Britannia, the country’s second-largest building society, is talking to the Co-op’s financial services arm about creating a 'super-mutual'.
This would create one of the largest financial groups in Britain with about £75 billion in assets, 13,000 employees and more than 6m members.
However, a merger would only be possible if the Butterfill bill passes through Parliament early next year.
The bill, sponsored by Sir John Butterfill, the Conservative MP, proposes to remove the current legislation that prohibits mergers between mutuals and co-operatives.
Sunday Times, Sunday Telegraph, Financial Times, Daily Telegraph