The Derbyshire has 50 branches and 500,000 members, while the Macclesfield-based Cheshire has 45 building society branches and 13 estate agency branches.

The proposed tie-ups come a year after the Nationwide completed a merger with the Portman, a deal which triggered windfall payments of between £200 and £1,000 for members of the UK's third biggest building society.

Nationwide's merger with the Portman left it with more than 900 branches and 14 million members.

The Swindon-based firm – the UK's largest society – has been one of beneficiaries of the downturn in the financing and mortgage markets because savers have deserted banks and smaller building societies in a so-called "flight to safety".

It said today: "The board of Nationwide Building Society can confirm that it is in advanced discussions with The Derbyshire and The Cheshire Building Societies over the terms of independent and proposed mergers.

"Further announcements will be made once those discussions have concluded."

While both sets of discussions are at an advanced stage, it is thought the talks relating to the Derbyshire are nearer to completion.

A spokesman declined to comment on whether the proposed tie-ups will lead to windfall payments for members of the two mutuals.

The talks relating to the Derbyshire are understood to have been instigated by Graham Picken, the chief executive of the Derbyshire, during the early summer, when deteriorating credit markets prompted him to decide that his members' savings would be better placed in the hands of larger, better capitalised rival.

It is believed to be one of a number of merger discussions currently taking place in the building society sector, as smaller firms look for merger partners in order to provide greater security to customers.

Nationwide opened 1.5 million new savings accounts in its last
financial year – equivalent to 4,000 a day – with almost £1 in every £5 saved in the UK going into a Nationwide account.

However, the mutual's share of the new mortgage market shrank to 7.1% – compared to 11% a year ago – as it looked to focus on quality rather than share. Nationwide funded the lending entirely through retail deposits, which trebled to £9.1 billion.

The Derbyshire's results for 2007 showed total group assets increased by 17.8% to £7.1 billion, but pre-tax profits dropped 47% to £8.7 million because of one-off items and financing costs. It said it performed solidly in a "very competitive mortgage market" and delivered record savings growth of 27.6%.

The society has branches in Derbyshire, Cheshire, Leicestershire, Lincolnshire, Manchester, Nottinghamshire, Staffordshire, West Midlands and Yorkshire.

Established in 1870 in Macclesfield, the Cheshire was one of the UK's first Permanent Societies. It merged with the Northwich Building Society in 1969 and followed this with a series of smaller mergers through the 1970s and 80s.

It now employs more than 800 staff and ranks just outside the top ten in terms of size, among a total of 59 UK building societies.