CYBG’s £1.7 billion takeover of Virgin Money could mark the start of a merger and acquisition wave in the sector, with mid-tier banks now ripe for takeover as crisis-era woes are laid to rest, the global chairman of PwC has said.

Despite recent speculation around big-scale tie-ups – including reports Barclays is eyeing Standard Chartered – Bob Moritz said smaller lenders were likely to star in the next string of acquisitions.

“You’re probably going to see it more so in the mid-tiers regardless of the country, even though there’s lots of rumours with some of the larger institutions – obviously particularly coming out of the UK,” he said. “The mid tiers are the ones that I think have historically been limited by what they can do with their capital because of the regulatory requirements. I also think they’re looking for the return and they are more likely to be challenged, and therefore they probably need a little bit more scale because of the cost of doing business.”

CYBG chief executive David Duffy framed the Virgin Money deal in a similar light. “Customers want more from their banks, there are new entrants emerging all the time, the technology is changing and with all the regulatory changes, we know PSD2 and Open Banking puts a lot of challenges out there,” he said.

He also noted the opportunity to scale up quickly, with the combined group set to double in size “on day one” with six million customers, and assets worth about £83.5bn.

“What’s important is that at our size and level we move out of the challenger bank market,” Duffy said.

It leaves sector peers like Metro Bank straddling the space between the challengers and the big players, while specialist bankers like OneSavings Bank and Charter Court have also joined the fray.

Some British lenders have already been snapped up, including Aldermore which was recently bought by South Africa’s FirstRand in a £1.1bn takeover, and Shawbrook, which was taken over by private equity firms last year in an £850 million deal.

Rumours have also swirled in recent months of big-ticket deals, with reports that Barclays was exploring a possible merger with rival banks including Standard Chartered in light of pressure from activist investor Ed Bramson.