Co-op Bank and Britannia reveal plans for a new 'super-mutual'

Although both sides stressed that talks were at an early stage and part of wider discussions about how they could work together, legislative changes due to come into force by the end of this year will make it easier for different types of mutuals - building societies, co-operatives and friendly societies - to join forces.

Both organisations are in sound financial health and believe that a tie-up could offer a customer-owned alternative to the plc market.

Staffordshire-based Britannia has a 245-strong branch network and 2.6 million savers. CFS, which is part of the Co-operative Group, the world's largest consumer Co-op, has a personal and business banking franchise as well as a life and general insurance operation.

The Co-op has weathered the turmoil in money markets because it is fully funded by customer deposits. It recently announced a 90 per cent rise in underlying half-year profits to £73.4 million and said that its bad debt levels had fallen.