Friday, 28 March 2014

Death of City of Derry Building Society Iminent


Yesterday, Thursday 27th March was the day that the savers and borrowers of the City of Derry Building Society received through their notification of the 137th Annual General Meeting of the Society. If the recommendations of the directors are followed this will be the last AGM. The members will be asked to approve the merger of the City of Derry Building Society and the Progressive Building Society. This is not a joining of equals, the Progressive Building Society is by far the larger of the two institutions. The reality therefore is that the City of Derry is being taken over and subsumed by the Progressive. If the borrowers and savers follow the advice that is being proffered in sufficent numbers then the City of Derry will cease to exist on 1st July 2014.


As the standard variable rate charged by the Progressive is lower than that charged by the City of Derry I suspect that the latter's borrowers may see little downside in voting for the merger. The savers might not view the, "transfer of engagements," with such equanimity. A comparison of investment rates as between the two Societies does not provide an automatic reason for savers to join the borrowers in voting for the death of the City of Derry.


There will be some savers, not a great number admittedly, who may be forced into closing accounts in order to maintain full protection under the Financial Services Compensation Scheme and who may well be financially prejudiced as a consequence. These are individuals who had up to £85,000 in both building societies, but who will end up with more than £85,000 in the merged entity. They are being told that normal notice periods will not apply and that short notice penalty interest will not be charged, but what if they are having to close or withdraw money from a fixed rate product and the same rate cannot be achieved elsewhere in today's market?


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