Interview: Sir Ronald Cohen

The venture capitalist who'll be calling the shots at the Big Society Bank describes how he hopes it will develop

Sir Ronald Cohen
Sir Ronald Cohen

The Big Society Bank is in many ways Sir Ronald Cohen's baby; he was one of the first to propose the concept of a wholesale lender for charities and one of the first, through the Commission for Unclaimed Assets, to suggest a funding stream for it - the money in dormant bank accounts.

So it is not surprising that when ministers announced an initial framework for the bank last month, it was Cohen who was given the responsibility, after his six-year struggle, of finally bringing the child into the world and taking charge of its formation.

Cohen - a first-generation immigrant who arrived penniless in the UK from Egypt at the age of 11 - went on to build up a £200m fortune in the UK's private equity market, founding Apax Partners in 1972 and earning a reputation as "father of venture capital". He is now trying to work the same magic in the world of social investment.

A vision for the future

Cohen likes the government's initial vision for the bank, he says - an independent, transparent organisation that provides wholesale finance. It will not make grants and will not invest directly in social enterprises, but will provide financial support to those who do.

He also says he's pleased with the level of funding it will receive - £200m from high-street banks "on a commercial basis" and all the money currently in dormant bank accounts in the UK, which the British Banking Association estimates is £400m, but Cohen thinks could be "a couple of billion".

Part of his job, which is unpaid, will be to work with Nick O'Donohoe, former head of global research at JP Morgan, to appoint a chief executive and chairman of the bank. Cohen will not take either job himself, he says, but he hopes to remain involved with the bank as it develops.

"The person in charge will need to be from the financial sector, although there will be people with voluntary sector expertise," he says. "There won't be a large staff, maybe 30 or 40 people."

There are still governance and structural issues to be decided, but he is confident he already has many answers. "It won't be a bank," he says. "It won't take deposits. In fact, the word bank might need to be taken out of the name."

The bank will have flexibility to use its capital as needed, Cohen says, whether that is to lend money, take equity, underwrite or guarantee deals. It will also back innovative financial products, such as the social impact bond, and act as a cornerstone investor in new social investment funds. He foresees the bank being self-sustaining, but not making large profits.

It will attract money every year from unclaimed assets, he says, and it will use these, rather than the profit from its lending, to expand. "But the bank will also attract other capital," he adds. "We would hope for every £1 the bank invests, it could attract £3."

The £200m from the high-street banks seems a good start, but some have objected because that money is provided "on a commercial basis". Cohen, however, is not concerned. That money, he believes, will be on useful, useable terms, and available to the bank permanently.

A chicken and egg scenario

Several funds already exist to make social investments, such as Big Issue Invest and Bridges, which Cohen also helped to found, and he says the bank will help capitalise them, as well as new organisations which spring up in the same space.

He does not agree with social finance practitioners who say that such a significant pot of money will flood the fledging social investment sector with cheap capital and distort the work of existing organisations. "The bank will not just pump money out of the door," he says. "It won't be set up in a way that allows it to. It will wait for good investment propositions."

Cohen is also confident that the sector will quickly become ready to receive more cash. "It's a chicken and egg scenario," he says. "It's not a question of waiting until you have built more capacity before you inject more capital. Capacity building and capital building must happen at the same time."

But the process of setting up the bank could be slowed by the European Commission, which has to agree that it does not breach rules against state aid. While the commission considers, the bank will be run on a temporary basis through the Big Lottery Fund.

Cohen also warns that the bank will need time to attract the right staff and develop the tools it will use. It could, he says, be two years before it is fully bedded in.


2007: Co-founded Social Finance, the organisation that created the Social Impact Bond

2005: Chaired the Commission for Unclaimed Assets

2002: Founded social investment fund Bridges Ventures

2000: Became chair of the Social Investment Task Force

1972: Founded Apax Partners, one of the UK's first venture capital firms, which provided start-up capital for AOL

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