Greater Bank and Newcastle Permanent will forge ahead with their plans, with the next step a vote by members on whether the mutuals should combine.

The endorsement from the board recommends members back the proposal.

Plans for the merger were revealed in August last year when a memorandum of understanding to explore the idea was announced.

READ MORE: Merger plan unveiled

Newcastle Permanent chair Jeff Eather and Greater Bank chair Wayne Russell have since signed a merger implementation agreement to consolidate the proposal, which will be submitted to the Australian Prudential Regulation Authority for review.

From there, it will go to a meeting of members. That is expected to be held later this year.

Mr Russell said the past five months had been consumed with extensive due diligence on both sides of the planned merger.

"The due diligence process has confirmed our initial view that this is the right time to bring together our two organisations, which in their own right offer exceptional financial strength built on years of solid performance," he said.

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"Combining our resources and financial strengths provides an unparalleled opportunity to grow and innovate, to deliver even better value for Greater Bank and Newcastle Permanent customers. This has been, and remains, the foundation for entering into such an arrangement.

"Merging will also enable us to keep pace with increasing regulation and reporting, and the rapid advancements in banking technology, both of which require significant investment."

The merger would retain both brands, serving a customer base of almost 600,000.

No forced redundancies would occur for at least two years, according to the plan endorsed by the boards.

A similar moratorium would stand on reductions to branch numbers, but not closures of specific branches. Headquarters and call centres will remain in the Hunter for the same period.

Mr Eather said the alliance would make both organisations sustainable in the long term.

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"This is a highly compelling opportunity to grow and compete on our terms. Importantly, we remain fiercely committed to being customer-owned and continuing to invest profits for the benefit of our customers and the communities we serve," said Mr Eather.

"Combined, Greater Bank and Newcastle Permanent have $19.8 billion in total assets and a customer base of approximately 600,000, and, in merging, will create one of Australia's largest customer-owned financial institutions.

"That puts us in an incredible position to be a real challenger and remain a significant competitor in the banking sector."

There are fewer than 70 mutuals in Australia, with mergers whittling down the field over the past decade.

If the merger proceeds, Mr Eather will become deputy chair while Mr Russell will be chairman.

Newcastle Permanent chief executive Bernadette Inglis will be the new CEO, while Greater boss Scott Morgan would be her deputy.

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