Skipton Building Society has announced it will take over Scarborough Building Society following an approach by the smaller firm.

The merger is expected to create a top five building society, based in Skipton, with about 860,000 members and assets of more than £16bn.

The move follows news of a planned merger between the Yorkshire Building Society and Barnsley Building Society, a victim of the Icelandic banking crisis.

The merger is anticipated to be completed in the first quarter of next year.

John Goodfellow, chief executive of Skipton Building Society, said: “By joining forces, these two societies will create a modern mutual that is set to grow in the years to come.”

David Cutter will become chief executive of the new society, which will be called Skipton Building Society and will have its headquarters at The Bailey, Skipton.

The chief executives of both societies, Mr Goodfellow and John Carrier, will continue with their planned retirements on December 31.

Mr Carrier said: “A merger of the societies will create a much larger, stronger business which offers real advantages to both organisations and their members.”

No compulsory redundancies have been planned.

A Skipton spokesman said there could be branch closures in areas where there will be more than one branch.

He said: “In some towns branches are just doors away from each other. Combined bigger branches may be planned in some areas.”

It has also been promised a presence will be kept in towns where Scarborough is represented and the head office in Scarborough will be used as an operational and administrative centre.

e-mail: james.rush @telegraphandargus.co.uk