Minutes of the Meeting of the Court of Directors held on 25 May 2023

1. Enforcement Decision Making Committee (EDMC) – Report to Court

(Sir William Blair, Duncan Cromarty and Heena Rabadia)

The Chair welcomed Sir William Blair, the Chair of the EDMC, to the meeting.

Court reflected on the cases of the EDMC and how the Committee operates.

It was observed that a small number of cases are referred to EDMC. Court noted that this could be explained by the balance between ex ante supervision and ex post enforcement of prudential matters in the UK’s regulatory framework.

Due to the relatively small number of cases, Sir William Blair noted the value of quarterly meetings, information sharing and succession planning. It was considered important for members of the EDMC to continue to serve on the Financial Conduct Authority’s Regulatory Decisions Committee, where possible to build and maintain experience, given the higher volume of cases at that Committee.

Court discussed the timeline for EDMC determinations. It was noted that as the EDMC’s deliberations were – to date - with regards to individuals and prohibitions, complex in nature. The EDMC noted that it would reflect on how determinations could be expedited while remaining fair to those making representations.

Court approved the EDMC Annual Statement to Court, due to be published alongside the PRA Annual Report.

2. Conflicts, Minutes and Matters Arising

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

The minutes of the meeting held on 5 April 2023 were approved.

Court noted updates provided under Matters Arising.

3. Governor’s Update

The Governor updated Court on a number of matters, including the recruitment processes for key senior appointments. He noted the recently announced Competition and Markets Authority (CMA) investigation into competition law on UK bonds and that the Bank stood ready to provide the CMA with any information and assistance required.

The Governor observed that inflation remained high. The Bank and the MPC’s focus was to bring inflation sustainably back to target.

The Governor highlighted recent experience with the forecast process, the degree of judgement being applied by the MPC, and the challenges of forecasting in such an uncertain environment with very large supply shocks.

The Chair proposed that Court, in line with its mandate to ensure the MPC has the right resources, tools and processes to execute in its objectives, should commission a broad review into the Bank’s forecasting - and related processes - during times of significant uncertainty. The Governor welcomed the proposal.

Court discussed the merits of the proposal and agreed that this should be the focus of the Review and that it should be led by an independent and objective external expert, supported by the Independent Evaluation Office.  Court agreed to delegate agreeing the precise terms of the Review to the Chair and the Governor.

The Chair updated Court on the appointment process for both the incoming Deputy Governor for Financial Stability and the Chair of the Audit and Risk Committee.

4. Audit and Risk Committee (ARCo) Update

Diana Noble set out that at its last meeting, ARCo had considered the Bank’s Annual Reports and Accounts.

Diana Noble noted that ARCo had discussed the oversight and governance processes for matters relating to Central Services. ARCo would focus on potential or emerging risks arising from current activities within the area. Court would then focus on broader transformation and change.

ARCo had considered two items relating to operational resilience. ARCo found that the Bank’s impact tolerances were reasonable, proportionate and in line with the PRA’s approach for similar sized firms. It was noted to ARCo that testing the plans for the Bank’s business critical functions, whilst iterative, provided a good learning opportunity for the organisation.

5. Remuneration Committee (RemCo) Update

Anne Glover set out that at its last meeting, RemCo had considered the Remuneration Report of the Bank’s Annual Reports and Accounts.

RemCo considered the Bank’s gender and ethnicity pay gaps and observed that the Bank’s ethnicity pay gap had increased. The Bank had hired staff, successfully increasing minority ethnic diversity, with the intention of building a diverse talent pipeline for the future as well as attracting more senior talent. It was noted that as the Bank continues to build a diverse talent pipeline, its longer-term intention was to reduce the gap as the Bank rebalances representation across the organisation.

6. Stablecoins

(Andrew Hauser, Stephen Brown and Sasha Mills)

Court were updated on developments in the area of systemic stablecoins, including new powers contained in the Financial Services and Markets Act 2023.

7. RTGS Renewal Programme update

(Victoria Cleland, Sushil Saluja, John Stocker, Mike Jones)

Victoria Cleland explained that this was Court’s last update before the planned “go-live” for TS2.1.

With regards to preparations for this, it was noted that a successful dress rehearsal with industry had taken place. No software issues had been identified and the Bank had a high degree of confidence in both its own and industry’s ability to successfully transition during the “go live” event.

The Renewal Executive Board had taken a caveated "go” decision for “go-live”. The caveats were: a successful dress rehearsal – which had now been achieved - an assessment of readiness criteria and no exogenous shocks. This was due to be communicated to Direct Participants in the near future.

Court thanked the teams that had contributed to the dress rehearsal.

8. COO Update

Ben Stimson noted that the CS2025 Programme continued to progress as expected at this point in a three-year transformation programme.

With regards to the Programme’s priorities, good progress was being made as a result of “sprint” working. Diana Noble thought it important to look at the phasing of the Programme and the impact of progressing the transformation of HR capabilities alongside Technology.

9. The Bank’s Finances

(Afua Kyei)

Afua Kyei updated Court on the Bank’s Finances, a quarter into the financial year.

10. Bank of England Annual Report and Accounts

(James Bell, Chris Peacock, Afua Kyei and Richard Faulkner, Ryno Swart (KPMG))

(a) Annual Report and Accounts

Afua Kyei introduced the item and explained that since the last meetings of Court and the relevant Court sub-Committees, the drafting had been refined reflecting comments received.

Diana Noble, Chair of ARCo, noted that ARCo had considered, and was content with, the Bank of England’s Annual Report and Accounts.

Anne Glover, Chair of RemCo, noted that RemCo had considered, and was content with, the Remuneration Report contained within the Bank of England’s Annual Report and Accounts.

Court agreed that it was appropriate to prepare the accounts on a going concern basis.

(b) Letter of Representation

The Bank’s external auditors, KPMG, said that audit was progressing as planned.

Court considered the management processes to support signing of the Letter of Representation and agreed to delegate signing of the Letter of Representation to the Chair.

(c) Bank of England Climate Change Disclosure Report (BCCD) and Carbon Transition Plan (CTP)

(Andrew Hauser, Paddy Pope, Tim Rawlings and Kate Hamilton)

Court was updated on the BCCD and the Carbon Transition Plan (CTP), noting it was the first time a central bank had published the latter.

The BCCD had been scrutinised by ARCo. ARCo were comfortable with the assurance process via which the report had been prepared.

It was noted that the CTP would set out the Bank’s strategic approach to deliver its commitment to reduce emissions from its own physical operations to net zero by 2024. The Bank was on track to meet its targets. The Governor noted that the Bank’s report would not include detail of the Bank’s “financed emissions” (emissions linked to investment and lending activities). It was expected that the carbon intensity would decrease as the UK decarbonises in alignment with HMG’s legal net-zero target.

Court thanked the team for their hard work in preparing the Bank’s first CTP and considered this an important disclosure for the Bank. Court approved the publication of both documents and delegated sign-off to the Executive Sponsors for Climate Change and Chief Financial Officer.

Court noted the BEAPFF and PRA Annual Report and Accounts for information, both of which were on track and would be signed by the relevant Directors. Court confirmed that they were content for the BEALF Annual Report and Accounts to be signed off by the relevant Directors. Court were due to receive a copy of this for information, when finalised.

11. Chair’s Effectiveness Review of the MPC

(Melissa Davey and Alan Castle)

Court, as part of its oversight functions, keeps under review the processes of the Bank’s Policy Committees.

The Chair introduced the item. He noted that the findings would return to the July Court.

12. Resolution Report

(Melanie Beaman and Rob Zammit)

Melanie Beaman introduced the item, noting that on taking up the position of ED for Resolution, the Directorate had been set to focus on non-bank resolution and that the banking resolution regime was considered mature. Due to recent events in the banking system, the forward work plan would also include learning lessons from the orderly failure and resolution of Silicon Valley Bank.

Court thanked Melanie Beaman for the update and for colleagues in the Resolution Directorate for their dedication in recent months.

Court noted the intention to enter into a non-commitment framework, in the event that skilled external parties were required, with potential value over £10m. Court noted that spend associated with the non-commitment framework would need to be closely monitored and escalated to Court as appropriate.

13. Committee Appointments and Conflicts

(Ruth Smith)

It was noted that Ron Kalifa and Frances O’Grady had been re-appointed to Court for a second term.

14. Items for Information

Court noted:

• Monetary Policy Committee Report
• Emergency Liquidity Assistance / Resolution Liquidity Framework (ELA/RLF) Report
• PRA Annual Report
• BEAPFF Annual Report and Accounts and Letter of Representation

The meeting of Court was closed.