MOVES to create a "super-mutual" from the merger of the Manchester-based Co-operative Financial Services and the Britannia Building Society have been confirmed.

A tie-up would form a business with more than six million customers and £70bn of assets, although both sides stressed that talks were at an early stage.

A legal change due to come into force by the end of this year or early next will make it possible for different types of mutuals - building societies, co-operatives and friendly societies - to join forces. At present, there is no legislation in place to allow this to happen.

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

As well as speaking to the Britannia, CFS - led by chief executive David Anderson - said it had been in contact with other parties about how its products can be sold in their branch networks.

The Co-op said: "We have ambitious growth plans and have had discussions with a number of parties including Britannia about how we can work more closely together for mutual benefit.

"There are clearly a range of possibilities open to us but we will only take action which benefits further the clear momentum occurring now within the co-operative and mutual sector."

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

It has also been boosted by £20m worth of deposits as savers spread their money between institutions amid fears over the security of Britain's banks.

Britannia, which is based in Leek, Staffordshire, has a 245-strong branch network and 2.6 million savers. It has 365,000 members in the north west.

It is not clear whether Britannia's three million members would receive a windfall payment as part of any merger with the Co-op.

Britannia boss Neville Richardson said it was too early to comment about the impact on customers and staff.