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Bank of England Annual Report and Accounts 1 March 2016–28

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Bank of England Annual Report and Accounts 1 March 2016–28 Annual Report and Accounts 1 March 2016–28 February 2017 Overview Court, and the Bank’s policy committees Bank of England Our organisation Annual Report and Accounts Review of 2016/17 Financial Stability Strategy 1 March 2016 to 28 February 2017 Financial review 2016/17 Risk management and business Presented to Parliament by the Chief Secretary to the Treasury practices by Command of Her Majesty Corporate social 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 2017 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 statement for the year prepared under section 7(2) and the report of the Bank’s auditors on it; (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 Prudential Regulation Authority has published a separate report as required by paragraph 19 of Schedule 1ZB of the Financial Services and Markets Act 2000, and in accordance with the requirements of the Companies Act 2006. 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 One Mission, One Bank iv Report of the Independent Auditor 80 Our organisation Statement by the Chair of Court 1 Banking Department statement Review of 2016/17 Report by the Governor 4 of income 82 Financial Stability Strategy Banking Department statement Financial review 2016/17 Court, and the Bank’s policy committees 9 of comprehensive income 83 Risk management and business The Court of Directors 10 Banking Department statement practices of financial position 84 Policy committees 12 Corporate social responsibility Banking Department statement Monetary Policy Committee (MPC) 12 Report of the Remuneration Committee of changes in equity 85 Financial Policy Committee (FPC) 13 Report on Oversight Functions Banking Department statement Prudential Regulation Committee (PRC) 14 of cash flows 86 Report of the Audit and Risk Committee Our organisation 16 Notes to the Banking Department financial statements 87 Statement of the responsibilities Review of 2016/17 17 of the Court of Directors in relation Issue Department account 136 to the financial statements Financial Stability Strategy 32 Issue Department statement Financial statements of balances 137 Financial review 2016/17 36 Contacting the Bank of England Notes to the Issue Department Risk management and business practices 44 statements of account 138 Corporate social responsibility 50 Contacting the Bank of England 141 Report of the Remuneration Committee 63 Report on Oversight Functions 71 Report of the Audit and Risk Committee 75 Statement of the responsibilities of the Court of Directors in relation to the financial statements 79 Bank of England Annual Report and Accounts 2016–17 iii www.bankofengland.co.uk Overview One Mission, One Bank The Bank of England’s mission is to promote the Good of the People of the United Kingdom by maintaining Monetary and Financial Stability. Promoting the Good of the People of the United Kingdom by maintaining Monetary and Financial Stability One Bank Maximising our impact by working together We attract and We are at the Our decisions We are inspire the best people forefront of research and actions have understood, credible to public service, and analysis as a influence and impact, and trusted, reflecting the diversity necessary part of our both at home so that our policies of the United Kingdom. policies and actions. and abroad. are effective. Diverse Analytic Outstanding Open and and Talented Excellence Execution Accountable Valuing diverse ideas Making creative Co-ordinated, Transparent, and open debate, use of the best effective and inclusive independent and while developing analytical tools and policy decisions accountable to and empowering data sources and reliable, stakeholders, with people at all levels to tackle the most expert execution efficient and economic to take initiative and challenging and in everything delivery of our policies make things happen. relevant issues. we do. and actions. iv Bank of England Annual Report and Accounts 2016–17 Overview Statement by the Chair of Court Overview Three years ago, the Bank launched the One Bank strategy to deliver the Court, and the Bank’s policy committees synergies between monetary policy, macroprudential policy and Our organisation microprudential supervision. The past twelve months have continued to Review of 2016/17 see that strategy come to fruition. Financial Stability Strategy The implementation of the One Bank strategy The first phase of the strategy emphasised the Financial review 2016/17 was underpinned by the changes brought about need for ‘Outstanding Execution’ — that is, by the Bank of England and Financial Services reliable, world-class execution in all that the Risk management and business Anthony Habgood Act 2016. As of 1 March 2017, following the institution does. That was exemplified in the practices Chair of Court Act’s final implementation, the three main comprehensive, highly effective and detailed committees of the Bank — the MPC, FPC and contingency planning carried out by the Bank Corporate social responsibility PRC — now enjoy the same statutory footing. in the run-up to the referendum on EU The Act has also streamlined and reinforced the membership, and in the professionalism of the Report of the Remuneration Committee work of the Court as the Bank’s unitary Board, institution’s response immediately following the Report on Oversight Functions with a firm focus on ensuring the professional ‘leave’ vote. The co-ordination between the management of a world-class institution. policy committees of the Bank during this period Report of the Audit and Risk was unprecedented. Committee The resulting benefits of the One Bank approach have been evident across the organisation. This The policy work of the Bank is not the only area Statement of the responsibilities includes our joint work — led by the policy that has benefited from reliable, professional of the Court of Directors in relation committees — on priority areas such as stress execution. In cyber security, for example, the to the financial statements testing and banking resilience. An example Bank’s investments in expertise and in during the year was the work to support professional standards have considerably Financial statements monetary and financial stability in the run-up strengthened the organisation’s defences. But, to, and the immediate aftermath of, the in a fast-moving environment, no institution can Contacting the Bank of England United Kingdom’s vote to leave the European afford to stand still. And the Bank needs to Union. continue to raise its game if it is to keep pace with the evolving nature of the threat. The One Bank strategy has rightly prioritised investment in the Bank’s most important asset Much of the Bank’s success stems from its — its people. The institution has seen material deserved reputation for analytical excellence. improvements in its approach to reward, The Bank has continued to invest in this area recruitment and retention, in talent over the past three years, not least with the management, in succession planning and in development of the One Bank Research Agenda measures taken to encourage diversity in all its and the launch of the Research Hub. Those forms. But while much has been done, investments have begun to reap rewards, challenges remain. For example, while it is including the notable rise in the Bank’s research encouraging to see increases in the proportion ranking. of female managers and of managers from an ethnic minority background, more needs to be Investment in data capability and expertise has done if the Bank is to succeed in meeting its been another analytical priority. While there 2020 diversity targets, particularly at senior has been clear progress here, it has not been levels. without its difficulties, not least that the transformation has proved to be more complex, and more time-consuming, than initially Bank of England Annual Report and Accounts 2016–17 1 www.bankofengland.co.uk Overview envisaged. In this area, as in a number of others The past year has seen a number of changes at the Bank, it is crucial that the institution in the Bank’s leadership. In late 2016, continues to equip its managers with the Dame Minouche Shafik resigned her post as professional skills they need. Deputy Governor of Markets and Banking to take up the position of Director of the London Openness and accountability is essential to School of Economics. On behalf of Court, maintain the public trust that the Bank needs if I would like to thank Dame Minouche for her it is to fulfil successfully its mission. And both service to the institution as well as to her Court, and the Bank more widely, continue to valuable contribution to cultural change — both seek out opportunities to bolster transparency within the Bank, and within the financial and trust. They are assisted in this by the services industry through her leadership of the Bank’s Independent Evaluation Office (IEO), Fair and Effective Markets Review.
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