The acquisition means the finance company owned by Sir Richard Branson can now accept deposits and offer customers mortgages.
The £50m deal to buy Church House Trust comes two years after it failed to win control of Northern Rock.
The deal has already been approved by the Financial Services Authority (FSA).
Virgin Money says the acquisition of the private bank will provide the platform for the company to develop a retail banking business in the UK.
Sir Richard Branson, Founder of the Virgin group says: “Virgin Money aims to bring simplicity to the UK banking market which has traditionally been a complex sector.”
Jayne Anne Gadhia, chief executive of Virgin Money says its retail banking operation will provide a “better, different form of banking” and increase competition in the sector.
She added: “Our aim is to make ‘everyone better off’ in the way we do business by offering good value to customers, treating employees well, making a positive contribution to society and delivering a growing profit to shareholders. Our approach to banking is founded on developing a sustainable, savings-based business.”