Paragon Bank has been granted a banking licence by the Prudential Regulation Authority (PRA).

The new bank, which launches today and is part of Paragon Mortgages’ parent company Paragon Group, will focus on providing savings and loans for UK consumers.

Paragon Bank is based in Solihull and will deliver lending products through established intermediary channels and via the growing use of the internet for its savings products.

It will operate in specialist lending markets, with its initial product range in car finance loans available via brokers and car dealers.

In late Spring Paragon Bank will also deliver a range of online savings products direct to consumers, launching with easy access and fixed rate savings accounts. Personal loans will be available through brokers later in the year.

The bank is led by managing director, Richard Doe, previously chief executive of ING Direct UK, together with an experienced banking and consumer finance management team and board of directors.

John Heron (pictured), managing director of Paragon Mortgages, said: “This is a significant strategic step for the Group. Paragon Bank provides further expansion and diversification of our funding capability which in turn will facilitate the diversification of our lending.

“This will see the Group returning to sectors where it has previously been a major competitor – car finance and personal loans – and will provide a spring-board for greater innovation going forward.”

The company has provided initial capital of £12.7 million to the bank and will expect to provide additional capital over time to support growth.

Nigel Terrington, Paragon Group chief executive, said: “Today’s launch of Paragon Bank marks an exciting development for the Group and represents the third leg of the strategy, joining Paragon Mortgages, the buy-to-let lending business and Idem Capital, the debt purchase business. The establishment of Paragon Bank facilitates a return to consumer finance lending, benefitting from the group’s heritage, expertise and scale as a low-cost specialist lender.

“Paragon Bank will bring choice and customer focus to the UK banking market, by providing consumers with straightforward, competitive products that are transparent, easy to understand and manage. Initially, Paragon Bank will focus on lending in sectors where Paragon has extensive experience and previous success, in markets which are displaying good growth opportunities. Paragon Bank’s aim is to establish itself as a trusted banking partner for its customers and business partners.”