Scottish National Investment Bank implementation plan: terms of reference

Terms of reference for the plan to implement a Scottish National Investment Bank, as announced in the Programme for Government 2017.


1. The Scottish Government and its enterprise agencies have invested significant resources in addressing market failures around access to early stage risk capital via the Scottish Growth Scheme and utilised European funding, through the £40 million small and medium enterprise (SME) Holding Fund in generating responses in the areas of microfinance, debt and equity with the appointment of delivery Agents (Developing Strathclyde, Business Loan Scotland and Scottish Enterprise) that will disperse, by December 2018, £250 million to SMEs. The Scottish Government (SG) is also investing heavily in our infrastructure with projects valued at more than £6.4 billion in construction or estimated to start in 2017.

2. Following advice from the Council of Economic Advisers, who recognised the scale and scope of Scottish Government investment and intervention in infrastructure and business development, the Government now wishes to build on the success of these schemes to establish a Scottish National Investment Bank (SNIB). This bank will become a key cornerstone of the future Scottish economic development policy landscape.

3. To ensure that the bank has a strong foundation with the optimum structure to support investment, the Scottish Government has requested an implementation plan be developed. The implementation plan will cover the following areas.

Evidence of market failure and business case

  • The implementation plan will be underpinned by analysis of the evidence on market failures, and appraisal of potential solutions to ensure that the bank has the maximum impact on the Scottish economy. In particular this should set out how displacement will be minimised and additionality maximised by the proposed approach. This should consider the potential scope of the bank in the widest sense drawing on this to inform its view on scope.

  • The plan will be based on engagement with key stakeholders in finance, the wider business community and civic Scotland to gather views on the merits of potential delivery models and approaches and their likely effectiveness in stimulating additional investment.

  • It will develop the aims and objectives for the Scottish National Investment Bank, drawing on work from the Council of Economic Advisers and elsewhere and seeking to maximise the contribution to the long-term growth of the Scottish economy. This will include whether the activities of the bank should be focused exclusively on the private sector or whether there is also scope to secure value in delivering new approaches to public sector financing.

  • The final report should take a wide view of market failure and consider how this can be addressed by the bank e.g. not just the quantum of business finance but also how the bank's scope of activities, and involvement both direct and indirect, might impact on improving conditions attached to finance for both businesses and infrastructure investment.

  • The final report should consider whether the bank should interact directly with business or through intermediaries. It should also consider the market for finance should it be limited to SMEs, wider business or include the public sector, in which case how would it complement existing sources of public finance.


  • Propose a governance model for the SNIB to ensure effective oversight and accountability in the delivery of the aims and objectives, and in particular ensure that the governance addresses the relationship with Scottish Ministers and the Scottish Parliament. Whether or not this is best delivered in the public or private sectors should be considered as part of the plan.
  • Working with SG Finance, consider the implications of the proposed governance model for National Accounts classification of the SNIB and consequently any questions that would need to be addressed with UK Government about its operation within budgetary rules.
  • Identify how the bank could operate within the current rules setting out what it could do and what it could not do. Make a clear case as to where any existing budgetary rules have the unintended consequence of forcing a National Investment Bank to operate in a sub-optimal manner and the advantages that could be gained from any changes.
  • Consider how the SNIB would relate to existing bodies, initiatives and funding streams which support infrastructure, business investment and innovation, and if appropriate where these might be consolidated within the SNIB.

Operating model

  • Develop a Target Operating Model for the SNIB to support recruitment of appropriately experienced staff and establishment of other aspects of the SNIB operations.

  • As part of considering the Target Operating Model, set out initial principles for the SNIB to ensure robust management of financial risk.


  • Drawing on discussion with SG Finance, the report should propose a capitalisation plan over an appropriate number of years to allow the Bank to operate effectively.

Resourcing the development of the Implementation Plan

4. The work will be supported by a secretariat of Scottish Government officials and financial sector experts.


5. Benny Higgins will report in February 2018.


  • A report setting out the recommended structure of the bank in line with the issues identified above and highlighting:
    • the evidence underpinning the implementation plan
    • the optimum governance structure and scope of bank operations
    • the operating model
    • capitalisation
    • the regulatory timeline
    • obstacles to delivery
    • the difference that the bank can make
  • The implementation plan will also set out the business case for the bank and the relative merits of the options considered.


Email: – Central Enquiry Unit

Phone: 0300 244 4000 – Central Enquiry Unit

The Scottish Government
St Andrew's House
Regent Road

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