Virgin Money considers small bank acquisition

by Gill Montia

Story link: Virgin Money considers small bank acquisition

Virgin Money is reported to be considering the acquisition of a small bank to enable its expansion into the UK’s retail banking sector.

The company’s name has already been linked to Government plans to create three new retail banks from the dissolution of Royal Bank of Scotland (RBS), Lloyds Banking Group and Northern Rock.

In November, the Treasury let it be known that it would be selling assets of the part and wholly-nationalised banks to relatively new entrants to the UK financial sector, such as Virgin Money and Tesco.

Over the next five year, ministers want to create three “boring” banks, focused on deposits and mortgages, and thereby increasing competition.

Virgin applied to the Financial Services Authority for a banking licence in the autumn, when the firm was rumoured to be preparing a bid for the “good bank” element of Northern Rock.

The outcome of the application is awaited and the acquisition of a small retail bank now could allow Virgin to keep pace with Tesco, which is proposing to launch a current account in late 2010.

Tesco recently appointed Fiserv to provide its financial services’ IT systems and the partnership with the global financial technology group was seen as further evidence of the seriousness of the supermarkets retail banking ambitions.