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The owner of Clydesdale Bank and Yorkshire Bank, CYBG, has sweetened its £1.6bn offer to buy Virgin Money.

Under the new terms, Virgin Money shareholders would own 38% of the new merged business instead of 36%.

CYBG and Virgin Money said the move would create "the UK's first true national banking competitor" as an alternative to the incumbent banks.

It would be the UK's sixth largest bank with six million personal and business customers and a balance sheet of £70bn.

CYBG has said it will keep the Virgin Money brand, subject to an agreement with Richard Branson's Virgin Group.

Virgin Money, which was founded in 1995, expanded its business in 2011 when it bought the remnants of Northern Rock for about £747m.

CYBG

Virgin Money

Sir Richard Branson's Virgin Group is Virgin Money's biggest shareholder with a 34.8% stake in the business.

CYBG's initial bid, made last month, offered 1.1297 of its shares for each Virgin Money share, giving Virgin Money shareholders about 36% of the new merged business.

However, the revised bid ups that to 1.2125 shares, giving Virgin Money shareholders about 38% of the combined group.

CYBG said discussions were "ongoing" regarding other terms and conditions and that the announcement of the revised bid did not constitute a firm intention to make an offer for Virgin Money.

CYBG now has until 17:00 on 18 June to make a firm offer or walk away from Virgin, under rules set down by Britain's Takeover Panel.