Charity Bank plans to work with grantmakers to help provide small loans to small charities and social enterprise; and is looking at setting up its own charitable foundation.

Announcing its new strategy at its annual open day, Patrick Crawford (pictured), chief executive of Charity Bank, said since it has ceased to be a charity, it has started the process of raising new capital.

Charity Bank was forced to forgo its charitable status earlier this year in order to comply with new European banking regulations, which were at odds with provisions in charity law around asset distribution and dividend payments.

He said demand for loans from Charity Bank was strong, but as it lacked capital it could not meet requests: “We’ve been recycling loans for some time,” he said.

The number of new loans approved by Charity Bank during 2012 fell by almost half compared with 2011, from 91 to 47, and their value plummeted from £26m to £9m.

Crawford told an audience of Charity Bank stakeholders that it would remain simple and would not look to trade, or include staff bonus schemes now it was a regulated bank.

“We will simply take deposits, make loans and put share capital to work,” he said.

Crawford said going forward Charity Bank hoped to make more loans, expand its investment-readiness work with the charity sector, and work with grantmakers to provide small loans to small organisations.

“Small loans are uneconomic for us,” he said. “But with a foundation we could justify making them against our financial objectives.”

It is also looking at setting up its own charitable foundation.

George Blunden, chairman at Charity Bank, added that going forward it would not look to become a hugely profitable bank delivering enormous profits to shareholders. “Our investors want money to do something useful,” he said.

He also said that Charity Bank had applied to Big Society Capital for funding and hoped to hear news on this soon. 

Its head of banking, Carolyn Sims, added that Charity Bank would have an old-fashioned banking model where it would want to know its borrowers.