Annual Report The Bank of England’s mission OF ENGLAND BANK Annual Report is to promote the Good of the and Accounts People of the United Kingdom 1 March 2019–29 February 2020 by maintaining Monetary ANNUAL REPORT and Financial Stability | 1 March 2019–29 February 2020 2019–29 February 1 March Bank of England Threadneedle Street London EC2R 8AH www.bankofengland.co.uk ISSN 1467-016x Photography Front cover – © Matt Clayton page iv – © Bank of England Portraits Bank of England Print Park Communications Bank of England Annual Report and Accounts 1 March 2019 to 29 February 2020 Presented to Parliament by the Chief Secretary to the Treasury by Command of Her Majesty © Bank of England 2020 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, paragraph 33 of Schedule 17A of the Financial Services and Markets Act 2000 and Regulation 25 of the Central Counterparties (Amendment, etc, and Transitional Provision) (EU Exit) Regulations 2018, on its supervision of Financial Market Infrastructures. Contents Overview Financial statements Statement by the Chair of Court 1 Report of the Independent Auditor 86 Report by the Governor 3 Banking Department statement of income 90 Court and the Bank’s policy committees 5 Banking Department statement The Court of Directors 6 of comprehensive income 91 Policy committees 8 Banking Department statement Monetary Policy Committee (MPC) 8 of financial position 92 Financial Policy Committee (FPC) 9 Banking Department statement of changes in equity 93 Prudential Regulation Committee (PRC) 10 Banking Department statement Our organisation 12 of cash flows 94 Review of 2019/20 13 Notes to the Banking Department financial statements 95 Financial review 2019/20 35 Issue Department account 154 Risk management 43 Issue Department statement of balances 155 Our people 50 Notes to the Issue Department Inclusion and Sustainability 57 statements of account 156 Report of the Remuneration Committee 71 PRA income statement 159 PRA statement of balances 160 Report on Oversight Functions 78 Notes to the PRA statement of accounts 161 Report of the Audit and Risk Committee 82 Contacting the Bank of England 168 Statement of the responsibilities of the Court of Directors in relation to the financial statements 85 Bank of England Annual Report and Accounts 2019/20 iii ‘ 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 2019/20 Overview Statement by the Chair of Court I write this foreword at an unprecedented time for the world, United Kingdom and the Bank itself. Covid-19 has disrupted our day-to-day lives and our economy. The Bank, however, continues to meet its mission to serve the people of the United Kingdom and support the economy through these challenging times. Bradley Fried Chair of Court It is meeting that mission from its staff’s homes None of this could have been achieved without a rather than from its London offices and other massive effort from our technology teams, who sites across the United Kingdom. I am very have enabled the Bank to continue working proud of what the Bank and its staff are remotely. I have seen how smooth that contributing to the UK both in their day jobs but transition has been for myself: our April Court also outside those roles in their local meeting was the first ever to be carried out over communities. conferencing facilities, and discussion was as robust and probing as when we meet in person. Those day jobs have gone well beyond business as usual. The Bank’s policy committees That Court meeting was the first attended by have launched a rapid, comprehensive and our new Governor Andrew Bailey. This crisis hit innovative response to the shock that has hit the as he took over from Mark Carney. We were economy and financial sector. That has been fortunate to have two exceptional Governors supported by a raft of analysis — with staff available in March to develop our initial seeking out new data sources and our Agents response to the crisis. around the country reaching out to their contacts so that the policy committees can I am grateful that Mark agreed to extend his monitor events in real time. Staff have term to enable a smooth handover. As I said in continued to develop and expand our policy last year’s Report, under Mark’s leadership, the tools, finding ways to support lending to small Bank has been modernised and the organisation and large businesses, while our markets teams has been successfully brought together to have ensured that those new tools are effective. exploit the synergies of having monetary policy, That has not been in isolation, and the Bank has macroeconomic policy and microprudential been working effectively with the UK authorities regulation together in one institution. This crisis and has been driving thinking across the global has again shown the benefits of that work. community. While I would have preferred to welcome Beyond the policy measures, staff around the Andrew to the Bank in less trying circumstances, Bank are continuing in their efforts to maintain his experience in managing crises, and his monetary and financial stability. It is important knowledge of the Bank and the financial system to ensure that money — both electronic and makes him ideally placed to help steer the physical — continues to flow through the economy through the challenging times ahead. system. It is also vital to ensure that our banks I look forward to working with Andrew, and and financial services firms are able to continue helping him deliver his vision for the Bank, to support households and businesses through including taking the best of our current ways these difficult times. of working into an organisation that focuses continually on making the most of its talented staff. Bank of England Annual Report and Accounts 2019/20 1 Overview Of course, this Report covers more than the past And as an institution the Bank has to meet its few months. And is it important not to forget own longer-term challenges. Court continues to what the Bank has achieved over the year as a focus on the diversity of the organisation. As in whole. We published a review on the Future of previous years progress continues, with a nearly Finance — and the Bank has committed to work even split of women and men at our Executive on five key areas including ways to boost access Director level. But there remains further to go, to finance for small businesses and supporting particularly with respect to BAME representation the transition to a carbon-neutral economy. We at senior levels. have also continued our work on the Future of Money, with a discussion paper in March 2020 The BAME Taskforce, led by Deputy Governor starting a dialogue on Central Bank Digital Sir Dave Ramsden, has made a real difference in Currency. supporting our BAME colleagues and raising awareness of the barriers they face. But we need Linking the technology that drives the future of to see that feed through into real changes in the finance to the cash in our pockets, we announced makeup of the Bank’s senior leadership team and this year that Alan Turing would appear on the Court will continue to monitor this closely. And new £50 polymer note and also launched our Court members continue to be closely engaged Turner £20 note. Those were supported by with ensuring the Bank delivers its project excellent public communications and outreach. portfolio, including the overhaul of the real-time And the Bank’s broader outreach continues to gross settlement system that ensures the expand, with over 300 schools getting visits from smooth functioning of electronic payments, and Bank speakers during the year and 17 citizens’ the major changes needed to support a more panels held across the country, where members streamlined and efficient delivery of the Bank’s of the public can share their views on the own central services. economic issues that are affecting them and their communities. Through all this, Court has provided support and challenge as the Bank navigates the The Bank also needs to maintain its focus on immediate, longer-term and organisational those issues that were already facing the UK and challenges. I would like to thank all my global economy. The Bank continues to work colleagues who have worked with me on hard to ensure that the financial system is Court over the past year, and in particular prepared for Brexit once the transition period welcome Ron Kalifa, Frances O’Grady and comes to an end in December this year.