Virgin Money bought by CYBG

20th June 2018

Full steam ahead as £1.7bn deal accepted by Virgin

Following a period of negotiation, the expected takeover of Virgin Money by the owners of Clydesdale Bank and Yorkshire Bank (CYBG) has now been agreed, creating the sixth largest bank in the UK.

There are potentially interesting times ahead for the banking sector, as the new look large challenger seeks to compete on a more equal footing with the big five banks – Lloyds, NatWest/RBS, Santander, Barclays and HSBC. With around six million customers, the new bank will certainly be more akin to these banking behemoths than the other challenger banks.

However, what savers will be hoping is that the interest rates on offer going forward will be more like the challenger banks than the big high street names – who are frankly nowhere to be seen when you look through our best buy tables.

It is certainly the case that Virgin Money has been competitive in key areas of the savings market over the last few years – particularly when it comes to cash ISAs, as evidenced by its clinching of both Best Fixed Rate Cash ISA Provider and Best Overall Cash ISA Provider in the 2018 Savings Champion Awards. And we hope that this remains the case following the takeover.

Virgin Money was founded by Sir Richard Branson in 1995 and, interestingly, this is not the first time that takeover talks involving Virgin have been in the news.

In 2007, Virgin attempted to expand its banking operations by making a bid for the troubled Northern Rock Bank, but the initial bid was not successful and Northern Rock was nationalised by the Government.

Then in 2012, Virgin was finally successful in its aim to make Northern Rock part of Virgin Money, combining its products with the Northern Rock ones and increasing its high street presence by utilising its branch network.

Since then, the Northern Rock brand has disappeared, making the Virgin Money brand now an established presence on our high streets through its branches (or stores as it prefers to call them).

The question on the lips of many savers who hold funds with these two providers will be what will happen going forward to the level of protection offered by the Financial Services Compensation Scheme (FSCS). As it stands today the two companies are covered by separate banking licences and so funds will be covered up to £85,000 per person in each.

However, this may not always be the case in the future, as while some larger banking groups have a number of separate banking licences – for example Lloyds Banking Group has a separate licence for Lloyds Bank and for HBOS – others have merged into one licence covering the whole group.

So, for now there is no change and if you have funds with both Virgin Money and Clydesdale Bank & Yorkshire Bank (combined), then each will be covered up to £85,000. Of course, if this situation changes, existing customers will be written to by the provider, giving notice of the change – which should allow action to be taken where possible.

That said, if you already hold funds with one provider or the other and are looking to add further funds or open a new account, limiting your balance to £85,000 across the new group may be a logical approach, certainly before any further announcements are made.

We will continue to bring you news as and when we get it and if you have any thoughts or questions on this or any other savings topic, call us on 0800 011 9705 or email [email protected].

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