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Virgin Money applies for banking licence
ADAM AIKEN, DEPUTY BUSINESS EDITOR
Last updated: 23/10/2009 17:25:00
Hopes of more competition among the UK's struggling banks were lifted last night after it was disclosed that Sir Richard Branson's Virgin Money had applied to become a bank.
The Norwich-based business, which currently offers credit cards, savings and investments, applied to the Financial Services Authority for a full banking licence earlier this month.
The process could take up to six months but could lead to a push into the current account and mortgage market next year if successful.
“This is an administrative first step to create a platform alongside the strong business that we already have,” said a spokesman.
Speculation has been rife about the Virgin Money's ambitions for some time. In the spring, Sir Richard signalled his intention to turn it into a high-street bank within two years, and predicted that the lack of trust in consumer banks meant his financial services operation would be able to build up its market share quickly.
He said: “We are going to get back into the mortgage business and we will become a bank either by acquisition or by getting our own banking licence.
“You will see us become a consumer bank within the next couple of years.”
Since the onset of the credit crunch and the financial crisis two years ago, Virgin Money, which has about 200 staff, has been heavily linked with the likes of Northern Rock and Royal Bank of Scotland.
It was one of the frontrunners to buy Northern Rock as the troubled lender sought emergency support in the early stages of the credit crunch, but the government eventually opted to nationalise the struggling lender in February 2008.
Yesterday's news emerged days after the governor of the Bank of England Mervyn King called for more competition in the banking sector as the impact of the financial crisis and state bail-outs fades.
Mr King said: “As in the English Premier League, getting into the top four will not be easy for those outside it. But in both cases I hope greater competition will produce less rigidity in the composition of the top four.”
Virgin Money's application comes as plans to split Northern Rock in two ahead of a possible sale are reportedly set to gain European approval in the coming weeks. The restructuring would see the bulk of Northern Rock's retail deposits and low-risk mortgage loans separated into a good bank and sold off.
Virgin Money is also understood to be in talks with the former chairman of the Newcastle-based lender, Bryan Sanderson, over a non-executive director role with the business. Mr Sanderson took over as chairman in October 2007 in the immediate wake of the crisis, before stepping down four months later.
Virgin Direct was launched in 1995 and merged with online financial products supermarket Virginmoney.com to become Virgin Money in 2002. Its Virgin One mortgage finance product was taken on by Royal Bank of Scotland the following year.
ADAM AIKEN, DEPUTY BUSINESS EDITOR
Last updated: 23/10/2009 17:25:00
Hopes of more competition among the UK's struggling banks were lifted last night after it was disclosed that Sir Richard Branson's Virgin Money had applied to become a bank.
The Norwich-based business, which currently offers credit cards, savings and investments, applied to the Financial Services Authority for a full banking licence earlier this month.
The process could take up to six months but could lead to a push into the current account and mortgage market next year if successful.
“This is an administrative first step to create a platform alongside the strong business that we already have,” said a spokesman.
Speculation has been rife about the Virgin Money's ambitions for some time. In the spring, Sir Richard signalled his intention to turn it into a high-street bank within two years, and predicted that the lack of trust in consumer banks meant his financial services operation would be able to build up its market share quickly.
He said: “We are going to get back into the mortgage business and we will become a bank either by acquisition or by getting our own banking licence.
“You will see us become a consumer bank within the next couple of years.”
Since the onset of the credit crunch and the financial crisis two years ago, Virgin Money, which has about 200 staff, has been heavily linked with the likes of Northern Rock and Royal Bank of Scotland.
It was one of the frontrunners to buy Northern Rock as the troubled lender sought emergency support in the early stages of the credit crunch, but the government eventually opted to nationalise the struggling lender in February 2008.
Yesterday's news emerged days after the governor of the Bank of England Mervyn King called for more competition in the banking sector as the impact of the financial crisis and state bail-outs fades.
Mr King said: “As in the English Premier League, getting into the top four will not be easy for those outside it. But in both cases I hope greater competition will produce less rigidity in the composition of the top four.”
Virgin Money's application comes as plans to split Northern Rock in two ahead of a possible sale are reportedly set to gain European approval in the coming weeks. The restructuring would see the bulk of Northern Rock's retail deposits and low-risk mortgage loans separated into a good bank and sold off.
Virgin Money is also understood to be in talks with the former chairman of the Newcastle-based lender, Bryan Sanderson, over a non-executive director role with the business. Mr Sanderson took over as chairman in October 2007 in the immediate wake of the crisis, before stepping down four months later.
Virgin Direct was launched in 1995 and merged with online financial products supermarket Virginmoney.com to become Virgin Money in 2002. Its Virgin One mortgage finance product was taken on by Royal Bank of Scotland the following year.
