The creation of Scottish Widows Bank will, however, send shock waves through the banking community, which already faces stiff competition and significant overcapacity.
Scottish Widows said: "This should not be interpreted in any way as some kind of assault on the bancassurers. It is simply a natural extension of Scottish Widows' existing business."
The banking licence from the Bank of England would enable its treasury operation to use more sophisticated techniques, particularly in handling the billions of pounds cash that flowed through it.
The mutual said: "With approximately £20bn funds under management there are times when up to £1bn of this may be held in cash. In an increasingly sophisticated financial environment, this requires ever greater expertise and Scottish Widows needs to buildon its existing treasury operations to meet future business demands."
The move comes as banks such as NatWest, Lloyds and TSB have moved heavily into the selling of financial services to existing branch customers to compensate for flat loan growth. Life assurance, pensions and mortgages are all seen as key weapons by the banks.
Scottish Widows' new venture also comes as life assurers face stiff new regulations requiring them to provide more information on charges to customers.
Analysts speculated yesterday whether Scottish Widows was signalling a move into banking in the same way that the banks have moved into insurance. The convergence of the two industries has been an important theme since the big wave of deregulation in the1980s.
Scottish Widows downplayed the move, saying the banking side was at a development stage.