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Annual Report 2018

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Annual Report 2018 Annual Report and Accounts 1 March 2017–28 February 2018 Overview Court, and the Bank’s policy committees Bank of England Our organisation Annual Report and Accounts The Bank’s Strategic Plan Review of 2017/18 1 March 2017 to 28 February 2018 Financial review 2017/18 Risk management Presented to Parliament by the Chief Secretary to the Treasury Our people by Command of Her Majesty Corporate Responsibility Report of the Remuneration Committee Report on Oversight Functions Report of the Audit and Risk Committee Statement of the responsibilities of the Court of Directors in relation to the financial statements Financial statements Contacting the Bank of England www.bankofengland.co.uk © Bank of England 2018 The contents of this Report encompass the requirements of Section 4 of the Bank of England Act 1998, and include: (1) a report by the Court of Directors (Court) on the matters which it reviews, monitors or otherwise considers in the performance of its oversight functions (S4(2)(a)); (2) a report by Court on the activities of the Financial Policy Committee of the Bank (S4(2)(aa)); (3) a copy of the statements for the year prepared under section 7(2) and 7(2A) and the report of the Bank’s auditors on them; (4) a statement of the rates at which Non-executive Directors of the Bank have been remunerated (S4(4)(a)); and (5) a statement of the Bank’s objectives and strategy for the next year, as determined by Court (S4(4)(b)). The Bank, in its capacity as the Prudential Regulation Authority, has published a separate report as required by paragraph 19 of Schedule 1ZB of the Financial Services and Markets Act 2000. The Bank has also published a separate report, as required by section 203B of the Banking Act 2009 and paragraph 33 of Schedule 17A of the Financial Services and Markets Act 2000, on its supervision of financial market infrastructures. Contents Overview Overview Financial statements Court, and the Bank’s policy committees Statement by the Chair of Court 1 Report of the Independent Auditor 68 Our organisation Report by the Governor 3 Banking Department statement The Bank’s Strategic Plan of income 72 Review of 2017/18 Court, and the Bank’s policy committees 7 Banking Department statement Financial review 2017/18 The Court of Directors 8 of comprehensive income 73 Risk management Policy committees 10 Banking Department statement Our people Monetary Policy Committee (MPC) 10 of financial position 74 Corporate Responsibility Financial Policy Committee (FPC) 11 Banking Department statement of changes in equity 75 Report of the Remuneration Committee Prudential Regulation Committee (PRC) 12 Banking Department statement Report on Oversight Functions of cash flows 76 Our organisation 14 Report of the Audit and Risk Notes to the Banking Department Committee The Bank’s Strategic Plan 15 financial statements 77 Statement of the responsibilities Review of 2017/18 18 Issue Department account 128 of the Court of Directors in relation to the financial statements Financial review 2017/18 27 Issue Department statement of balances 129 Financial statements Risk management 34 Notes to the Issue Department Contacting the Bank of England Our people 38 statements of account 130 PRA income statement 133 Corporate Responsibility 46 PRA statement of balances 134 Report of the Remuneration Committee 52 Notes to the PRA statement of accounts 135 Report on Oversight Functions 59 Contacting the Bank of England 142 Report of the Audit and Risk Committee 64 Statement of the responsibilities of the Court of Directors in relation to the financial statements 67 Bank of England Annual Report and Accounts 2017–18 iii www.bankofengland.co.uk ‘ Now know ye, that we being desirous to promote the publick Good and Benefit of our People…’ Charter of the Bank of England, 1694 iv Bank of England Annual Report and Accounts 2017–18 Overview Statement by the Chair of Court Overview As my four-year term as Chair of Court draws to a close, I want to Court, and the Bank’s policy committees take this opportunity to thank my committed, public-spirited and Our organisation exceptionally able colleagues for all they have done to support the The Bank’s Strategic Plan Bank’s mission to promote the public good by maintaining monetary and financial stability. Review of 2017/18 Sir Anthony Habgood Financial review 2017/18 Chair of Court Over the past four years — indeed over the two Cyber-security is just one area where the need decades since independence — the Bank has for excellence in professional standards and Risk management consistently demonstrated that it can adapt and business practices is as critical in public life as it thrive in the face of challenge. In my own time is in the private sector. And the importance of Our people we have seen the successful integration of the continuous professionalisation has been an area Corporate Responsibility PRA, the coming of age of the FPC, the of particular focus for me and for my Court successful switch to polymer banknotes and the colleagues over the past few years. We have Report of the Remuneration Committee comprehensive and highly effective contingency made many other advances, ranging from planning carried out first for the Scottish and improvements in talent management and Report on Oversight Functions EU referenda, and subsequently for the succession planning, to the investments made in substance of EU withdrawal. the Bank’s risk management approach. Report of the Audit and Risk Committee That excellence in the face of change has The Bank’s evolving remit means that efficiency Statement of the responsibilities continued over the past year. The Bank’s remit and prioritisation have moved up the agenda. has continued to adapt, with the acceptance of There is now a need to embed more firmly the of the Court of Directors in relation new responsibilities for operating the UK’s high Bank’s culture of cost containment. The to the financial statements value payments system (CHAPS) and for National Audit Office’s first review of the Bank Financial statements administering the benchmark interest rate was a valuable reminder of the importance of SONIA. And the organisation has continued to keeping costs under scrutiny, and of providing Contacting the Bank of England analyse the implications for its mission of clarity up front about the aims of planned challenges such as climate change and FinTech. investments. And the Bank’s Vision 2020 strategy is supporting the organisation’s aim of It is not only the economic and financial context becoming more flexible and agile in the way that that is changing. The commercial environment it works. is changing too. Cyber-security continues to be one of the most pressing issues facing all In my time as Chair, Court’s effectiveness has companies. Court, as the Bank’s Board, been strengthened by greater transparency continues to focus on the institution’s about its work as well as streamlined essential work to maintain and strengthen its governance arrangements. These have been cyber-defences. The Bank has made major underpinned by the 2016 Bank of England and strides here over the past few years, and fully Financial Services Act. The Act has supported recognises it needs to make further progress to the integration of different parts of the Bank, keep pace with technological change. including by putting the three main policy committees (MPC, FPC, PRC) on the same statutory footing. The Act has also reinforced Court’s work as the Bank’s unitary board, with non-executives and executives working together in a forum designed and sized to encourage fuller participation. Bank of England Annual Report and Accounts 2017–18 1 www.bankofengland.co.uk Overview Court’s statutory duty to keep the performance dedicated Governor, Mark Carney. I would like of the Bank under review continues to be to thank him, his Deputy Governors and Court supported by its Independent Evaluation Office as a whole for all that they have done over the (IEO). The IEO has published two in-depth past four years. I am also grateful for the reviews of the Bank’s work over the past year. It ongoing support for the work of the Bank has carried out an in-depth assessment of the provided by both HM Treasury and the effectiveness of the Bank’s reforms to its Treasury Committee. sterling liquidity facilities — reforms which were in part driven by a previous Court review Over the past year, Court has welcomed the in 2012. The IEO has also reviewed the appointment of Dave Ramsden as Deputy effectiveness of the Bank’s resolution Governor for Markets and Banking and arrangements. In both cases, the IEO observed Joanna Place as Chief Operating Officer, that while much had been achieved, there succeeding Charlotte Hogg. And after six years remained opportunities for different parts of of service, Tim Frost is stepping down as a Court the Bank to deepen their co-operation in Non-Executive Director. On behalf of the whole support of the organisation’s mission. Bank, I would like to thank Tim for his many contributions to the work of the institution, As well as these regular evaluations, the including the emphasis that he has rightly IEO supported the review carried out by placed on the need for the Bank to adapt itself Court Non-Executive Directors of the and its approach to the shifting technological Bank’s approach to conflicts of interest. and financial landscape. That review was published in August 2017. Court remains firmly focused on ensuring its I am delighted that Bradley Fried will be recommendations — and those of IEO reviews succeeding me as Chair of Court.
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