Minutes of the Meeting of the Court of Directors held on 12 February 2025

1. National Audit Office (NAO) – scoping options for next audit of the Bank

(Gareth Davies and Simon Reason, NAO)

Gareth Davies introduced the NAO plans and noted the intention to conduct a value for money audit of the Real Time Gross Settlement Renewal (RT2) programme.

In response to questions, Gareth Davies asked that the Bank alerts the NAO if its review process risked impacting on critical operations, as his team would revise engagement plans to ensure there was no negative impact on operations.

The Governor said it would be helpful for the NAO to consider whether industry was ready to utilise the potential for enabling innovation that RT2 presented. Dave Ramsden said international comparisons would also be helpful. Gareth Davies agreed these points and the Bank offered to help facilitate international engagement.

2. Conflicts, Minutes and Matters Arising

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

The Chair placed on record thanks for Frances O’Grady’s contribution to Court, following her resignation.

The Chair thanked Ben Stimson for his service, noting this would be his final Court meeting.

The minutes of the meeting held on 11 December 2024 and 7 January 2025 were delegated to the Chair and the Governor for final approval, ahead of publication.

3. Governor’s Update

The Governor reflected on a number of key developments over the past year.

On the transformation agenda, he noted that good progress had been made in establishing the leadership team in Central Services, with other parts of the Bank developing approaches to partner effectively with Central Services to deliver change. He said that agreement had now been reached on the pension reforms. In response to questions, he said that an important focus internally for the year ahead would be on identifying and delivering efficiencies, in the context of a challenging budget environment and the need for greater investment to overcome obsolescence.

Court Directors discussed the Bank’s People strategy, noting developments across the world. Court Directors observed the importance of learning from the experience of other organisations and ensuring that inclusion was at the forefront of the Bank’s people strategy.

The Governor turned to discuss progress on the Bernanke Review. He also observed discussions both domestically and internationally regarding the future of payments. He concluded by reflecting on the current condition of the UK economy and its position in the global context. Court Directors also discussed the deregulation agenda observable globally.

The Governor noted press interest in gold movements and said teams were managing operational pressures associated with an increase in the number of requests from clients to move gold. These were being handled in an orderly way, clients were content, and movements were low in the context of the Bank’s gold storage.

4. Audit and Risk Committee (ARCo) Update

Jitesh Gadhia gave an update on the recent meeting of ARCo. In the audit section, ARCo had reviewed the Bank’s accounting and related policies, and welcomed the external review of Internal Audit, which had been positive.

In the risk section, ARCo had considered the balance sheet transition, the approach to anti-money laundering and cyber risks. ARCo undertook a deep dive on information governance, and how this fitted into the Bank’s governance structure.

Jitesh Gadhia said ARCo had also discussed the Bank’s investment programme (see item 7), and MoU with HM Treasury (see item 10).

5. Remuneration Committee (RemCo) Update

Diana Noble gave an update on the recent meeting of RemCo. RemCo had approved pay and performance awards for Executive Directors (EDs).

RemCo had also agreed that given the Governor has not accepted a pay rise, a shadow salary would be published in the Annual Report to show what the Governor’s salary would be had pay rises been accepted each year.

6. COO Update

Ben Stimson gave an update on RT2, noting good progress. A successful dress rehearsal had taken place and all key performance indicators looked positive for the planned go-live date.

Ben Stimson noted the CS2025 programme has now closed and has substantial delivered benefits versus its costs.

• Annual Salary Review outcomes

(Jane Cathrall)

Jane Cathrall said that following Union approval of the pay deal, managers were working through the individual decisions required to implement it.

• Finance Modernisation Programme (FMP)

(Sarah John, Sara Ward and Afua Kyei)

Sarah John updated Court on the progress of the FMP, seeking approval for a revised budget. Sarah John said there was a high degree of certainty for Phase 1 costs, which covered procurement and general ledger modules, but costs for Phase 2, interfaces with the general ledger, were much less certain.

Court Directors asked about the level of risk in the Phase 1 costs and estimates for Phase 2. Sarah John said for Phase 1 a key cost risk was failing to hit the July go-live target. For Phase 2, costs were high level placeholders. These costs are expected to change given the complexity and risk profile of the implementation of the strategic accounting interface.

Court approved the budget and delegated approval of an additional 10% contingency fund over that to the Governor and Chair of Court, should it be required.

7. The Bank’s Finances

(Afua Kyei, Jo Hill and Anita Kelly-Metelewa)

Jo Hill said that Court was asked to consider the relative prioritisation between investments the Executive considered to be essential but not all of which could be funded currently. All investment projects considered discretionary had been deferred or cancelled.

In response to questions, the Governor said the binding constraint on investment was more finance than capacity to deliver investment.

Court Directors discussed the varying level of confidence around cost estimates of individual investment projects and the impact to any potential delays around each.

Court agreed the investment portfolio for 2025/26.

Turning to the budget and financial outlook, Court agreed that, notwithstanding a profitable year and the increase in loss absorbing capital, that a dividend should not be paid this year. Court noted this was in line with the Bank’s Memorandum of Understanding with HM Treasury, whereby when loss absorbing capital is below the agreed target threshold, the Bank retains 100% of net profits.

Turning to the three-year budget plan, Afua Kyei noted it contained a cost constraint in line with CPI.

Court Directors wished to return to the issue of investment funding in the outer years of the three-year plan.

Court approved the 2025/26 budget but asked that the outer years return to Court following further work to identify how investment capacity can be increased. The Governor noted the Bank had some options to make the budget more flexible but would have to reflect the overall public sector financial management position more broadly.

8. PRA External Business Plan 2025/26

(Ben Martin and Sheila Omaboe)

Ben Martin introduced the PRA External Business Plan. In response to questions, the Governor said the PRC should reflect on including language around the support the PRA would give to innovation and emerging business models.

9. IEO – Horizon Scanning Evaluation

(Melissa Davey, John Lewis, Alison Pollard, Dorothy Fouracre and Pooja Pattar)

Melissa Davey and John Lewis introduced the item. They highlighted opportunities to improve information sharing around horizon scanning and learning from outside organisations. The Governor noted the management response would follow, but that he was mindful of the constraint imposed by the budget to undertaking new activities.

Court Directors said the report gave specific areas where co-ordination would be useful, however there wasn’t a case for significant changes. The Chair noted there was an opportunity to improve use of technology and of external engagement.

Court agreed the report and noted that the management response would return to Court, following this a summarised report would be published.

10. The Financial relationship between HM Treasury and the Bank of England: Memorandum of Understanding (MoU)

(Afua Kyei, Stephen Brown and Vicky Saporta)

Stephen Brown introduced the item, and said that subject to Court’s approval, the revised MoU and a joint statement from the Bank and HM Treasury will be published 13 February.

It was agreed that Court would receive an update on the proposed revised financial framework for managing the Bank’s budget, which would show how cost is recovered for different functions of the Bank in due course.

11. Court Effectiveness Review 2024

(Ron Kalifa)

Ron Kalifa presented the findings from his Court Effectiveness Review.

In response to questions, the Governor said Court has evolved over time to focus on the areas where it could provide substantial value to the Bank.

12. Committee Appointments and Conflicts

(Sebastian Walsh)

Court noted the paper.

13. Papers for Information

Court noted:

• Monetary Policy Committee Report
• Internal Whistleblowing Annual Report
• Publication of Historic Court Minutes for 2004
• RTGS Renewal Update
• Approved minutes from Committee meetings since the last meeting of Court on 11 December 2024
• ARCo minutes 27 November 2024
• RemCo minutes 5 December 2024

The meeting of Court was closed.