Big Society Bank launches as Big Society Capital and makes first £1m investment

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Big Society Bank launches as Big Society Capital and makes first £1m investment 4

Finance | Vibeka Mair | 29 Jul 2011

The Big Society Bank officially launched yesterday with a new name, CEO and board and announced its first investment of £1m into the Private Equity Foundation.

Minister for the Cabinet Office Francis Maude announced the news yesterday, where he also confirmed that the “Merlin banks” HSBC, the Royal Bank of Scotland, Lloyds Banking Group and Barclays had agreed on the terms of their £200m investment into the new organisation.

Big Society Capital

Big Society Capital will be the new name for the Big Society Bank. Sir Ronald Cohen, founder of private equity firm Apax, will be its interim chair, while Nick O’Donohoe, former global head of research at JP Morgan, will be its chief executive.

Both Sir Ronald and O’Donohoe drew up the proposal for the organisation, which was approved by government earlier this year.

Speaking at the launch, Sir Ronald Cohen said it was the start of a revolution similar to the venture capital movement in the 1980s.

“Today’s launch of Big Society Capital Group marks the culmination of ten years of thought and effort by many individuals and organisations," he said. "It is the first of a new kind of organisation devoted to providing finance in the interest of society. "

The Big Society Capital’s structure will include three entities: Big Society Capital Limited (BSC), the operating company of the group; the Big Society Trust (BST), responsible for ensuring the group stays true to its mission, and the Big Society Foundation, a charity able to receive philanthropic donations to support the investment readiness of social organisations.

The Merlin banks have agreed to provide equity investment of £200m into BSC over four years. The banks have one representative on the board of BSC, and 20 per cent voting rights.

The Merlin banks have also agreed to provide BSC with an interest-free loan to assist with its establishment.

BSC, which will be independent from government, will also receive equity capital from dormant bank accounts, estimated to be £400m.

State aid exemption

However, government is still awaiting FSA authorisation and EU state aid approval to set up Big Society Capital.

Maude said he would be going out to Brussels to deal with the matter. “We’ve made a formal application,” he said. “But it is a grindingly slow task and process. I am pressing commissioners and I shall be going out to Brussels.

“It’d be surprising if they say no.”

BSC’s new CEO, Nick O’Donohoe, said he didn’t forsee any issues with the FSA.

While the BSC is waiting for EU and FSA authorisation, the Big Lottery Fund has established a committee, chaired by BSC board member John Kingston, which will start to make investment from dormant bank accounts.

Payment-by-results fund

It announced its first investment yesterday of £1m in a social investment fund run by the Private Equity Foundation to help disadvantaged young people into employment, education and training.

The investment will be split with £500,000 as equity in the fund, which will have a payment-by-results model, and the other £500,000 to underwrite efforts to attract investors into the fund.

The board of Big Society Capital includes:

• Sir Ronald Cohen, Chair (the Portland Trust and Bridges Ventures)
• Nick O’ Donohoe, CEO (formerly JP Morgan)
• Dawn Austwick (Esmee Fairbairn Foundation)
• David Carrington (Independent consultant)
• John Kingston (Association of Charitable Foundations)
• Geoff Mulgan (National Endowment for Science Technology and the Arts)
• Dai Powell (HCT Group)
• Lady Susan Rice (Lloyds Banking Group)
• Danielle Walker Palmour (Friends Provident Foundation)

The Board of the Big Society Trust, responsible for ensuring the group stays true to its mission, includes:

• Sir Richard Lambert (University of Warwick)
• Ian Davis (formerly McKinsey & Co)
• Baroness Pitkeathley (House of Lords)
• David Robinson (Community Links)
• Sir Stephen Bubb (CEO of Acevo) [in rotation every three years with NCVO]
• Peter Holbrook (CEO of Social Enterprise Coalition)
• Gareth Davies (Cabinet Office)
• Sir Ronald Cohen (Chair of BSC)

Caroline Mason, former chief operating officer of Charity Bank, also joins the BSC senior management team as the organisation's chief operating officer.

Directory: Association of Chief Executives of Voluntary Organisations (ACEVO) | National Council of Voluntary Organisations (NCVO)

Place a comment

Kevin Nunan
2 Aug 2011

So the first 'investment' is £1M to the Private Equity Foundation. Robert Peston nailed them in 2007.
"...According to a banker, the collective net worth of those at the do was more than £10bn. They were there for "charidy", to launch the Private Equity Foundation, a new charitable trust endowed by private equity's leading firms and individuals. It's part of a slightly belated charm offensive, to show that some of the high returns generated by the buyout of companies will be ploughed back into good causes. So far it's raised £5.1m, which is a fraction of what a private equity partner can expect to earn in just one big deal that goes right. "Frankly the charity has got to do a lot better if it wants to impress," said one of the guests."
The full article is here - (PEF story half way down next to pic of the Roundhouse) http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/01/why_its_time_for_business.html

[Reply]

Jay Kennedy
Head of Policy
Directory of Social Change
1 Aug 2011

Banks which aren't banks, trusts which aren't trusts, and plenty of jobs for the boys (and a few girls). This has all the hallmarks of a colossal governance catastrophe in the making. The Charity Commission needs to take a serious look at the board of the Big Society Foundation (which is who?) and establish that it will in fact be an independent charity not simply a tax efficient delivery arm for BSC's (and Government's) policy objectives.

[Reply]

Gordon Hunter
Director
Lincolnshire Community Foundation
29 Jul 2011

I'm interested in costs and structures both of the parent trimumvirate and the first lucky winner:
Does the Bank, supporting local action, need to set up two charities and a limited company. Where are they based, what's the staffing, what's the budget?
And the "Private Equity Foundation". Who's on the Board; what's the staffing. We know that half of its million pounds (is that a grant/loan mix by the way?) will be spent on promotion, will they also publish its operational budget?

I'm still seeing lots of BIG and not much LOCAL.

[Reply]

Shiree Kelly
29 Jul 2011

So the chair of the board of BSC is also on the board of the organisation responsible for ensuring the group stays true to its mission. That's a conflict of interest if ever I saw one!

[Reply]

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