The European Commission has approved the use of up to £400m from dormant bank accounts to set up Big Society Capital.

Commission vice president Joaquín Almunia, in charge of competition policy, said: "The commitments and safeguards put in place by the UK ensure that state aid linked to this innovative project in the social sector remains well-targeted and does not result in undue distortions of competition."

A spokesman for Big Society Capital (BSC) said the European Commission's approval under EU state aid rules had been given much faster than expected, and the move reflected how engaged Brussels is with social investment.

It was feared that a decision from the Commission could take up to 18 months, resulting in a delay in properly setting up BSC, which is currently making social investments through an interim committee within the Big Lottery Fund.

BSC is still seeking FSA authorisation, and plans to be open for business in the first quarter of next year.

The European Commission’s approval of BSC will last five years. An increase of the initial capitalisation of BSC through dormant account money beyond £400m, and any increase of BSC’s total balance sheet beyond £600m, will need to be notified to the Commission.