Virgin Money, the consumer credit arm of the conglomerate, put forward the bid which has been approved by Financial Services Authority and values its target, Church House Trust at just under £12.5m.
In a statement the group said it had received yes votes covering two thirds of the Trust’s shares. Under the deal it will also invest £37m into the business and begin offering savings and mortgage deals to customers.
Sir Richard said: "The Church House Trust business offers us a strong platform for growth. Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector."
Church House is a modest bank with 3,000 private customers and £50m in deposits – twice the £25m on its loan book. The Somerset-based business has offices in Yeovil, Leeds and London and can trace its heritage back to the eighteenth century.
Virgin’s swoop for the bank will no doubt please chancellor Alistair Darling, who recently called for greater competition in a financial market hamstrung by the credit crunch.