BRITISH BUILDING society Nationwide, which is planning to start taking deposits in the Republic early next year, is to take over smaller building societies The Derbyshire and The Cheshire, after bad debt-induced losses left both lenders facing "financial issues".

Nationwide said the move was instigated by its smaller rivals, which approached it after suffering first-half pretax losses of £17 million (€21.1 million) and £10.5 million respectively.

In order to avoid "prolonged uncertainty" the deals will be completed through board resolutions, sidestepping the usual requirement for a vote in favour by the societies' customers, Nationwide said. The Derbyshire and The Cheshire customers will not receive a payout so as to preserve the enlarged company's capital.

"The Derbyshire and The Cheshire have independently concluded that a merger with Nationwide is in the best interests of their savers and borrowers given the financial issues faced by both societies," Nationwide chief executive Graham Beale said in a statement.

The mergers look set to create a mutually-owned lender with nearly 15 million members, assets of £191 billion, and £122 billion in retail deposits, consolidating Nationwide's position as the largest building society in the UK.

Mr Beale said the lender had not been approached by any other struggling mutuals, and played down suggestions that the tie-ups were facilitated by the Financial Services Authority (FSA) in a bid to prevent market instability.

Nationwide said last month it was "putting plans in place to operate" in the Republic.

It plans to launch both regular savings and fixed-term deposit products. ( Additional reporting: Reuters)