Virgin Money Holdings PLC (LON:VM. shares gained after saying UK regulators have agreed improvements to its mortgage risk-weight models that will bolster the lender’s capital position.
The company, which is being taken over by CYBG, said the Bank of England’s Prudential Regulation Authority has agreed to its proposed changes to the mortgage risk weight model.
READ: Virgin Money agrees £1.7bn takeover by CYBG
The lender expects the improvements will add 250 basis points to its common equity tier 1 capital ratio to about 16%. It estimated the leverage ratio was 3.8% at June 30.
“The agreed improvements to mortgage risk-weight models will be reflected in Virgin Money's interim financial statements which are due to be published on 26 July 2018,” Virgin Money said in a statement.
The group added that the PRA has also revealed the outcome of its 2018 Supervisory Review and Evaluation Process.
The revised Pillar 2A capital requirement, which includes fixed and variable elements, will take effect on July 5.
Virgin Money said if applied at the end of June, it would have led to a Pillar 2A capital add-on of 5.4%.
In morning trading, shares rose 1.8% to 399p.