Cheltenham MP Is Concerned about Chelsea Building Society Takeover

Cheltenham MP Martin Horwood expressed real concern over the proposed merger of Chelsea Building Society with Yorkshire Building Society and particularly the future of 700 jobs at the Society's Thirlestaine Road headquarters and its Charlton Kings site. The 'merger' announced today promises that the new enlarged Yorkshire Building Society will retain its head office in Bradford, retain only an 'operational presence' in Cheltenham and retain the Chelsea name only as a brand. The merger still has to be voted through by Chelsea members and has to be given the all-clear by the Financial Services Authority which is likely to take place in the new year. The merger itself is likely to take place on 1 April 2010. It will create the UK's second largest building society with assets worth more than £35 billion.

'This had an air of inevitability about it but it is still a sad day for the Chelsea and for Cheltenham', said Martin. 'The Society will remain a mutual organisation and if a merger with someone had become inevitable, then Yorkshire is probably one of the best possible partners, particularly as it is a strong mutual itself and the two branch networks complement rather than duplicate each other. But I have grave concerns about the job losses that are going to result in Cheltenham. This is, in effect, a takeover. I have been assured that there will be a 'significant operational presence' here on top of any branch presence but that this will only be guaranteed for three years and that it will probably be at just one site.'

'I have also been promised a meeting within days with chairman and chief executive Stuart Bernau at which I will raise the future of staff in Cheltenham and also my concerns about the future of Chelsea's community involvement programme which has benefited many local schools and charities, including LINC, Sue Ryder Care, Winston's Wish, Gardner's Lane, Lynworth Primary and Christ College.'

'But there are deeper questions for the society and the mutual sector to answer. How did a building society, supposedly based on strong mutual values, get into such a position of weakness? I was being assured not that long ago that Chelsea's finances were strongly based on retail savings and that it was less exposed to recession than many of its banking competitors. That turns out to have been what could be politely called 'optimistic'. There is little that they could have done about their exposure to the Icelandic bank collapse - many local authorities and other institutions were caught the same way. But that is only part of the picture. Underlying profitability was clearly pretty weak and Chelsea's future looked bleak from the day their credit rating was downgraded by ratings agencies in April, following their public revelation that they were exposed to up to £41m worth of fraudulent mortgage deals. And it's now clear that resulted from the society departing from its traditional mutual values and indulging in risky practices very similar to its banking competitors, including aggressively marketed buy-to-let mortgages, self-certified, sub-prime and high loan-to-value mortgages.'

'I will be asking questions in Parliament about the road that led to takeover and the role of the Financial Services Authority and I will also be seeking meetings with the Building Societies Association and the mutuals organisation Mutuo to discuss the issue. Building societies should have been part of the solution not part of the problem.'