£35m grant payout
Virgin Money fund support ‘will shake-up SME banking’
New business services will be launched (pic: Terry Murden)
Virgin Money has received a £35m boost for its expanded business services from the remedy fund set up following the rescue of Royal Bank of Scotland.
The Capability and Innovation Fund was created to encourage competition in the SME banking industry as part of an agreement between the UK Government and the European Commission after RBS failed to split off its Williams & Glyn business as a new bank.
The £425 million fund is distributed to other SME lenders and Virgin Money will use it to scale up its regional franchise, provide more time with relationship managers and access to new digital technologies and services. It will provide matched funding.
Virgin Money Business is due to launch next year with its first business current account, alongside additional large-scale investment. It says this will enable the group to become a disruptor in the SME banking market.
The group aims to attract 100,000 SME customers by the end of 2025 (including 20,000 by the end of 2022).
It wants to increase net lending to SMEs by an extra £2.2bn by the end of 2025 (including £0.5bn by the end of 2022).
Virgin will add 150,000 hours of relationship manager time per annum from the end of 2022, through an investment in data infrastructure.
More than 80% of new customers will be based outside of London.
Gavin Opperman, group business banking director at Virgin Money, commented: “This grant award is an endorsement of the group’s potential to shake up SME banking and a vote of confidence in our ability to invest in new capabilities.
“The grant will be used to accelerate our existing ambitious growth plans.
Banking Competition Remedies Limited (BCR) was established to implement the Alternative Remedies Package of measures agreed between the UK Government and the European Commission following the EC approving a number of state aid measures granted to The Royal Bank of Scotland Group.
The package consists of the Capability and Innovation Fund to provide grants to help improve banking capabilities for SMEs, and an Incentivised Switching Scheme to provide funding to incentivise RBS’s Williams and Glyn SME banking customers to switch their business current accounts.