Minutes of the Meeting of the Court of Directors held on 5 April 2023

1. Conflicts, Minutes and Matters Arising

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

The minutes of the meeting held on 8 February 2023 were approved.

The Chair noted that a number of steps had been introduced to support the effectiveness of Court meetings.

The Chair welcomed Ruth Smith to the meeting and noted that Ruth had been appointed as interim Secretary of the Bank.

2. Governor’s Update

The Governor updated Court on recent developments in the banking system.

The Governor reflected that recent weeks had seen two banks with UK operations fail and parts of the financial sector come under stress. Silicon Valley Bank (SVB) and its UK subsidiary failed on 10 March due to a deposit run following significant losses in the US parent. Court observed the speed of the run on SVB. Court noted the factors underlying this, including the extent to which social media now drives bank runs.

The PRA’s approach to the UK operations of SVB ensured a greater degree of financial resilience, particularly the subsidiarisation policy. Over the weekend that SVB UK failed, the Bank conducted a successful resolution transaction – demonstrating the effective operation of the UK’s resolution regime. SVB UK’s capital instruments were written down, and the firm was sold to HSBC. The Bank’s actions protected both depositors and public funds.

The Governor set out that the resolution plan for Credit Suisse was well-rehearsed by the UK, US and Swiss authorities. However, the Swiss authorities had not used the resolution plan. Instead, the Swiss conducted a going-concern sale underpinned by some public support, which in turn effected a full write-down of subordinated debt instruments, while equity was only partially written down. There had been some brief fallout in AT1 markets following this action, but swift communications from the UK and EU authorities on their approach to the creditor hierarchy in resolution had stemmed this.

Though SVB and Credit Suisse had failed for different reasons, the events had taken place in close proximity to each other. As a result of this, investors perceived that the outlook for the global banking sector was uncertain. The Governor noted that more broadly the backdrop for these events was an uncertain outlook for global economic activity. The Bank was monitoring the financial system closely, particularly the impact of recent events on financial markets, UK banks and economic conditions. The Governor noted that UK banks are well capitalised, liquid and resilient to continue supporting households and businesses.

Providing further detail about this work, Sam Woods explained that the FPC and the PRA had been closely examining developments across the financial system as a whole.

Members of Court reflected that a number of lessons could be learnt from recent events. The Bank’s directorates would be exploring these over the coming weeks and months.

The Governor noted the importance of the Bank and its international counterparts continuing to ensure and communicate that resolution plans for global systemically-important banks remained credible.

Jon Cunliffe noted that the Bank’s resolution communications demonstrated the importance of a swift, decisive, targeted approach in a stress event.

The Chair recognised that responding to recent events required colleagues from across the Bank to work tirelessly. Court thanked Bank staff for their hard work and dedication.

3. Audit and Risk Committee (ARCo) Update

Diana Noble updated Court on the work of ARCo. At its last meeting, ARCo had considered a number of matters including Finance Systems Modernisation, the Bank’s technology function and approach to obsolesce and cyber capabilities.

Diana Noble noted that ARCo were content with the progress that had been made in scoping and readying the business for the Finance Systems Modernisation Programme.

Diana Noble updated Court on the tender process that would appoint a new external Auditor for the Bank.

ARCo approved Internal Audit’s Annual plan.

4. Remuneration Committee (RemCo) Update

Anne Glover updated Court on the work of RemCo. Since Court’s last meeting, RemCo had met twice. First, to approve the remuneration for an Executive Director Appointment. Second, to discuss matters relating to pensions and objective setting.

Anne Glover noted that at the next meeting, Court would be asked to consider the Remuneration Report as part of the Bank’s Annual Report.

The Chair thanked members of the Committee for their continued support of RemCo’s work.

5. RTGS Renewal Programme Update

(Victoria Cleland, Sushil Saluja and John Stocker)

Victoria Cleland updated Court on the RTGS Renewal Programme.

Since the February Court meeting, the ECB had successfully migrated to the new payments messaging standard, ISO 20022. This was viewed as a major milestone in the Bank’s own RTGS Renewal Programme.

Victoria Cleland noted that the team continued to be focussed on testing TS2.1. This was a valuable exercise for shaping future processes and procedures for operating the renewed RTGS.

Court discussed the key risks to delivery of TS2.1. Victoria Cleland noted that there was contingency planning for a range of scenarios, and that the Programme remained on track.

Victoria Cleland noted that recruitment continued to be a challenge due to a tight external market. The positive impact that the next phase of RTGS Renewal – the build of TS3 – could have on staff retention and attraction was noted.