Veteran banker Sir Peter Burt is being lined up to chair Vince Cable's £1bn business bank which is part of the business secretary's attempt to kickstart the economy.
The Scottish banker was instrumental in creating the now defunct bank HBOS in 2001 when Bank of Scotland and Halifax merged.
He had been chief executive of Bank of Scotland and did not take a top job when the banks combined – allowing the Halifax team to take the key boardroom roles – and left the enlarged organisation in 2003. He went on to chair ITV until 2007.
The business bank – a key project of Cable's – is not a bank in the conventional sense but more a way to provide lending capacity to existing lenders so they in turn can lend to small and medium-sized enterprises (SMEs), which argue they are being denied credit by mainstream banks.
The chancellor, George Osborne, used the autumn statement this month to pledge £1bn for the business bank, which should have a capacity to leverage that up to £10bn.
Burt will lead the advisory board which will decide how to pass on credit to existing lenders – most likely alternatives to the likes of the big four.
The institution will need state aid approval from Brussels which is unlikely to be forthcoming until 2014. But it is expected to begin lending before then within terms agreed by Europe.
Cable's Department for Business, Innovation and Skills declined to comment on Monday night but an announcement is expected within days about Burt's appointment and other members of the advisory panel he is expected to chair.
The business bank will provide guarantees to peer-to-peer lenders – such as Zopa and Funding Circle – which this week were praised by Bank of England executive Andrew Haldane.
The idea has not been universally popular, with some commentators arguing that SMEs are not borrowing because they overextended themselves during the boom before 2008 and are now becoming more cautious.
Cable, a senior Liberal Democrat, has previously favoured nationalising the Royal Bank of Scotland — which is 82% owned by the taxpayer — to try to kickstart lending. The business bank is his idea to get credit flowing to a crucial sector.
The funding for lending scheme run by the Bank of England and also intended to get lending going has had a slow start. Labour pointed out that lending statistics for the BIS's enterprise finance guarantee scheme showed lending now less than a third of what it was in 2009/10.
Burt's appointment follows a series of hearings by the banking standards commission into the collapse of HBOS and its rescue by Lloyds in 2008.
Former bosses of the enlarged bank have admitted lending decisions were incompetent while Peter Cummings, the only former executive to be banned from the City, has criticised regulators and former colleagues for the growth targets he was set.
Hector Sants's £3m deal
Hector Sants, the former boss of the Financial Services Authority, is in line for a £3m pay package when he joins Barclays next year as head of its compliance and government relations department. He is joining the executive committee of Barclays where his salary could be about £700,000 topped up with long-term bonuses. His pay is not disclosed as he is not on the board but it could amount to £3m or possibly more if he is paid in line with other members of the executive committee – and if all targets over three years are met. Sants has not criticised high pay as a regulator, but has been more concerned that bonuses encourage recipients to take too much risk. Barclays has long had a reputation for high pay in the industry.
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