Virgin 'Bank' steps closer with Northern Rock in sights

Friday, 23 October 2009 04:32

Virgin is set to launch a bank, it has confirmed.

Currently Virgin Money is limited in the number of services it can provide, but it has now revealed it has applied for a banking licence.

However, with a banking licence Virgin Bank could widen its number of services beyond its current raft of insurance, savings and credit cards.

A Virgin Money spokesperson said: "We applied for a banking licence in October.

"Since Northern Rock we have stated our ambition to become a bank. Applying for a licence is just part of that move."

Before Northern Rock was nationalised, Virgin was a favourite to buy the Novocastrian mortgage lender.

There have also been suggestions Virgin could be lining up to buy Northern Rock once more.

The government is currently splitting Northern Rock into a 'good bank' holding savings, branches and new mortgages and a 'bad bank' holding the existing mortgage book.

The Treasury has confirmed it has received interest from a number of parties in buying Northern Rock and it is thought a sale could be lined by before the coming general election.

The move for a banking licence from Virgin, follows Tesco's personal finance business's rebranding as Tesco Bank.

Currently Virgin Money's offset mortgage service, the One Account, is provided by the Royal Bank of Scotland, while its loans are provided through the Co-operative Bank.

A banking licence could see Virgin offering its own deals.

It would also be able to move into current accounts. A branch network of Virgin Banks has also been mooted, even if a Northern Rock deal falls flat.

Kevin Mountford, head of banking at moneysupermarket.com, said: "Although this news has been long expected, it will be interesting to see if and when it comes to fruition.

"The UK banking landscape is going to look very different in 2010; on one hand we will see consolidation with the likes of Alliance & Leicester and Abbey migrating to Santander but with Tesco and now Virgin declaring their ambitions it should lay down a real challenge to the traditional players.

"Hopefully this spells good news as it can only help to provide the UK consumer with a wider level of customer choice."

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