Kaupthing Singer & Friedlander and Heritable banks.

The Yorkshire, which was formed from the Huddersfield and Bradford Building Society, has its head office in Bradford and is the UK’s third largest society with more than 1.9m members.

It has 136 branches, 64 agencies and total assets exceeding £20bn.

The Barnsley is the UK’s 34th largest society with some 60,000 members, eight branches and total assets of £376m.

Iain Cornish, chief executive of Yorkshire Building Society, said: “The merger is a further step in demonstrating the strength of the mutual sector in the UK, with complete certainty to customers maintained at no cost to the taxpayer.

“I am delighted that the Yorkshire’s strong financial position enables us to provide assurance to the members of the Barnsley, as well as preserving its local character.”

Mr Cornish said: “Yorkshire members will benefit from the Barnsley’s strong funding position and very high quality mortgage book as well as strengthening even further our position in our heartland area.”

Steve Mitchell, acting chief executive of Barnsley Building Society, said “The board has been consistent in pro-actively managing its exposure to the financial markets by spreading risk across a variety of institutions and countries.

“The global crisis of recent weeks has seen governments taking positive measures to support their financial systems. However, the current exceptional situation in Iceland and the full extent of the repercussions were beyond anticipation.

“The Society’s reserves are sufficient to absorb our potential losses to Icelandic banks, but the board considered that their reduced level would restrict its ability to provide members with the security and benefits associated with mutuality.”