A Salvage Proposal

It will be recalled that the Commonwealth Development Finance Corporation (CDFC), had been set up in 1953 by the Bank of England at the behest of the new Conservative government to demonstrate an alternative model to CDC of a private sector development finance institution for the Commonwealth. Apart from the Bank of England as leading shareholder, together with several large banks, some 140 companies were induced to subscribe towards its capital of £26 million, of which £7 million was paid up. CDFC’s subsequent investment record was dismal and by 1980 its accumulated losses had reduced shareholders’ funds to below £1 million, for a portfolio of £24 million. At this point the recently retired deputy chairman of the Bank, Sir Jaspar Hollom, became chairman of CDFC. The Bank also made available £10 million of concessionary loan finance and Hollom put in train a vigorous programme of rationalisation. There was a certain irony in the situation in that CDC’s own residual capital losses from the first years had eventually been written off in 1977 and it had enjoyed an element of concessional finance itself (through partial interest waivers) since 1965. Here now was the crippled private sector rival to CDC being accorded some of the same treatment, courtesy of the Bank of England.