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As reported in the Dailey Mail:

Financial services group Hargreaves Lansdown is expected to say it will apply for a full banking licence to take advantage of a growing flood of client money through its business.

Analysts at investment bank Morgan Stanley say Hargreaves, which provides investment and share dealing services, could announce the move at its full-year results on Wednesday.

That would pave the way for the business to pay better rates of interest on clients’ cash portfolios.

Morgan Stanley said: ‘Isa reforms allow for increased cash holdings plus flexibility between cash and investments, and pension reform would also increase client cash. To attract and retain customers, we believe Hargreaves will have to pay more competitive rates on client cash.’

The bank estimates that Hargreaves is already responsible for about £3.8billion in client cash, but as it is not a full bank it cannot hold that cash directly and must place it with other banks.

Gaining a banking licence would enable Hargreaves to hold those deposits on its own account. If Hargreaves took deposits, it could invest the money to earn higher returns and pay higher rates of interest to customers.

Simon Dixon

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