Alliance and Leicester merger with Abbey
- How the merger between Alliance & Leicester and Abbey came about
- What the bank merger means for consumers
This article, Alliance and Leicester merger with Abbey, was last updated on 05 November 2008 and is now out of date and held in our online archive for reference. Explore our latest Money articles.
Alliance and Leicester, which offers current accounts, savings, loans and mortgages - and which saw its share price fall dramatically over the past year - is set to become a subsidiary of Spanish banking giant Banco Santander. On 17 September 2008, Santander announced that it intends to merge Alliance and Leicester with Abbey.
Bank merger creates UK's second biggest mortgage lender
Having bought Abbey in 2004 the merger means that Santander will own a huge stake in British high street banking. The merger of A&L with Abbey will create a network of almost a thousand branches handling more than 8% of the savings and personal loans market. And following the previous merger between Abbey and Bradford and Bingley, the merged organisation will become the UK’s second biggest mortgage lender.
When Santander bought Abbey four years ago it proceeded to cut 5,000 jobs, but is now reassuring Alliance and Leicester staff that similar cuts are not predicted. The long-term plans for A&L have yet to be clarified but Santander intends to continue to operate the Alliance and Leicester brand in the short term.
An important distinction between this merger and other recent mergers and takeovers is that Alliance and Leicester has become a subsidiary of Santander and will continue to operate under its own banking license.
This means savers with money in both Abbey and A&L continue to have two separate accounts. So as long as the money in each of the banks is under £50,000 it will be protected by the Financial Services Compensation Scheme (FSCS).
What is the Financial Services Compensation Scheme?
The Financial Services Compensation Scheme (FSCS) offers a safety net for savers and investors if their bank goes bust. Since 7 October 2008 it has protected up to £50,000 of an individual’s savings held with each authorised provider (previously the limit was £35,000).
Best buys and worst deals
While consumers with Alliance & Leicester savings accounts may be reassured that they are now part of a larger group, they will be hoping that Alliance & Leicester doesn't allow its customer satisfaction levels to slip as a result of this takeover.
Alliance and Leicester has often performed well in Which? Best Buy surveys, its current account topping the most recent Which? Best Buy table, offering 8.5% credit interest for balances up to £2,500 for a year. It has a history of offering accounts with more accommodating features than Abbey, such as payment holidays and underpayments.
Abbey, however, was rated the joint-worst current account provider by Which? members in a customer satisfaction survey carried out in April and May, and was also ranked bottom by Which? members in a savings satisfaction survey that was carried out at the same time.
Previous mergers have often resulted in one company’s product range disappearing rather than bringing together the best of products offered by the banks or building societies concerned.
Which? is lobbying the FSA and the government to ensure that banks and building societies continue to offer diverse and competitive products and measures are taken to protect consumers.