The Big Society Bank will provide grants for investment readiness via a charitable foundation it will set up, while the Bank itself will only make investments for social and financial returns into social finance intermediaries.
This week, the government has accepted a proposal for the Big Society Bank from Nick O’Donohoe, former global head of research at JP Morgan, and Sir Ronald Cohen, former chair of the social investment taskforce.
In it, they recommend that the Big Society Bank set up a charitable foundation capable of receiving charitable donations to support its mission, such as grants to venture philanthropy organisations whose purpose is to increase the investment readiness of strategic social organisations.
The charitable foundation will receive philanthropic donations from third parties as well as profits from the Big Society Bank at the discretion of its board.
However, it will not provide grants alongside investments made by the Big Society Bank.
Big Society Bank structure
The Big Society Bank’s structure will include a parent company called the Big Society Trust, with an operating company currently dubbed the CLS (short for company limited by shares) as its subsidiary, and a separate charitable foundation.
The CLS will be a company limited by shares to retain the maximum flexibility to respond to possible needs for future capital. It will be regulated by the FSA, but currently will not seek a banking licence.
The ordinary shares of the CLS will be held by a private company limited by guarantee called the CLG.
The CLG structure will comprise a board of eight unpaid directors including the chair of CLS.
The CLS will include an executive team, and three boards – advisory, remuneration and investment.
The investment committee will comprise six experts in social and financial investment including:
• John Kingston, outgoing director of CAF Venturesome and chair of the investment committee;
• chair of Big Lottery Fund’s England committee or his/her nominee [to be appointed shortly];
• Anna Southall, Big Lottery Fund;
• Sir Ronald Cohen, independent adviser on the Big Society Bank;
• Nick O’Donohoe, independent adviser on the Big Society Bank; and
• Dawn Austwick, chief executive of Esmée Fairbairn Foundation.
Initially, the investment committee will provide support to social investment organisations enabling them to increase their capability.
The Big Society Bank will be initially funded with £200m on a commercial basis from four high street banks and around £100m this year from dormant accounts.
The government is still discussing with the four banks (Barclays, HSBC, Lloyds and RBS) about the terms of the investment.
It is also still working on state aid approval from the European Commission to set up the bank.
In the meantime, the government will work with the Big Lottery Fund on interim arrangements that will enable investments to be made as soon as dormant money accounts becomes available in the summer, using existing state aid exemptions.
The dormant accounts legislation named the Big Lottery Fund as the distributer of dormant accounts.
