Britain hires chairman for new state-backed business bank

LONDON (Reuters) – Britain on Thursday named the first chairman of its new British Business Bank, a body designed to support lending to small and medium-sized firms, as banker-turned-academic Ron Emerson.

The appointment marks the biggest step to date in setting up one of Business Secretary Vince Cable’s flagship policies: a state-backed bank to boost lending for firms that have been cut off by the post-financial crisis drought of bank funding.

The bank aims to facilitate lending worth 10 billion pounds over the next five years by drawing existing government schemes under a single umbrella and by using a 1 billion pound funding boost announced in the last budget to stimulate traditional lending.

The bank is not designed to compete with mainstream lenders and will not have branches on Britain’s high streets, Cable said.

Emerson left the banking industry in 1996 after spells at Nomura, Standard Chartered and Bank of America and has since held academic and consulting roles. He will work as non-executive chair of the board.

“I’m really looking forward to this. It’s a seriously important and interesting idea,” Emerson said. “The ability to stimulate (small and medium sized businesses) and provide a more effective set of financing solutions could have a dramatic effect.”

One of Emerson’s first tasks will be to help appoint the bank’s chief executive, who is expected to be announced later this year.

Business groups welcomed the appointment, but the British Chambers of Commerce (BCC), said the bank needed more funding and the ability to lend directly to businesses.

“Under the current plans the Bank will lack the scale necessary to play a full role in providing access to finance to viable businesses,” said BCC Director General John Longworth.

The bank’s schemes provide guarantees for portions of loans taken out through traditional high-street lenders, at a cost to the borrower, and offer a pledge to match certain loans made through alternative funding sources like peer-to-peer lenders.

These existing schemes, which support a stock of loans worth 1.3 billion pounds, will officially be transferred to the business bank in around a year’s time once the plan has received clearance from the European Union.

(Reporting by William James; editing by Tom Pfeiffer)

Britain hires chairman for new state-backed business bank