Ross will become a 21% shareholder in Virgin Money and has committed to making further investments, reported to be about £500m. This will allow Virgin Money to accelerate its expansion into a full-service retail bank with a branch network, following its acquisition of Church House Trust in January.

Ross previously teamed up with Virgin Money in 2007 when it attempted to buy Northern Rock after it fell into trouble.

Virgin Money will put in an official expression of interest in buying the 318 branches of RBS on offer by the deadline of 5pm on 6 April. Santander and the National Australian Bank are also expected to be in the running for the branches, with Santander the current favoured bidder.

Analysts estimate that the cost of the branches could be £2bn.

RBS has been ordered by the European Commission to sell the branches in England and Wales in order to satisfy competition concerns, along with its Natwest brand in Scotland, RBS Insurance and Global Merchant Services.

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Sir Richard Branson said he was “delighted” Ross had decided to invest in Virgin Money, while Ross said he was “impressed with Virgin Money’s well deserved reputation with UK customers and with its growth strategy”.

Ross told Reuters that he believed Virgin Money was “ideally positioned to be one of the big winners” as the UK banking system is overhauled and confirmed that acquiring the RBS branches was Virgin Money’s current focus.

Jayne-Anne Gadhia, chief executive of Virgin Money, said: “The investment from WL Ross is a significant endorsement of our banking plans and will help Virgin Money build a real banking alternative for consumers in the UK market.”

The bid process could take between six weeks and three months to complete once RBS decides which offers it is interested in taking forward.