Share

Charity Bank will cease to be a charity but will keep charitable mission

Patrick Crawford, CEO, Charity Bank
News

Charity Bank will cease to be a charity but will keep charitable mission

Finance | Tania Mason | 18 Mar 2013

Charity Bank is to relinquish its charitable status in order to comply with new European banking regulations and allow it to attract more capital.

The decision has the support of the Charity Commission, Financial Services Authority and Charity Bank's major shareholder, Charities Aid Foundation.

For several months now the bank has been trying to find a way to comply with the new banking rules, but also with charity law.  Provisions in charity law around asset distribution and dividend payments were at odds with the new banking regulations, which are aimed at improving banks' financial profile and behaviour.

The solution devised by the bank will mean that while it will cease to be a registered charity, it will retain its existing mission and charitable purpose and these will be enshrined in proposed new articles of association. It will continue to make loans to charities and social enterprises.

This will include a ‘mission lock’ requiring at least 90 per cent of the bank’s ordinary shareholders to agree to any changes to the existing charitable purpose.

Staying as a charity would have meant that Charity Bank could only grow its balance sheet by obtaining grants from charitable foundations – a difficult ask in the current economic climate.

Changing its constitution to a for-profit bank will have the effect of attracting capital from social investors happy to accept a more modest financial return as long as it also delivered a social return, according to Charity Bank’s chief executive Patrick Crawford.

“In future most of our capital will come from investors rather than grantmakers but these shareholders are likely to be foundations, social investors and charities that are attracted to the self-sustaining model created by Charity Bank,” he said.

Charity Bank hopes to grow its balance sheet from £93m to around £250m over the next five years, he said.  Its income for the last financial year was £4.9m.

In order to comply with charity law, certain property owned by Charity Bank must continue to be used to further the charitable purposes of the former charity.  Therefore, its capital is to be transferred to Charities Aid Foundation, the principal shareholder in Charity Bank, to be held on trust for the current charitable purposes.  In return, CAF will make a capital grant to the Bank as a social investment to further the charitable purposes for which the property is held.

Next Monday, 25 March, the Charity Commission will publish details of the proposals that are required to effect the change.  Responses will be invited and subject to the results of this consultation and the approval of the bank’s shareholders, the change will take effect by 30 April 2013.

Malcolm Hayday, the founder and former chief executive of Charity Bank, said it was “sad” that the Charity Commission and FSA could not find a way to accommodate the bank’s unique structure within the changed regulatory framework, but added: “the mission of Charity Bank must be able to thrive regardless of legal form”.

Crawford added that the Charity Bank name would be retained.

He denied that today’s announcement was a precursor to a merger between Charity Bank and CAF Bank, which was considered but ruled out by the two banks last year.

He said merger talks might be reopened if that was deemed to be in the best interests of the charity sector, but at the moment that didn't seem to be the case.

Comments

[Cancel] | Reply to:

Close »

Community Standards

The civilsociety.co.uk community and comments board is intended as a platform for informed and civilised debate.

We hope to encourage a broad range of views, however, there are standards that we expect commentators to uphold. We reserve the right to delete or amend any comments that do not adhere to these standards.

We welcome:

  • Robust but respectful debate
  • Strongly held opinions
  • Intelligent relevant discussion
  • The sharing of relevant experiences
  • New participants

We will not publish:

  • Rude, threatening, offensive, obscene or abusive language, or links to such material
  • Links to commercial organisations or spam postings. The comments board is not an advertising platform
  • The posting of contact details for yourself or others
  • Comments intended for malicious purpose or mindless abuse
  • Comments purporting to be from another person or organisation under false pretences
  • Gratuitous criticism, commentary or self-promotion
  • Any material which breaches copyright or privacy laws, or could be considered libellous
  • The use of the comments board for the pursuit or extension of personal disputes

Be aware:

  • Views expressed on the comments board are left at users’ discretion and are in no way views held or supported by Civil Society Media
  • Comments left by others may not be accurate, do not rely on them as fact
  • You may be misunderstood - sarcasm and humour can easily be taken out of context, try to be clear

Please:

  • Enjoy the opportunity to express your opinion and respect the right of others to express theirs
  • Confine your remarks to issues rather than personalities

Together we can keep our community a polite, respectful and intelligent platform for discussion.

Tags

Free eNews

Diabetes UK raises £18.6m through Tesco partnership

27 Feb 2015

Tesco employees, suppliers and customers raised over £18m for Diabetes UK between March 2013 and December...

Coffee mornings top list of most popular fundraising events, report shows

26 Feb 2015

Coffee mornings are the most popular ways for supporters to raise money for charity, according to new...

Foundations discuss creating grants map of the UK

26 Feb 2015

Some of the sector’s largest foundations are discussing creating a map of all charitable grant funding...

Jimmy Savile investigations by Barnardo's and Action for Children find 'no evidence' of wrongdoing

27 Feb 2015

Children's charities Barnardo's and Action for Children have released reports saying there is "no evidence"...

Great Ormond Street Hospital charity to become independent of Department of Health regulation

27 Feb 2015

Great Ormond Street Hospital Children’s Charity has begun the process to free itself from being regulated...

Oxfam comms director says politicians are using regulation to silence charities

26 Feb 2015

Oxfam’s director of communications said yesterday that politicians were using regulation to threaten...

Daniel Phelan dies, aged 58

13 Feb 2015

Daniel Phelan, owner and editor-in-chief of Civil Society Media, passed away on Wednesday following a...

LinkedIn launches matching service to bring charity volunteering opportunities to 250,000 members

6 Feb 2015

Charities in the UK will be able to advertise volunteer opportunities to 250,000 LinkedIn members who...

Free guide to Bitcoin donations produced for charities

5 Feb 2015

Two Bitcoin organisations have launched a website and free guide to promote the use of the digital currency...

Join the discussion

 Twitter button

@CSFinance