The government has kicked off the search for a new head of its economic development bank amid an intensifying political debate about its future.

Sky News has learnt that ministers are aiming to appoint a successor to Lord Smith of Kelvin as chairman of the British Business Bank (BBB) in the next three months.

The search, which is being led by the headhunter Russell Reynolds Associates, will come during the most significant period in the institution's nine-year history.

The BBB found itself the target of political criticism over its performance during the pandemic, prompting the Labour Party to say recently that it would seek to overhaul the lender's role if it wins the next general election.

Lord Agnew, a Treasury minister, resigned at the despatch box after expressing concerns that banks were not doing enough to address COVID loan fraud.

He questioned whether the BBB was holding banks to account sufficiently in order to protect public money.

Lord Smith, who was appointed as BBB chairman in 2017, will step down when his term ends in June.

Last year, the government named Louis Taylor, the chief executive of UK Export Finance, as the BBB's new CEO.

He replaced Keith Morgan, who had resigned in 2020, after interim boss Catherine Lewis La Torre withdrew from the search process amid controversy over the government's COVID loan schemes.

A BBB spokesperson confirmed that a search for Lord Smith's replacement was under way.