THE boss of Virgin Money has warned that cheap personal loans could pose a threat to the financial system as the banking sector marks 10 years since the collapse of Northern Rock.

Jayne-Anne Gadhia said personal unsecured loans were priced too low for a good economy “let alone one that might have an uncertain outlook”.

Ms Gadhia, who worked under Fred Goodwin at Royal Bank of Scotland until 2006, called for regulators to keep a watchful eye on the car finance market.

Northern Rock’s collapse 10 years ago saw the lender become a symbol of the financial crisis in the UK and crash into Government ownership.

The chief executive – who oversaw Virgin Money’s takeover of Northern Rock’s “good” operations in 2010 – said: “I would say that in the UK the car finance market is the area that should be watched.

“The other area that I find concerning, and Virgin Money are not in this, is personal unsecured loans that people might take out for a new kitchen or conservatory.

“The pricing on those loans is very low at the moment. I saw a pricing chart only last week and they are being priced at about 3%.

“I would say that probably there is an issue there that the price of unsecured loans is not pricing in the real risk of how they might perform in a good economy, let alone in one that might have an uncertain outlook.”

However, she added that the UK financial sector is better protected than a decade ago.

The Bank of England has attempted to shield the UK financial system since the banking crisis of 2008 by forcing high-street lenders to hold extra capital.