Nationwide Building Society is being urged to give members “a say” over its proposed takeover of Virgin Money.
Earlier this month, the lenders reached a preliminary agreement worth around £2.9billion in a deal which would challenge the Big Four banks.
If this agreement becomes a reality, the new banking group would have estimated assets of around £336billion with almost 700 branches.
However, a Conservative peer has reminded Nationwide that it “would be wise” to consult its 14 million customers about the deal.
The building society is the last mutually owned financial institution of its size which means the board is accountable to members.
Baroness Ros Altmann is calling for Nationwide customers to have a vote over the proposed Virgin Money agreement.
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Nationwide Building Society is the last mutually owned financial institution of its size
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Last week, the former pensions minister asserted that it was “important” for the building society’s members to have their voices heard.
She said: “‘It would be wise for Nationwide members to be given a say in the takeover of Virgin Money.
“The whole beauty of a mutual is that it is run in the interests of its members who have voting rights too and giving them the chance to exercise their right in a major transaction seems sensible.”
According to Nationwide, the proposed takeover would “accelerate” its plans to improve services and products across the country.
Kevin Parry, the chairman of Nationwide Building Society, explained: “The combination would increase Nationwide’s scale and financial strength, put us in a stronger position to continue to provide Fairer Share Payments to eligible Nationwide members, and offer rates for mortgages and savings that are, on average, better than the market average.”
David Bennett, Virgin Money’s chairman, added: “The Board of Virgin Money is pleased that Nationwide recognises the considerable strengths and opportunities that exist across our business, with the potential acquisition delivering attractive value for our shareholders.”
Speaking to This is Money, an unnamed member of a major shareholder advisory group shared that they “couldn’t see why there shouldn’t be a member vote”.
Only 500 Nationwide members depositing £50 each could call a special meeting to push for a vote on the Virgin deal, according to the building society's own constitution. However, there is no guarantee a vote would be given.
This means a small number of the financial institution’s 14 million-strong customer base could derail the takeover plans.
In the announcement of the proposal, Nationwide confirmed it had no plans to make material changes to staff if it were to acquire Virgin Money.
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Money has been among the high street banks to close branches across the country, shutting 39 branches last ye
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Furthermore, the lender will continue to be a mutual building society if the deal is given the green light. This deal comes as Nationwide has bucked the trend of bank branch closures recently, pledging not to leave any town or city it’s currently based in until at least 2026.
In comparison, Virgin Money has been among the high street banks to close branches across the country, shutting 39 branches last year.
On Nationwide's potential takeover of Virgin Money, CEO of the BSA Robin Fieth said: “History shows how critical mutuals are to UK financial services. Having real diversity of ownership model is essential to effective competition, supporting economic growth and systemic resilience.
"There are many parts of financial services which would benefit from the mutual model, not least business banking”.
Peter Hunt, the founder of Mutuo, added: "This is an exciting prospect that would grow the mutual sector and broaden the Society’s banking services, including into business banking.
"It would also return much of the former Northern Rock mortgage book to the mutual sector. We’ve worked for years to grow and bolster the sector and this is precisely the kind of imaginative thinking that is to be welcomed. Customers like their mutuals and this shows they are well placed to consider strategic growth opportunities to deliver even more mutual value to more people.”