Barnsley Building Society is to merge with larger rival Yorkshire Building Society after it was forced to write off as much as £10m for cash deposited with two Icelandic banks.

Depositors with Barnsley stand to gain from the union as they will receive higher rates on both their savings and current accounts in most cases. They must, however, continue to bank at Barnsley’s eight branches and will not be permitted to make deposits at the Yorkshire.

Following the merger’s completion, which is expected before the end of this year, the Yorkshire will attempt to recover Barnsley’s deposits with Kaupthing Singer & Friedlander and Heritable banks, which may result in a cash windfall for its customers.

However, the move will not trigger a windfall for Barnsley members who do not join the Yorkshire.

Financial Times, The Times, Daily Telegraph