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Government sets out vision for Social Investment Bank 15/07/09
 

Today the Government has launched a consultation into the design and functions of a Social Investment Wholesale Bank, but noting it is not a bank just for the Third Sector or giving an indication of how it will be financed.

The consultation was announced in the Chancellor’s 2009 budget and will last 12 weeks. It sets out that was is being launched is not a Third Sector Investment Bank, some in the sector would want, but a Social Investment Bank with the "third sector at its heart."

If positive, this consultation could result in a new breed of financial institution – a bank with the primary purpose of investing in society, the environment and the economy.

On this vision of the bank, Campbell Robb, director general at the Office of the Third Sector in the Cabinet Office, said: "It will be a financial institution which would work in the interest of society as a whole and harness the power of finance for the common good."

Originally it was proposed that a Social Investment Wholesale Bank could be funded predominantly by unclaimed assets lying in dormant bank accounts, but this is no longer the focus. The Government did however note it was looking forward to seeing the banks make progress on releasing these resources for reinvestment over the coming months.

The Government also noted that today’s consultation is not about identifying the financial resources but more about how the bank would work.

Though this brought criticism from Stuart Etherington, CEO of NCVO. He said: “The Government’s consultation into the design and functions for a Social Investment Wholesale Bank is an important step forward.

"However it is also important that discussions start around how the bank will be financed, to make sure it is properly capitalised. A properly designed and funded Social Investment Bank will provide a range of funding options for existing social investment retailers. This will have far reaching positive outcomes for community cohesion and well being.”

Campbell Robb admitted that from a financial perspective it could take some time for the Social Investment Bank to get going, as the market for social investment is fragile and immature.

"This could take a long time, it could be five, ten or even 15 years before we get to a critical mass," he said.

The consultation will present a range of possible functions for the bank, such as attracting money from other investors, and helping raise funds for existing social investors.

It could be designed to be independent of government, regularly reporting its social, financial and environmental impact, and working with other investors wherever possible.

Robb said: "The potential functions, but I am not saying it will do all these things, are: raising capital, with a range of potential products and investors; a champion for social investment, such as research, awareness, market analysis; investing and providing capital to existing and new social investors through debt, grants, guarantees or underwriting; market making, by creating platforms and mechanisms to link buyers and sellers and advisory services."

Angela Smith, minister for the Third Sector, Cabinet Office, will formally launch the consultation at a launch event this evening, attended by leaders from the third sector, the world of social finance and experts from across the finance sector.

Smith said: “There is a huge public appetite for social responsibility, especially in areas like finance, and that’s why I am absolutely delighted to launch this consultation on the Social Investment ‘Wholesale’ Bank.

“The launch of this consultation is an exciting step on the road towards a Social Investment Wholesale Bank. I look forward to hearing evidence and views on how this bank would work with and for our third sector to ensure that charities, voluntary groups, social enterprises, co-operatives and mutuals grow stronger and are in a better financial position to lead the way in building Britain’s future.”

Stephen Timms, financial secretary to the Treasury, added however, that a strong and growing third sector needed a resilient and sustainable source of finance. "Earlier this year, we announced a £42.5m economic action plan to support the third sector through the downturn. But we also understand the importance of investing in the long-term future of the sector.

“This consultation represents an important opportunity to explore the concept of a Social Investment Wholesale Bank, and the role it could play in developing and adding value to the social investment market in a sustainable way.

"Such an institution could help deliver the Government's commitment to supporting fair markets and to building the financial sustainability in the third sector that will allow it to grow and thrive.”

 
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