Cascade Commentary

Banking licence changes for Virgin Money expected by the end of 2019

June 2019

The recent acquisition of Virgin Money by CYBG has been hailed by Chief Executive, David Duffy, as an exciting challenge to the Big Five in the UK banking market. CYBG, owner of Yorkshire Bank and Clydesdale Bank, completed its £1.7bn purchase of Virgin Money in October 2018 in an all-share transaction creating the sixth largest lender in the UK market. The merger brings together complementary strengths through the combination of CYBG’s personal and business banking prowess with Virgin Money’s mortgage and credit card operations.

Virgin Money began its journey into mortgage lending through the acquisition of Northern Rock in January 2012. Having started with £14bn of mortgages at that time, the new bank grew mortgage lending by 43% in just over two years. The bank listed via an IPO in November 2014 and became a public company committed to improving competition in the retail banking market, a key objective of the regulator in the aftermath of the financial credit crisis.

The decision to join with CYBG could prove a historic milestone in years to come for both banks through the national footprint and enhanced scale it delivers – indeed, the combined entity is double the size of any other challenger bank in the UK market.

When banks combine, they can decide to continue to operate from separate banking licences or can merge to share one licence. CYBG have indicated that the group plans to share a single licence by the end of 2019. As many North East savers have savings accounts with Virgin Money, it’s important to take note of what this change may mean for you.

Savers in the UK are afforded £85,000 of deposit protection under the Financial Services Compensation Scheme (FSCS) per banking licence per entity/person. That means that if a bank were to enter difficulty and cease trading, savers with said entity would have the first £85,000 of cash held with that bank compensated back to them once submitting a claim to the FSCS.

As it stands, CYBG and Virgin Money operate from two separate banking licences. This means that a saver presently has £85,000 of their cash protected with CYBG and £85,000 of their cash protected with Virgin Money. The plan to combine the banking licences to a single licence by the end of 2019 will however mean that this will change and at the point either licence is cancelled with the other joining the remaining licence, savers will no longer be protected separately for cash held with Clydesdale Bank, Yorkshire Bank or Virgin Money and so will need to ensure that they do not exceed the £85,000 limit across all three banks should they wish to have their cash savings protected.

Many banks share a licence and it’s important to be aware of changes taking place. Recently Holmesdale Building Society was acquired by Skipton Building Society with both now sharing the Skipton Building Society licence. Sufficient notice is typically given to ensure savers have ample time to decide what they would like to do. For those that have fixed term accounts or notice accounts, we recommend you keep a close eye on any news announcements to ensure you’re aware of your options before the banks join onto the same single licence.

Should you require any further information, please do get in touch or feel free to contact Virgin Money directly by either your online account with them or by contacting 0345 608 1604 if you’re an online customer or 0345 600 7301 if you’re a postal, telephone or branch customer.

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