Virgin Rock & Roll

So Virgin Money has bought Northern Rock. But not all of it. Northern Rock was nationalised in early 2008 and split in two in 2010. But only the banking and mortgage lending arm of the old Northern Rock bank that are now housed in Northern Rock Asset Management, and lives under the umbrella of a state agency called UK Financial Investments. This part has been bought for £747 million by Sir Richard Branson's Virgin Money.

So what about Virgin Money? Where did it come from? How did it start?.Virgin Money was started in 1995 as a seller of financial investments. It grew into an online financial "supermarket", offering things like credit cards, insurance policies, personal loans, pensions, investments, mortgages and ISAS. But it did not have any high street branches it was all 'online', not even any conventional bank current accounts.

But at the start of 2010, it formally acquired a banking licence, paving the way for it to become a proper deposit-taking bank.

Now having got a licence Mr Branston was in a good position to get some real branches for his bank. And this is where Northern Rock comes in, with an offer to buy it from the government holding company. But How will this fit with virgin Moneys customers?

Virgin has more than 3 million customers to add to the one million savers and borrowers and 75 high street branches of Northern Rock. This all looks very rosy but it all depends on how to two sets of customers merge together. Virgin still has a lot of work to do re-branding all the branches with the Virgin Logo. And remember it is 'small' compared to the big four or five banks who have hundreds of branches each. But its a start and if Sir Richard's previous enterprises are anything to go by it will get a lot bigger.

What will happen to the customers of Northern Rock after the acquisition?. Under the rules of the Financial Services Compensation Scheme (FSCS), savers' funds are guaranteed to be safe up to a limit of £85,000 per saver per institution. But as Virgin and Northern Rock are keeping their banking licences a customer would be covered up to £85,000 in each 'bank'.

Sir John Vickers',( Independent commission on banking) argued strongly that more High Street banks should be created to stop banks "exploiting lack of customer awareness or poor regulation".

It is expected It will start to offer current accounts in 2013 and later start lending to small businesses. So we have a merger between Virgin Money and Northern Rock following the acquisition from the state agency called UK Financial Investments.

Remember Northern Rock was split up in 2010. So what happened to the other part?.More than £28bn has been injected by the government into the Northern Rock in the past few years. Although some has already been repaid, the bulk of that debt to the taxpayer lives on with Northern Rock Asset Management, which still owes the Treasury £21bn. Whether the taxpayer i.e. you and me, will ever get our money back remains to be seen. Maybe over a long period of time after loans and mortgages have been repaid we might break even, but I doubt it.

Sources: BBC News, Virgin, FSCS.