LONDON, March 7 Reuters Nationwide39;s 2.9 billion pound 3.7 billion play for Virgin Money is fuelling talk that Britain39;s biggest banks might pounce on smaller lenders, heralding an MA watershed as competition to lend reaches new heights.

The allcash deal proposed by the 140yearold mutuallyowned building society is potentially the biggest British banking takeover since the 2008 global financial crisis.

It is also a bold challenge to the dominance of Lloyds Banking Group, Barclays, HSBC and NatWest, after efforts by midsize and challenger banks over the last decade to break their hold had little success.

Nationwide39;s proposed takeover would create the secondlargest mortgage and savings provider in the UK with close to 700 branches, just as most rivals rapidly downsize inperson banking services.

Growing costs and falling margins for smaller lenders like Virgin which joined forces with Clydesdale Bank in 2018 have made Britain39;s banking sector ripe for consolidation outside the Big Four.

Coventry Building Society, another mutuallyowned lender, said in December it had entered exclusive talks to buy Coop Bank, another example of how smaller players are teaming up to better their prospects.

Shawbrook, a specialist lender backed by private equity groups BC Partners and Pollen Street, approached Starling Bank about a deal last year but was rebuffed, two sources familiar with the matter told Reuters.

Shawbrook also bid for Coop and made failed approaches for Metro…