Minutes of Money Market Committee meeting – April 2024

Minutes

Item 1 – Welcome

The Chair thanked members for attending and confirmed that the Minutes of the December 2023 meeting had been published on the Bank’s website.footnote [1]

The Chair welcomed new members and those who were attending as part of the Bank’s Meeting Varied People (MVP) initiative.

Item 2 – Discussion on Market Conditions

A member of the committee presented an overview of market conditions. This covered: economic and inflation conditions (UK and globally); the UK Budget and gilt issuance; central bank policy developments; and regulatory change across the UK, Euro area, and the US. In addition, future potential volatility events were outlined, including elections and geopolitical tensions.

Committee members agreed money markets are functioning well and adjusting to the combination of increased collateral supply and falling central bank reserves in an orderly manner. The committee noted that dynamics in unsecured and secured market rates were rational, but also acknowledged the potential impact as the level of bank reserves shifts closer to the preferred minimum range of reserves. The committee added that the Bank’s short-term repo facility was working well, and volumes reflected their expectations.

The committee discussed the recent and upcoming reforms on US institutional prime money market funds. Noting the recent increased portfolio minimum liquidity requirements and discretionary liquidity fees, as well as the upcoming mandatory liquidity fees that will be applied later this year.

A member of the committee also provided an update from the ECB’s recent Money Market Contact Group.footnote [2]

Item 3 – Working Group Updates

A representative of the UK Money Markets Code sub-committee provided an update on its ongoing review of the Money Markets Code, which is now in the final stages.

Draft changes to the Code will be circulated to committee members, relevant trade associations and other stakeholders for comment. The final document will be ratified by the committee prior to publication, which is expected to be in the first half of 2024.

A member of the Securities Lending Committee Secretariat provided an update on the working group looking into fails in the UK securities lending market. It was noted that the group has fed into the revision of the UK Money Market Code.

Item 4 – Any other business

A representative from the FCA provided and update from the T+1 Accelerated Settlement Taskforce Report.footnote [3] The report recommends the UK migrating to T+1 by the end of 2027, and in the interim, various operational changes to facilitate settlement being implemented by the end of 2025.   

The Chair thanked members for their time and welcomed any suggestions for future agenda items to be sent to the Secretariat in due course.

Committee attendees

Gordon Lowson – Abrdn

James Winterton – Association of Corporate Treasurers

Ina Budh-Raja – Bank of New York Mellon

Romain Dumas – UBS

Inna Shaykevich – Goldman Sachs

Chris Brown – Insight Investment

Olivia Maguire – J.P. Morgan Asset Management

Tony Baldwin – LCH

John Wherton – LGIM

Scott Creed – Lloyds Bank

Emma Cannon – Lloyds Bank (presenter)

Joanne Gaskin – Lloyds Bank (presenter)

Oliver Butcher – NatWest Markets

Avi Tillu – PIMCO

Chirag Patel – Rabobank

Alan Williams – Santander UK

Jessica Pulay – DMO (Observer)

Jo Whelan – DMO (Observer)

Alan Barnes – FCA (Observer)

Ellie McCormack – FCA (Observer)

Bank of England

Andrea Rosen

Simon Dolan

Grace Greer

Tom Archer

Apologies

Victoria Worsfold – Guildford Borough Council

Nic Erevik – Newcastle Building Society

John Argent – Tradition

Emma Cooper – BlackRock

Marije Verhelst – Euroclear

James Murphy – HSBC

Nina Moylett – M&G

Romain Sinclair – Société Générale 

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Updates to eligibility of residential mortgage collateral in the Sterling Monetary Framework – Market Notice 23 May 2024

Market notice

This Market Notice sets out changes to collateral eligibility that the Bank is making to manage financial risks in residential mortgage collateral in the Sterling Monetary Framework (SMF). All changes set out in this Market Notice will become effective on 1 August 2024.

Eligibility criteria

As set out in the Domestic Minimum Energy Efficiency Standard (MEES) Regulations, since 2018, rental properties in England and Wales are required to have a current EPC rating of at least ‘E’– or a valid exemption – to be let out. 

To mitigate risks associated with non-compliant properties, the Bank is updating its eligibility criteria for Buy-to-Let (BtL) mortgages. Specifically, non-compliant mortgages will no longer be eligible as collateral in the Bank’s SMF operations. Where a property has a valid exemption in place, the SMF counterparty must confirm this to the Bank in order for the mortgage to be eligible as SMF collateral. 

BtL mortgages for which SMF counterparties do not provide EPC ratings that are originated after 1 August 2024 will likewise be ineligible as SMF collateral. For BtL mortgages originated before 1 August 2024 with no reported EPC ratings, the Bank will apply a tiered treatment to recognise some challenges that lenders face in obtaining comprehensive EPC data for their back books. 

For operational reasons, the Bank will not require SMF counterparties to remove affected loans from their mortgage pools. But they will be assigned zero nominal value or, in the case of mortgages originated before 1 August 2024 with no reported EPC ratings, a reduced nominal value.

These changes to the Bank’s eligibility criteria do not apply to owner-occupied mortgages.

Haircut adjustments

The EPC ratings, to which the MEES Regulations are linked, measure a property’s energy efficiency, and provide insights into mortgagors’ exposure to energy price shocks. In this context, the Bank is adjusting its haircut models to protect the Bank against potential financial losses arising from mortgagors’ exposure to energy price shocks in owner occupied mortgage collateral. Relevant mortgages with no reported EPC ratings will be subject to conservative assumptions, which will tend to increase collateral haircuts relative to a scenario in which counterparties provide EPC data. These adjustments will be rolled out alongside similar measures to protect against possible financial losses from the risk of more frequent and severe flooding. 

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The Prudential Regulation Authority (PRA) fines Citigroup Global Markets Limited (CGML) £33,880,000 for failures in its trading systems and controls

The Prudential Regulation Authority (PRA) has fined Citigroup Global Markets Limited (CGML) £33,880,000 for failings in its trading systems and controls during the relevant period of investigation, being between 1 April 2018 and 31 May 2022.

The Financial Conduct Authority (FCA) has also imposed a financial penalty of £27,766,200 on CGML following an FCA investigation into related matters. The two regulators’ investigations, conducted in parallel, have resulted in a combined total financial penalty of £61,600,000.

The Firm agreed to resolve this matter, and therefore qualified for a 30% reduction in the amount of the financial penalty.  Without this reduction, the amount of the financial penalty imposed by the PRA would have been £48,400,000. 

Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said:

“Firms involved in trading must have effective controls in place in order to manage the risks involved. CGML failed to meet the standards we expect in this area, resulting in today’s fine.”

Throughout the relevant period, CGML received repeated supervisory communication from the PRA on the need to strengthen its trading controls. Notwithstanding this engagement and the remediation work CGML undertook during the relevant period, weaknesses in trading controls persisted.

The PRA expects firms to remediate identified issues promptly and completely. In this case, certain of the issues crystallised into trading incidents, the most significant of these occurring on 2 May 2022. In this instance, an experienced trader incorrectly inputted an order, resulting in US$1.4bn inadvertently being executed on European exchanges. Deficiencies in CGML’s trading controls contributed to this incident, in particular the absence of certain preventative hard blocks and the inappropriate calibration of other controls.

Following the trading incident on 2 May 2022, the PRA has required CGML to strengthen its trading controls. CGML has undertaken remediation work, taking steps to improve and strengthen its trading controls.

Rule breaches

The PRA found that CGML breached the following during the relevant period:

  • PRA Fundamental Rule 2 (a firm must conduct its business with due skill, care and diligence);
  • PRA Fundamental Rule 5 (a firm must have effective risk strategies and risk management systems);
  • PRA Fundamental Rule 6 (a firm must organise and control its affairs responsibly and effectively);
  • Rule 2.1(2) Algorithmic Trading of the PRA Rulebook (a firm must have in place effective systems and risk controls, suitable to the business it operates, to ensure that its trading systems are subject to appropriate trading thresholds and limits);
  • Rule 2.1(3) Algorithmic Trading of the PRA Rulebook (a firm must have in place effective systems and risk controls, suitable to the business it operates, to prevent the sending of erroneous orders, or the systems otherwise functioning in a way that may create or contribute to a disorderly market);
  • Rule 2.2(2) Algorithmic Trading of the PRA Rulebook (a firm must ensure that its systems are fully tested and properly monitored to ensure they meet the requirements of Rule 2.1 Algorithmic Trading of the PRA Rulebook).

Notes to editors

  1. The PRA’s Final Notice
  2. The FCA’s Final Notice
  3. PS1/24 – The Bank of England’s approach to enforcement
  4. The PRA’s approach to enforcement: statutory statements of policy and procedure
  5. The PRA’s Supervisory Statement SS5/18: Algorithmic Trading
  6. Fundamental Rules

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Second Phase Extension of Term Funding Scheme with additional incentives for SMEs (TFSME) – Market Notice 17 May 2024

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Bank of England to increase Leeds office presence

News release

The Bank of England is set to increase its presence in Leeds with further details announced today for an expanded and permanent presence in the city. The Bank is committing to a headcount of at least 500 staff to be based in Leeds by 2027, which equates to around one in ten staff.

The headcount target will be achieved through a combination of voluntary internal relocations and new Leeds-based recruitment. The Bank will look to maintain its overall current headcount number, whilst expanding its numbers in Leeds.

The increased office space in Leeds aims to improve trust and wider understanding of the Bank’s work across the UK, ensure as an organisation it better represents the people it serves, help tap into wider talent pools across the UK, and retain talented colleagues.

Governor of the Bank of England, Andrew Bailey, said:

“Leeds is a thriving city where the Bank of England has had a significant presence for over 200 years. Committing to a permanent, expanded Leeds office is a fantastic opportunity for us better to represent the public, build stronger links with the local business community and help promote the work of the Bank to a wider pool of talented workers.”

Tracy Brabin, Mayor of West Yorkshire, said:

“With booming cities, bustling towns and beautiful countryside, national institutions are flocking to West Yorkshire.

“This decision from the Bank of England is a major vote of confidence in our region, cementing our reputation as England’s leading banking capital outside of London, and opening up hundreds of local jobs for our talented graduates and professionals.

“By bringing decision-making power from London to the heart of the North, this move will benefit the entire country and help us rebalance our national economy.”

Councillor James Lewis, Leader of Leeds City Council, said:

“We are delighted that the Bank of England has chosen to expand their office space in Leeds. Leeds is the UK’s second largest city for financial services, and a major hub for related professional services, this move further reinforces the city’s progress and influence and showcases the strength of Team Leeds and the partners across the private and public sectors, that come together to deliver brilliant results in a truly collaborative way, for the best impact on our residents.

“Next week we welcome 12,000 delegates from across the world into our city for UK REiiF, and give them the opportunity to see why top global brands like Burberry, C4 and now the Bank of England are choosing Leeds.”

Work will continue with Leeds City Council, the West Yorkshire Combined Authority and the local business community to establish the Bank’s presence in the city.

Notes to editors

  1. In April 2021 the Bank announced its intention to create a new northern hub as part of an ambitious plan to significantly increase its staff presence outside London. Later in October 2023 the Bank opened an expanded office in the city at Yorkshire House which currently accommodates up to 70 staff.
  2. Leeds was among the earliest locations proposed when the Bank began considering establishing a network of branches in the 1800s. The Bank first opened a Leeds branch in 1827 under Thomas Bischoff who was the Bank’s first Agent.
  3. Leeds has a strong financial and professional services sector, considerable commercial real estate opportunities, extensive higher education sector in region, and data, AI and green finance initiatives that can support the Bank’s current and future skills needs.
  4. The Bank currently has 12 Agencies across the UK, including for the nine regions of England and each of the devolved nations. These operate from a network of offices in Belfast, Birmingham, Bristol, Cardiff, Fareham, Glasgow, Leeds, Manchester, Newcastle and Nottingham.
  5. The Bank of England had a headcount of 4,971 employees as of the 2023 Annual Report and Accounts.

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Bank rate maintained at 5.25% – May 2024

Monetary Policy Summary, May 2024

The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 8 May 2024, the MPC voted by a majority of 7–2 to maintain Bank Rate at 5.25%. Two members preferred to reduce Bank Rate by 0.25 percentage points, to 5%.

The Committee’s updated projections for activity and inflation are set out in the accompanying May Monetary Policy Report and are conditioned on a market-implied path for Bank Rate that declines from 5¼% to 3¾% by the end of the forecast period, compared with an endpoint of 3¼% in February.

Internationally, recent growth outturns have tended to be stronger in the United States than in the euro area. Underlying inflationary pressures in both regions have continued to moderate somewhat since the start of the year, though by less than expected in the United States. Forward interest rates have risen in the United States and, as a result, elsewhere.

Following modest weakness last year, UK GDP is expected to have risen by 0.4% in 2024 Q1 and to grow by 0.2% in Q2. Despite picking up during the forecast period, demand growth is expected to remain weaker than potential supply growth throughout most of that period. A margin of economic slack is projected to emerge during 2024 and 2025 and to remain thereafter, in part reflecting the continued restrictive stance of monetary policy.

With respect to indicators of inflation persistence, services consumer price inflation has declined but remains elevated, at 6.0% in March. There remains considerable uncertainty around statistics derived from the ONS Labour Force Survey. It is therefore more difficult to gauge the evolution of the labour market. Based on a broad set of indicators, the MPC judges that the labour market continues to loosen but that it remains relatively tight by historical standards. Annual private sector regular average weekly earnings growth declined to 6.0% in the three months to February, although that series tends to be volatile. Alternative indicators also suggest easing pay growth.

Twelve-month CPI inflation fell to 3.2% in March from 3.4% in February. CPI inflation is expected to return to close to the 2% target in the near term, but to increase slightly in the second half of this year, to around 2½%, owing to the unwinding of energy-related base effects. There continue to be upside risks to the near-term inflation outlook from geopolitical factors, although developments in the Middle East have had a limited impact on oil prices so far.

Conditioned on market interest rates and reflecting a margin of slack in the economy, CPI inflation is projected to be 1.9% in two years’ time and 1.6% in three years in the May Report.

The MPC’s remit is clear that the inflation target applies at all times, reflecting the primacy of price stability in the UK monetary policy framework. The framework recognises that there will be occasions when inflation will depart from the target as a result of shocks and disturbances. Monetary policy will ensure that CPI inflation returns to the 2% target sustainably in the medium term.

At this meeting, the Committee voted to maintain Bank Rate at 5.25%. Headline CPI inflation has continued to fall back, in part owing to base effects and external effects from goods prices. The restrictive stance of monetary policy is weighing on activity in the real economy, is leading to a looser labour market and is bearing down on inflationary pressures. Key indicators of inflation persistence are moderating broadly as expected, although they remain elevated.

Monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC’s remit. The Committee has judged since last autumn that monetary policy needs to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipates.

The MPC remains prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. It will therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation. The Committee will consider forthcoming data releases and how these inform the assessment that the risks from inflation persistence are receding. On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level.

Minutes of the Monetary Policy Committee meeting ending on 8 May 2024

1: Before turning to its immediate policy decision, the Committee discussed: the international economy; monetary and financial conditions; demand and output; and supply, costs and prices. The latest data on these topics were set out in the accompanying May 2024 Monetary Policy Report.

2: The MPC discussed developments in consumer price inflation in the United States and in the euro area. In the United States, recent outturns had been higher than expected by market participants on both headline and core PCE inflation. The evidence suggested that this higher-than-expected inflation had reflected surprisingly strong domestic demand rather than inflation persistence. Euro-area inflation data had been more in line with market expectations, and demand had remained relatively subdued. The increased divergence in demand across regions could be consistent with a divergence in monetary policy, with potential implications for exchange rates and broader financial conditions.

3: Given this change in the perceived outlook for US demand and inflation, market participants had revised their expectations for US monetary policy since the MPC’s previous meeting, pushing out the expected timing and degree of future reductions in the federal funds rate. Alongside this, the market-implied path for policy rates in other major advanced economies, including the United Kingdom, had also shifted up materially, though by less.

4: The Committee discussed the degree to which these moves in UK interest rates had reflected global or domestic factors. This was not straightforward to separate out. The correlation between US and UK market interest rates had been near the top of its historical range, and the sensitivity of UK rates to both US and domestic data outturns had remained elevated. Nevertheless, market contacts had begun to judge that the increasing divergence of the US outlook from that of other major advanced economies could be reflected in their monetary policies in the near term. That said, contacts had expected that the influence of global factors could lead to greater macroeconomic and monetary policy convergence across major advanced economies beyond 2024.

5: In the United Kingdom, all but one of the respondents to the Bank’s latest Market Participants Survey (MaPS) had expected Bank Rate to be left unchanged at this MPC meeting. They had also all expected the next move in Bank Rate to be downwards. The median expected profile for Bank Rate from MaPS implied a cumulative 75 basis point reduction in Bank Rate this year, similar to the profile from the March MaPS, despite the increase in the UK yield curve.

6: Turning to activity, UK GDP growth had strengthened since the start of the year, reversing the fall in output that was estimated to have occurred in the second half of 2023. The Committee expected the recovery in output to be underpinned by a pickup in household consumption, supported by higher real incomes.

7: The Committee discussed the risks around the near-term outlook for consumer spending. House price inflation had held up by more than had been expected, which could suggest upside risks to the outlook for spending. One potential explanation for this would be that higher interest rates had weighed on house prices by less than had been expected. Set against that, a modest expected rise in unemployment could pose downside risks to consumption, for example if those households not directly affected nevertheless chose to save more for precautionary reasons.

8: The Committee discussed the degree of persistence in UK wage growth and domestic price inflation. Consistent with the recent easing in short-term inflation expectations and a loosening in the labour market, wage growth had fallen somewhat further. Services consumer price inflation had also continued to ease. Although both wage growth and services price inflation had been slightly higher than expected in the February Monetary Policy Report, that difference was small in the context of typical data volatility. Both series still indicated elevated domestic inflationary pressures.

9: The Committee discussed the relative weights to put on different indicators of inflation persistence, particularly in the event that they were to give divergent signals in the future. There remained considerable uncertainty around estimates of labour market tightness derived from the Labour Force Survey (LFS), owing to small sample sizes. A range of labour market indicators, including the vacancies to unemployment ratio and survey indicators of recruitment difficulties, suggested that the labour market had continued to loosen, however, while remaining relatively tight by historical standards.

10: Although less severe than the issues surrounding the LFS, the Committee noted that the private sector regular average weekly earnings (AWE) series tended to be volatile, especially when compared with services price inflation. While AWE growth had fallen sharply since last year, the decline suggested by other indicators appeared more gradual and from a lower peak. Possibly reflecting past falls in real wages and a relatively tight labour market, nominal pay growth had continued to be elevated.

11: The appropriate weight to place on different indicators of inflation persistence would also depend on wider economic developments. Depending on the expected path for demand, for example, indicators of inflation persistence might be expected to diverge. In an environment of subdued demand, firms might be expected to absorb higher wage growth into their profit margins. Higher wage growth would then not pass through to higher services price inflation. But as demand recovered, firms might choose to pass through that wage growth, resulting in higher services price inflation. Initial reports indicated that the Agents’ contacts generally expected lower pass-through of higher labour costs to prices than last year, owing to weaker demand. Consumer-facing services firms surveyed in the Decision Maker Panel in the three months to April had said that they expected to raise prices by 4.7% over the next year. The Committee would consider evidence from different indicators of persistence and would continue to monitor them in context.

The immediate policy decision

12: The MPC sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.

13: Indicators of inflation persistence had evolved broadly as expected, albeit a little stronger than had been anticipated in the February Monetary Policy Report.

14: Services consumer price inflation had declined but remained elevated, at 6.0% in March. Higher-frequency measures of services price inflation showed somewhat more of a slowdown than annual rates but still indicated elevated domestic inflationary pressures. Services price inflation was expected to continue to ease gradually over the course of this year, as wage growth and indirect effects from energy and other goods prices weakened further.

15: There remained considerable uncertainty around statistics derived from the ONS Labour Force Survey. It was therefore more difficult to gauge the evolution of the labour market. Based on a broad set of indicators, the MPC judged that the labour market continued to loosen but that it remained relatively tight by historical standards. Annual private sector regular average weekly earnings growth had declined to 6.0% in the three months to February, although that series tended to be volatile. Alternative indicators also suggested easing pay growth.

16: The Committee noted that this year’s pay settlements, which tended to be concentrated in the early part of the year, would provide an important indication of the extent to which pay growth continued to moderate as expected. Firmer information on April settlements would soon become available, including from the Bank’s Agents’ intelligence.

17: Twelve-month CPI inflation had fallen to 3.2% in March from 3.4% in February, broadly as expected in the February Report. In the MPC’s May Report projections, CPI inflation was expected to return to close to the 2% target in the near term, but to increase slightly in the second half of this year, to around 2½%, owing to the unwinding of energy-related base effects. Conditioned on market interest rates and reflecting a margin of slack in the economy, CPI inflation was projected to be 1.9% in two years’ time and 1.6% in three years.

18: There continued to be upside risks to the modal CPI inflation projection from geopolitical factors during the first half of the forecast period, but the risks overall were more evenly balanced over the second half.

19: The MPC’s remit was clear that the inflation target applied at all times, reflecting the primacy of price stability in the UK monetary policy framework. The framework recognised that there would be occasions when inflation would depart from the target as a result of shocks and disturbances. Monetary policy would ensure that CPI inflation returned to the 2% target sustainably in the medium term.

20: Monetary policy would need to remain restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term in line with the MPC’s remit. The Committee had judged since last autumn that monetary policy needed to be restrictive for an extended period of time until the risk of inflation becoming embedded above the 2% target dissipated. The Committee recognised that the stance of monetary policy could remain restrictive even if Bank Rate were to be reduced, given that it was starting from an already restrictive level.

21: Seven members judged that maintaining Bank Rate at 5.25% was warranted at this meeting. Headline CPI inflation had continued to fall back, in part owing to base effects and external effects from goods prices. The restrictive stance of monetary policy was weighing on activity in the real economy, was leading to a looser labour market and was bearing down on inflationary pressures. Key indicators of inflation persistence were moderating broadly as expected, although they remained elevated. There was a range of views among these members regarding the risks around the assumptions on persistence embodied in the May CPI projection. There was also a range of views about the extent of the evidence that was likely to be needed to warrant a change in Bank Rate, and the degree to which these members anticipated that incremental information in forthcoming data outturns would lead them to update materially their assessment of inflation persistence. All of these members would continue to consider the degree of restrictiveness of policy at each meeting.

22: Two members preferred a 0.25 percentage point reduction in Bank Rate at this meeting. For these members, Bank Rate needed to become less restrictive now to enable a smooth and gradual transition in the policy stance, and to account for lags in transmission. Consumer price inflation was already, and had been for some time, on a firm downward trajectory. The latest forecasts showed inflation returning close to the target in the short term, and this was consistent with forward-looking indicators of output price inflation falling behind input price inflation. As the outlook for demand remained subdued, with vacancies continuing to fall and nominal pay growth easing, the risks to inflation returning sustainably to the target in the medium term were to the downside.

23: The MPC remained prepared to adjust monetary policy as warranted by economic data to return inflation to the 2% target sustainably. It would therefore continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation. The Committee would consider forthcoming data releases and how these informed the assessment that the risks from inflation persistence were receding. On that basis, the Committee would keep under review for how long Bank Rate should be maintained at its current level.

24: The Chair invited the Committee to vote on the proposition that:

  • Bank Rate should be maintained at 5.25%.

25: Seven members (Andrew Bailey, Sarah Breeden, Ben Broadbent, Megan Greene, Jonathan Haskel, Catherine L Mann and Huw Pill) voted in favour of the proposition. Two members (Swati Dhingra and Dave Ramsden) voted against the proposition, preferring to reduce Bank Rate by 0.25 percentage points, to 5%.

Operational considerations

26: On 8 May, the total stock of assets held for monetary policy purposes was £703 billion, all of which were UK government bonds. The Corporate Bond Purchase Scheme had been fully unwound on 2 April, such that there were now no holdings of sterling non‐financial investment‐grade corporate bonds.

27: The following members of the Committee were present:

  • Andrew Bailey, Chair
  • Sarah Breeden
  • Ben Broadbent
  • Swati Dhingra
  • Megan Greene
  • Jonathan Haskel
  • Catherine L Mann
  • Huw Pill
  • Dave Ramsden

Sam Beckett was present as the Treasury representative.

David Roberts was also present on 30 April and 2 May, as an observer for the purpose of exercising oversight functions in his role as a member of the Bank’s Court of Directors.

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Minutes of the Meeting of the Court of Directors held on 7 February and 4 March 2024

David Roberts, Chair

Andrew Bailey, Governor

Sarah Breeden, Deputy Governor – Financial Stability

Ben Broadbent, Deputy Governor – Monetary Policy

Sir Dave Ramsden, Deputy Governor – Markets & Banking

Sam Woods, Deputy Governor – Prudential Regulation

Jonathan Bewes

Sabine Chalmers

Lord Jitesh Gadhia

Anne Glover

Sir Ron Kalifa

Diana Noble

Frances O’Grady

Tom Shropshire

In attendance:

Ben Stimson, Chief Operating Officer

Secretary:

Sebastian Walsh

1. Conflicts, Minutes and Matters Arising

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

The minutes of the meeting held on 14 December 2023 were approved.

The Chair said the present meeting of Court would happen over two days, with the second part scheduled for 4 March, where the Bank’s business plans and investment priorities would be discussed.

2. Governor’s Update

The Governor set out that the Bank’s latest Monetary Policy Report and MPC Minutes had been published since Court’s last meeting.

Court members noted the newly appointed House of Lords Financial Services Regulation Committee, as well as the recent publication by the Treasury Committee’s report on Quantitative Easing.

3. Audit and Risk Committee (ARCo) Update

Jonathan Bewes, Chair of ARCo, introduced the item. ARCo had received an update from the National Audit Office regarding their planned audit of the Asset Purchase Facility. ARCo also received an update from KPMG on its year-end audit planning. Internal Audit also advised ARCo of its activities.

ARCo was informed by the Risk Directorate that the Bank’s financial risks were largely unchanged.

ARCo discussed technology risk. ARCo noted the Bank’s enhanced banknote exchange process.

ARCo approved the annual update to the Bank’s Speak Up (internal whistleblowing) policy and reviewed the MLRO annual report. ARCo also received an update on model risks management standards and discussed Central Services Operations.

Jonathan Bewes added that it was hoped that the Bank’s new auditor would be announced in the coming weeks.

ARCo had discussed whether to split into separate committees covering Audit and Risk. ARCo members felt the current approach was a more efficient and effective approach for the Bank.

ARCo considered the external auditor’s fees and recommended Court approve them. The fees were duly approved.

4. Remuneration Committee (RemCo) Update

Diana Noble updated Court on the 24 January RemCo meeting.

RemCo had discussed Executive Director (ED) and Deputy Governor (DG) objectives, alongside the Bank’s overall approach to performance management.

RemCo approved the Annual Salary Review for EDs and DGs.

RemCo had also been updated on the Pensions Review.

5. Data and Analytics Strategy

(James Benford)

James Benford updated Court on progress made to produce the Bank’s updated Data Strategy, which was due to be published alongside the Bank’s Annual Report and Accounts.

James Benford noted that the Bank would explore Cloud storage solutions. Staff engagement with Data and Analytics had increased, supported by the decision to ask staff to familiarise themselves with the new data strategy as part of Our Code.

Ron Kalifa requested further information about how the portfolio of work was being delivered and what Court could expect to be delivered by the end of the year.

James Benford informed Court that the delivery plan would return to Court following the completion of the investment prioritisation process currently being undertaken, with the specific data deliverables being overseen by a Bank wide Data Board.

Ron Kalifa said that it would be critical to attract the right skills to the Bank to drive forward this work. Jonathan Bewes asked James Benford to consider carefully the risks presented by elements of the data strategy, alongside the potential benefits.

The Chair said that the success of the Data Strategy would play a substantial role in transforming the Bank. He observed that the Future Data Systems Programme would come for approval at the second part of the Court meeting, to be held on 4 March.

6. COO Update

Ben Stimson noted that progress was being made across a range of initiatives.

He updated Court on work, designed to help develop a collective view of the Bank’s key priorities over next three years – and agree the investment programme necessary to deliver them.

Non-executive members observed that the level of organisational change was high at present, so thought should be given to the ability of staff to absorb that change.

Ben Stimson updated Court on the progress of the National Audit Office review on legal, ethical and compliance risks.

7. RTGS Renewal Programme Update

(Victoria Cleland, Nathan Monk and John Stocker)

Victoria Cleland informed Court that the RTGS Renewal Executive Board had decided to postpone the go-live date for TS3 until the Autumn. A communications plan was being developed for stakeholders, while a new go-live date would be agreed.

Court supported the decision of REB to delay go-live. The Chair expressed his thanks to staff and asked Victoria Cleland to work with Technology and Ben Stimson to ensure implications of the decision on the Bank’s other technology modernisation programmes were clarified.

8. Viewpoint Survey Results

(Jane Cathrall and Mark Menary)

Jane Cathrall introduced the item on the Viewpoint staff survey.

Court asked the People Directorate to consider external benchmarking of the Viewpoint scores to provide context and challenge to the findings. It also recommended that People Directorate reflect on how frequently staff surveys were run. The Chair said he would like Jane Cathrall to identify 2-3 areas of focus for action from the next Viewpoint survey.

9. 2023/24 Q3/4 Update, Budget approval for 2024/25 and Payment in Lieu of Dividend

(Afua Kyei and Paul McArdle)

Afua Kyei introduced the item, highlighting that the next few years would be challenging.

The Chair said that the coming refresh of the Bank’s strategic priorities would be an important shaping device for the budget and business plans. He said that the Bank provided a number of critical services to both public and industry, where demand was growing, but it was nonetheless vital that the Bank could articulate its planned approach to realising productivity gains and driving efficiency.

Court agreed that the Bank should not make any payment in lieu of dividend to HM Treasury this year.

10. Communications Six-Monthly Update

(James Bell)

James Bell introduced the item on the Bank’s overall communications strategy and public sentiment. He added that the Bank would follow Cabinet Office guidelines on communications ahead of the next general election, in line with past practice.

Court members noted movements in public sentiment regarding the Bank, against the backdrop of falling inflation.

11. PRA Strategy 2024/25 Strategic Goals and Business Plan/Prioritisation

Sam Woods introduced the item. Court approved the strategy.

12. Court Effectiveness

Ron Kalifa introduced the item in his capacity as Senior Independent Director. Court reflected on the feedback that had been received from a range of stakeholders on the performance of Court. The overall conclusion was that Court continued to operate effectively. A couple of areas were proposed for increased focus recognising Court’s priorities for the coming 12 months.

13. Committee Appointments and Conflicts Update

(Sebastian Walsh)

The Secretary introduced the item.

Court approved the appointment of Shoib Khan as the Bank nominated member to the Pension Fund Trustee Board.

Court approved the appointment of Vicky Saporta as a Director of the Bank subsidiary companies Bank of England Asset Purchase Fund and Bank of England Alternative Lending Fund from 13 February 2024, and as Chair of both companies from 14 February 2024.

Court approved the unchanged membership of Financial Markets Infrastructure Committee, with Vicky Saporta remaining a member.

Court noted that Ruth Smith had been appointed as ED, Resolution.

Court approved a number of appointments to the EDMC.

Court Meeting – Continued 4 March 2024

14. Conflicts and Appointments

The Chair noted the appointment of Clare Lombardelli as Deputy Governor for Monetary Policy.

15. 2024/25 Investment Portfolio: Delivery of holistic portfolio management and the emerging 2024/25 Investment Portfolio

(Afua Kyei, Ed Moore and Jo Hill)

The Chair welcomed Jo Hill to her first Court meeting since taking up role of ED Change and Planning.

Jo Hill introduced the item to Court. She noted a major priority was to assess how best to sequence the new portfolio, based on resourcing, change capacity and dependencies particularly linked to critical technology enablers. She said her priority was to take a more thematic approach to investment to help Court see how different priorities link together. She also updated Court on progress in building her directorate and its capacity. The finalised plan would be brought to Court in May.

Diana Noble sought greater clarity regarding the role of Change and Planning relative to other directorates. Jo Hill explained some of the priorities for the directorate, including standardisation of approaches around investment and ensuring governance was effective, but noted it would be critical to avoid duplication of functions with other areas.

The Chair requested a heightened focus on benefit realisation with clear line of accountability established at the onset of projects.

Court agreed the shape of the investment portfolio and asked Jo Hill to put forward a standardised approach for engaging Court in future on projects.

16. 3-year Business Plans 2024/25 to 2026/27

(Afua Kyei, Ed Moore and Jo Hill)

Afua Kyei introduced the item, noting the challenge of hitting the 3-year target for cost growth whilst recognising the increased scope of the Bank, along with the need to support significant investment and associated ongoing costs to modernise the organisation. She also highlighted the upcoming end of the investment supporting the Strategic Priorities with the consequence that any ongoing costs will need to be accommodated within the business-as-usual cost base.

The Governor said there was a clear cost control challenge and finding opportunities to improve productivity and efficiency would be critically important. Headcount management would therefore be an important component, especially given the consequences of headcount expansion for the Central Services budget.

Diana Noble said that technology investment would be an important part of efficiencies in future years. The use of AI was another important example of this process.

The Chair noted that performance management and driving efficiency would be the focus of the coming away day.

The Chair concluded that this was vital to progress the focus on productivity given the pressures the Bank was under, with a real need for a systematic and strategic look at efficiency over time rather than purely in the context of meeting an annual budget.

17. Technology Modernisation Update

(Nathan Monk, Pete Townsend and Jo Hill)

Nathan Monk introduced the item.

In response to questions, Nathan Monk and Pete Townsend noted that there needed to be an uplift in organisational leadership in Technology to help drive progress, including the new Chief Technology Officer at Director level – and the Chief Information Officer roles for individual governorships. A very strong candidate pool had been identified and he was confident we could attract strong external talent to the roles. He highlighted the slowing technology talent market and the use of recruitment strategies.

Diana Noble welcomed the proactive, strategic approach to technology as outlined in the paper. She asked whether the change programme had increased attrition in Technology and the extent to which Technology was comfortable with its capability in managing vendors and suppliers.

Nathan Monk explained that with regard to sourcing there was a need to move from a tactical to a strategic approach based on a better understanding of aggregate demand, and this was under active discussion with the procurement team.

18. Future Data Systems (FDS) Programme

(James Benford and Martine Clark)

Martine Clarke explained the history and purpose of the FDS. She also invited views from Court on the structure of the programme.

Sam Woods noted that transforming data collection, a separate project, was an important priority. James Benford stressed this was an enterprise-wide piece of work that could help the Bank’s entire business, for example the Bank’s post-Bernanke review and response.

Court approved the Programme.

19. Governor’s Objectives

The Chair asked Court to consider the Governor’s objectives.

Court approved the Governor’s objectives and requested Deputy Governors consider them in setting objectives for their areas.

20. Papers for Information

Court noted:

  • Monetary Policy Committee Report
  • Deputy Governors / COO Objectives

The meeting of Court was closed.

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Liz Oakes appointed and Carolyn Wilkins reappointed to the Financial Policy Committee

News release

Liz Oakes has been appointed and Carolyn Wilkins has been reappointed as external members of the Financial Policy Committee (FPC), the Chancellor of the Exchequer, Jeremy Hunt, has announced today.  The Chancellor of the Exchequer, Jeremy Hunt, has appointed Liz Oakes as an external member of the Financial Policy Committee (FPC). Her appointment fills the role previously filled by Elisabeth Stheeman. She will serve a three-year term, which will begin on 3 June. 

Ms Oakes joins the FPC following a long career in the financial services sector focussing on payments. She has held a number of executive and board level roles in financial and professional services firms, including global positions leading strategy, market and product development.

The Chancellor has also reappointed Carolyn Wilkins for a second term on the FPC beginning on 21 June 2024. Carolyn has 20 years of experience in central banking, most recently as Senior Deputy Governor at the Bank of Canada. 

Further information

About the appointment process

Ms Oakes has been appointed following an open recruitment process. As part of this process, HM Treasury recruited an executive search agency. A panel comprising of Gwyneth Nurse (non-voting member of the FPC and Director General of Financial Services, HM Treasury), Jonathan Hall (external member of the FPC) and Douglas Flint (independent panel member) interviewed a number of candidates and made recommendations to the Chancellor, which informed his decision.

There were 17 applications, of which 7 candidates were shortlisted for interview. One candidate withdrew prior to interview. The gender breakdown for this appointment is below:

About the Financial Policy Committee

  • The FPC is the UK’s macroprudential authority: its objective is to protect and enhance the stability of the UK’s financial system by identifying, monitoring and addressing systemic risks.
  • The FPC has thirteen members. Six of them are Bank of England staff including the Governor, four Deputy Governors and the Executive Director Financial Stability, Strategy and Risk.
  • There are also five external members who are appointed by the Chancellor and selected from outside the Bank for their experience and expertise in financial services. External members sit on the Committee on a part-time basis.
  • The Committee also includes the Chief Executive of the Financial Conduct Authority and one non-voting member from HM Treasury.
  • The Bank has robust procedures in place to monitor and manage any actual or potential conflicts of interest to ensure the independence, integrity and impartiality of the Committee, and avoid any perception that a Committee member may obtain an unfair advantage through their association with the Committee. 

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