State-backed Scottish bank will be closely watched as new boss arrives

At first glance, this may not seem like big news. But the backdrop to the appointment of financial services veteran Al Denholm, who will be paid a salary of £240,000, to the role will ensure the performance of the new leader will be closely scrutinised in the months to come.

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The arrival of Mr Denholm, who has spent the last 36 years working in big roles for major institutions across the UK, Europe, Asia, and the US, closed a recruitment process that lasted around 14 months and was sparked by the departure of the bank’s former boss in controversial circumstances.

Eilidh Mactaggart, the inaugural chief executive of the development bank, quit abruptly in January last year, with the news conveyed in a statement on the institution’s website.

Ms Mactaggart, an infrastructure funding specialist who previously worked for MetLife Investment Management, Commonwealth Bank of Australia, and ABN Amro Bank NV, had been in the post for less than two years. The length of the tenure was not unusual; it is certainly not unheard of for people to quit prominent positions after significantly less time. But the decision of the Scottish National Investment Bank not to expand on the reasons behind Ms Mactaggart’s departure saw it become embroiled in a political firestorm.

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Given the huge political capital staked by the Scottish Government and former first minister Nicola Sturgeon on the bank, not to mention the £2 billion of public money that will be invested in the organisation over a 10-year period and the £235,000 salary paid to Ms Mactaggart, it was no surprise that the silence surrounding the chief executive’s exit would prove to be highly controversial.

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Faced with repeated questions from opposition politicians over why Ms Mactaggart had left, the SNP Government said her employment details were confidential and that it was a matter for the bank’s board. A similar line was taken by the bank’s chairman, Willie Watt, when he appeared before MSPs to answer questions about Ms Mactaggart’s exit.

Ms Mactaggart broke her own silence when she issued a statement several weeks later, which cited “personal reasons” for her departure. By then, however, it is arguable that the bank had suffered reputational damage, with the allegations of secrecy not doing any favours for Scottish Government ministers either.

More than a year on, the bank could say with justification that the episode is history and has no bearing on the important work it is doing now. But even before the storm around the departure of Ms Mactaggart, questions were being asked in the business community about the performance of the bank and its relevance.

There were concerns over the speed of its delivery and doubts were expressed in some quarters about whether it was actually needed at all, such was the broad investor base that already existed for up-and-coming companies in Scotland. Some observers wondered whether the Scottish National Investment Bank would duplicate the work already being carried out by Scottish Enterprise.

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Mr Watt, a financial services veteran, had previously responded to those criticisms in an interview with The Herald. He noted that it takes time to build an investment bank from scratch, highlighting the work involved in compliance with regulations and assembling an investment team, and explained why the type of investment that his organisation provides differs to the financial backing that Scottish Enterprise specialises in.

In short, Mr Watt, who formerly ran Martin Currie and the 3i investment company, delivered a robust and cogent response to the criticisms made of the bank.

Moreover, in recent months the level of investment activity at the bank has stepped up. Last week the bank, which provides a range of debt, equity, and fund investments, announced it had provided £6.6m of support to Verlume, a clean energy pioneer.

That followed two other investments already made by the bank in 2023, which included £5m of backing for Edinburgh-based cloud platform specialist Forrit, and a further £20m for Lothian Broadband Networks as it seeks to connect 100,000 rural homes to ultrafast fibre broadband.

In total, the bank has now invested £415.1m in nearly 30 companies that are directly engaged in the bank’s core missions to support the transition to net zero, build communities and promote equality, and harness innovation to help people flourish.

However, concern remains over the extent to which the bank is supporting smaller firms.

“We were excited to see the launch of SNIB with its goal to direct funding towards smaller businesses, however we have yet to see this materialise into firm actions and were disappointed by their underspend last year in direct business funding,” said Colin Borland, director of devolved nations at the Federation of Small Businesses.

“That being said, SNIB is still a new body, with a lot of potential to make an impact. Smaller businesses are typically viewed by lenders as riskier to lend to, so we would hope that going forward SNIB can fill the gap which many of our smallest operators find themselves falling through.”

Mr Borland said that the FSB’s engagement with the bank has “historically been limited”. Asked what changes in approach the FSB hopes the new chief executive will bring, he told The Herald: “It is clear that SNIB must be bolder in setting out not only its vision but the specific actions it plans to take to boost investment for small businesses. Many smaller traders are unaware of its existence, so a first priority of the new chief executive must be raising the bank’s profile.”

It will only be in the fullness of time that we will discover whether the bank has been able to help smaller businesses in Scotland fulfil their potential and deliver a return on its investments for Scottish taxpayers. Such is the nature of any form of investing, of course.

One thing that is beyond question is that Mr Watt is convinced that Mr Denholm, who was most recently chief information officer of the £100bn Aviva Investment Solutions business and previously worked for BlackRock, ING, Insight and Scottish Widows, is the right person to take the bank forward.

“Al brings a wealth of experience to the role, and I am confident he can continue to develop and grow the bank on behalf of the people of Scotland,” Mr Watt said.

“The bank has made excellent progress in a short period of time, and I’d like to thank interim CEO Sarah Roughead and her executive team for their commitment.

“I look forward to Al’s leadership and continuing investment that will have a transformative impact on the economy of Scotland.”