Minutes of the Meeting of the Court of Directors held on 15 December 2022

1. Conflicts, Minutes and Matters Arising

There were no conflicts declared in relation to the present agenda.

The minutes of the meeting held on 25 October 2022 were approved.

The Chair welcomed Tom Shropshire to his first Court meeting.

2. Governor’s Update

Court received an update on the Bank’s key priorities.

The Governor briefed Court on the key elements of the Financial Stability Report, published on 13 December. He added that the Bank had now sold 60% of the index-linked gilt portfolio it had purchased consistent with it’s financial stability objectives this autumn. The Governor also advised Court that the image release for the King Charles III banknote would take place on 20 December 2022.

Sam Woods provided an update on discussions with the Government and industry regarding Solvency II and Basel 3.1.

Jon Cunliffe updated Court on the progress of the Bank’s work on digital money. He said the Bank and HM Treasury were in close consultation on the UK’s approach to stablecoin and Central Bank Digital Currencies (CBDC) and he would provide future updates depending on the outcome of those discussions.

The Chair thanked colleagues for the update and continued work through what had been a challenging year.

3. Audit and Risk Committee (ARCo) Update

Diana Noble updated Court on the work of ARCo.

The Audit section of the meeting discussed recent reviews that had taken place. Diana Noble highlighted that a key area of focus for ARCo would be the potential upcoming change to the Sterling Bond Portfolio (SBP). The SBP invests deposits held under the Cash Ratio Deposit Scheme. Under the Financial Services and Markets Bill, this is due to be replaced with the Bank of England Levy in 2024.

The timetable to recruit a new external Auditor for the Bank had been agreed.

The Risk section of the meeting updated ARCo on key people risk and the impact of recent market volatility on the Bank’s balance sheet.

ARCo had noted that the impact to the Bank’s balance sheet from recent market volatility was within risk tolerance.

The Chair thanked Diana Noble for her continued support of ARCo, as interim Chair of the Committee.

4. Remuneration Committee (RemCo) Update

Anne Glover updated Court on the work of RemCo.

RemCo had met to discuss the appointment of the Bank’s Chief Information Officer as well as matters relating to pay and pensions.

5. RTGS Renewal Programme Update

(Victoria Cleland, Sushil Saluja and Nathan Monk)

Victoria Cleland updated Court on the RTGS Renewal Programme. Since the October Court meeting, the Programme had been focussed on assessing the impact on its own plans of the ECB’s revised timeline for the introduction of ISO 20022 messaging – specifically the demands the change had placed on direct participants in CHAPS, who were engaged with both programmes. Following consultation with industry, the Programme had announced a delay to the start date for its own ISO migration from April to June 2023.

Court members asked about the readiness of Direct Participants. They asked that the Programme give regard to third party providers to Direct Participants. Court members also noted the additional time the delay gave the Programme would be used to focus on Operational Acceptance Testing (OAT). 

Court also discussed learning from the first dress rehearsal for the shift from RTGS 1 to Transition State 2.1. The internal dress rehearsal had been designed to test ways of working, communications and decision making. 

Jon Cunliffe said the Bank’s Financial Markets and Infrastructure Directorate FMID, which regulates RTGS, was supportive of the re-plan.

6. Review of Personal Financial Transactions (PFT) Policy

(Sebastian Walsh and Michael Salib)

Sebastian Walsh introduced the proposed changes, noting that he was proposing that the Bank adopt a public register of interests for members of Court and the Bank’s statutory policy committees.

Court discussed the proposals.

The Governor and Chair said they supported the approach outlined.

Frances O’Grady added that transparency was a key element of public life and a public register of interests would be a welcome step. Other Court members agreed with the principle of a register, though asked the Bank give consideration to the resourcing it would require given the need to ensure its accuracy – and that its requirements were understood by Court and statutory committee members.

Sam Woods said that he felt it was important to move forward in a timely manner and supported the proposals.

The Chair said the final proposal for changes to the policy and the associated register of interests would come to Court in February for approval.

7. Bank’s Own Application of the PRA’s Operational Resilience Rules

(Stephen Brown, Jon Rand and Ed Dew)

Bank staff explained that the Bank had undertaken work to explore how it would apply the PRA’s operational resilience rules to itself. It was noted that the Bank had a good understanding of its business critical functions and impact tolerances should an outage occur. Further work was being undertaken to refine impact tolerances to the Bank’s critical functions.

The Chair thanked the presenting team for their thorough work in this area and noted that progress was likely to be in line with industry. Sam Woods noted that the Bank’s approach was aligned to how the firms the PRA regulates were applying the rules.

It was clarified that future updates would be tabled at ARCo and escalated to Court where necessary.

Court supported the Bank’s approach to the issue.

8. Three-Year Business and Financial Planning and 2023/24 Budget

(Afui Kyei)

Afua Kyei introduced the item, noting the increase in demand on the Bank’s budget from its activities. The Governor added that the Bank nonetheless had to operate under tight budgetary constraint – and that the move to a three-year planning horizon was a positive step.

Afua Kyei explained that the Bank would experience budget constraints over the next year, which would impose challenges across the organisation.

Non-executive members of Court noted that it seemed clear that efficiencies and increasing productivity gains would need to be considered given this budgetary environment. Governors said they had sought to deprioritise some workstreams in recent years, but the Bank’s statutory obligations had to be met.

Court thanked Afua Kyei for her work and asked for a detailed discussion at its February meeting.

9. Chief Operating Officer Update

(Ben Stimson and Sushil Saluja)

Ben Stimson updated Court on the Annual Salary Review (ASR). The Bank had submitted a revised offer to the Union and negotiations were constructive. The Bank was hopeful that the revised offer would be accepted.

Ben Stimson said progress had been made with regards to the Central Services 2025 (CS2025) Programme. Sushil Saluja noted that the priority in Technology was to maintain service, review the Bank’s key programmes that are due to be delivered over a two-to-three year time horizon and establish a senior leadership team in Technology.

In response to questions, it was noted that recruitment for key positions within Technology should start in early 2023. The establishment of a strong leadership team in the area was seen as essential for the Bank to execute its transformation Programme.

Court members noted the large scale of work that the Bank’s Technology function was due to undertake in the coming years. They noted that careful consideration would need to be given to the sequencing of Programmes.

10. Climate Plan Net Zero Strategy

(Joshua Simons and Paddy Pope)

Court approved the Bank’s plan to reach net-zero. It was noted that this would be communicated externally in 2023.

11. Annual Deep Dive – Court Review of Ethnic Diversity and Inclusion 2021 and 2022 Reporting

(Jane Cathrall, Afua Kyei, Sarah Guerra, Radiet Zenebe, Ragveer Brar, Peter Fashesin-Souza and Jacqueline Koay)

Sarah Guerra introduced the item. She said that the Bank had made positive progress against the actions set out in the Court Review of Ethnic Diversity and Inclusion, with data indicating that the Bank had reached the stage of embedding progress as defined by the Review.

Court thanked the BEEM Network co-chairs for building on the work of the Review and driving progress. In response to questions, the Network co-chairs reflected that engagement exercises with staff had been well-received, though recruitment and retention remained key areas to address.

Court members said they wished to engage with any events where the BEEM network felt their involvement would help build momentum.

Sarah Guerra noted that it was important to continue to focus on other protected characteristics, notably disability.

In a discussion of leadership in diversity and inclusion, Court members emphasised the critical role of leaders and middle managers in driving progress, and emphasised there could be no opt-out on this work. Whilst communications will be important, ultimately achievement of the targets would require embedding behavioural and process actions into day-to-day activity which can only be achieved by concerted effort across all levels of management within the Bank.

12. Court Minutes De-Redactions

(Sebastian Walsh)

Court approved the item.

13. Committee Appointments and Conflicts

(Sebastian Walsh)

The Secretary of the Bank updated Court on progress regarding upcoming appointments.

14. Items for Information

Court noted:

• Monetary Policy Committee Report

The meeting of Court was closed.