New 'social' bank could aid charities

Commandeering money tied up in dormant bank accounts would enable a new Social Investment Bank to support charities with up to £60m a year, Sir Ronald Cohen, the financier, said yesterday.

Sir Ronald, who chairs the Commission on Unclaimed Assets, which was launched two years ago to consider how hundreds of millions of pounds of dormant bank-account cash could be used, called for the launch of a new financial institution that could battle poverty and social exclusion.

Estimates of how much money is sitting in bank accounts with which the owner has lost touch vary from £400m to £4bn.

Sir Ronald said the Social Investment Bank would cost around £250m to set up and would then have annual running costs of up to £20m.

The bank would use the dormant-account cash as security against which it could raise finance to support charitable causes, but savers would still be free to claim back their money at any time.

The commission said its first priority, even before the launch of the bank, should be to reunite savers with money they have forgotten about.

"In time, the bank would begin to function in much the same way as the mainstream capital markets," Sir Ronald said.

"We could support charitable causes seeking to provide a service with equity, or with debt, or through conventional grants."

The Social Investment Bank would expect to earn a return of around 3 per cent a year on its investments, which might include supporting any charity in the UK, or organisations that already provide finance to good causes.

In addition to offering finance itself, the bank would advise organisations on their own attempts to raise private capital.