Virgin Money, the finance arm of the business empire of Sir Richard
Branson (pictured), has applied to the British regulator for a
banking licence in a move expected to be in preparation for a
takeover bid of the troubled Northern Rock bank.

Virgin said it applied two weeks ago to the Financial Services Authority for a licence to sell current accounts and mortgages and gain a high-street presence. The Government will be told this week if plans to hive off Northern Rock's toxic mortgages into a "bad bank" will get the go-ahead. The European Commission is expected to rule on Wednesday on the plans that would also create a "good bank" with the bank's existing savers and high-quality mortgages.

The Government is expected to consider selling the good bank to a new player to raise vital funds and counter criticism that the financial crisis has consolidated the power of the major banks.