Chelsea is the UK’s fifth largest building society with assets in excess of £13bn, while the Catholic had assets of £44m at the end of 2007.
Any merger between the two building societies will be subject to the approval of the Catholic members and confirmation by the FSA.
Under the proposal the Catholic would transfer its engagements to Chelsea on a date to be determined.
Chelsea says that discussions between the two lenders are continuing and further details of the proposed transaction will be announced in due course.
It is likely that bonus payments will be made to members of the Catholic. In this event, the first qualifying date for such bonuses will be 31 May 2008.
This means that only those shareholding and borrowing members who had a qualifying savings or mortgage account open with the Catholic on that date will be eligible to receive bonuses.
Chelsea chairman Trevor Harrison says: “We are looking forward to finalising the terms of the transaction with the Catholic and to welcoming the Catholic’s members into the Chelsea family in due course.”
Catholic chairman Clare Whittaker adds: “We are delighted to have chosen Chelsea as our merger partner. The Catholic and Chelsea have much in common and share common values around mutuality and people”.