Direct Line to take deposits

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Financial Editor

Direct Line, the pioneering tele-sales insurance and loans group, has been given the go-ahead to launch a savings product this summer. It has been authorised by the Bank of England to take deposits in the same way as banks and building societies.

An important step in the company's development into a diversified financial services group, it changes the way Direct Line raises funds. Previously, the group has offered insurance, mortgages and loans backed by finance raised in the wholesale money markets by its parent, the Royal Bank of Scotland.

"We need to balance our fundraising," a spokeswoman said. "By launching the new savings product, we will be able to finance our rapidly growing mortgage business."

Details are yet to appear, but the savings product will be designed as a mass-market product competing with high street banks and building societies.

The organisation said the move did not imply it was turning itself into a bank.

"We do not have any plans to launch a current account," Jim Spowart, managing director of financial services, said. The group currently has a customer base of 2.7 million policyholders.