Afua Kyei is the CFO and Executive Director of the Bank of England. She reflects on the importance of leadership, strategy and resilience drawing on her experiences having been at the core of the Bank of England’s leadership during unprecedented times.
Executive Director, Finance
I am delighted to be here today. The last time I was here at the World Finance Forum was in October 2021, which was held at the QEII Centre in Westminster, where I spoke about the CFO’s role during a crisis.
I have been the CFO of the Bank of England for 4 years now, and I am also the Co-Executive Sponsor of Diversity & Inclusion at the Bank.
These last few years have brought new challenges and fresh opportunities. Today, I wanted to share some of my perspectives that I have developed on leadership, strategy and resilience during these unprecedented times.
The Bank has played an active role in reforming the financial system post EU-withdrawal. In particular, we have taken on major new responsibilities as a rule-maker and now have a significant additional number of firms to authorise and supervise due to the end of passporting arrangements. Since the autumn, the Bank has had a major role in stabilising, and supporting confidence in, the financial system at times of stress, including its intervention in the gilt market and the resolution of Silicon Valley Bank UK.
Every bit as importantly, the cost-of-living crisis and bringing inflation back down to the target of 2% remains a critical focus for the Bank.
We continue to assess the case for a UK Central Bank Digital Currency.
So, what does the CFO of the Bank of England do? I get that question a lot…
To put it simply, I try to help the Bank deliver its mission. Our mission is clear: “to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.”
Some of the things I am responsible for are strategy, performance, finance, tax, and managing the cash flows between the Bank and HMT, our sole shareholder. As the CFO, I oversee the financial governance of our £1 trillion balance sheet, so that’s a huge responsibility.
From a balance sheet perspective, I have also been leading a review of how we fund our policy costs. This has involved consultation with industry and requires a change in primary legislation; and we have put forward a proposal to move away from the cash ratio deposits scheme to the Bank of England levy, as part of the Financial Services and Markets Bill.
I am on the Board of the Bank of England Asset Purchase Facility Fund Ltd. This is the vehicle through which central bank operations, like quantitative easing and tightening, are conducted. As a director, it is my responsibility to ensure the company applies corporate governance arrangements judged appropriate to its policy objectives. One of the things I am proud of is that during the pandemic, I helped to set up a new subsidiary, the Covid Corporate Financing Facility Ltd. This provided liquidity in the market to non-financial institutions during the pandemic, so that they had sufficient cash to operate. We set this up very quickly to support the economy, and I was a director of this vehicle until we recently put it into liquidation.
I manage a number of key relationships with my peers at HMT, the National Audit Office, our two sets of auditors and central banks in the G7. I also liaise with the staff union to help maintain an open and constructive dialogue between the Bank and its employees.
So, what’s my background? I am not an economist. I am a chemist, a chartered accountant, a specialist in mergers and acquisitions and a commercial banker. I joined the Bank having spent my entire professional career in the private sector. At Ernst & Young, I was an auditor, at UBS during the global financial crisis, I was an investment banker advising clients and at Barclays, I did a mixture of CFO roles.
This means I bring something different to my organisation.
The Bank of England’s remit is incredibly broad, so I will touch on that briefly.
Firstly, there’s monetary stability – maintaining the stability and integrity of money. We do this by using monetary policy to meet the inflation target, and by ensuring the supply of genuine banknotes that are high quality, durable and difficult to counterfeit.
Secondly, financial stability, makes sure the UK financial system as a whole is safe and resilient to the inevitable shocks that will hit it so that it can continue to support the economy. This area of the Bank also supervises financial market infrastructures, such as clearing and settlement houses.
Thirdly, the Prudential Regulation Authority (PRA) is responsible for regulating and supervising around 1,500 individual financial institutions such as banks, building societies and insurers. It makes sure they are safe, sound and well run.
Fourthly, markets, banking and payments is at the core of using the Bank’s balance sheet to implement monetary policy and maintain financial stability by conducting market operations and providing banking facilities. Activity was heightened during the pandemic where we saw our balance sheet grow to over £1 trillion.
The payments division is responsible for operating critical national infrastructure, the
Real-Time Gross Settlement (RTGS) service, which processes over £750bn of payments a day. We are renewing this system, and I am part of the Renewal Executive Board (REB), which is providing senior governance for this renewal.
The Bank also acts as the UK’s Resolution Authority so, in the event that a bank or building society does fail, we minimise the impact on customers, the financial system and public finances.
Lastly, we have the areas responsible for the day-to-day operations and governance of the Bank; this includes areas like finance, risk, technology and people & culture.
Like you, my colleagues and I have been navigating the challenge of working through unprecedented times, against a complex, volatile, and uncertain economic and geopolitical backdrop. The main lesson we have all learned is that we need to be prepared for the unexpected.
After all, if we roll back five years, nobody would have predicted the combination of the Covid-19 pandemic, the brutal war in Ukraine, wholesale energy prices spiking, UK inflation hitting a 40-year high and having three UK prime ministers in 77 days.
I will always remember the day that Russia invaded Ukraine. As an executive team, a diverse mix of governors and executive directors of the Bank gathered around a hybrid table for a live update on the status of affairs. We then went around the table to think about how all the different parts of the Bank would contribute to help with the emerging tragedy through our unique position as a central bank. This involved assisting the Central Bank of Ukraine to help safeguard Ukrainian assets. We then used our regulatory powers to freeze the assets of Russian banks. We coordinated with SWIFT to exclude Russian banks from the SWIFT financial system. A team of our colleagues at the Bank even drove across Western Europe to support Ukraine by delivering three of the armoured trucksOpens in a new window that we use to transport banknotes, to the Central Bank of Ukraine.
We are in a new era, which has prompted the need for innovation and fresh approaches. The pandemic has caused a societal change, driving different cultural norms, ways of working, shifts in consumer behaviour and an emergence of innovative technological solutions.
When I was invited to speak with you, I thought carefully about which topics to cover. I decided to speak about topics that are important to me and my colleagues at the Bank. Leadership, strategy and resilience are three pillars that we have drawn on as we have navigated the external shocks and this intense period of change. These are areas where
I have been closely involved and which are fundamental to how we deliver our mission.
So, what have we done? And how have we done it?
It starts with our leadership culture at the Bank. In my opinion, leadership is about creating unity and drawing people towards a common goal. At the Bank, our mission is clear, and this is what galvanises the organisation and gives us a strong sense of purpose. We are here to serve the public and make a significant contribution to the good of nation.
The first thing I would say, is that our culture is underpinned by strong governance. Given how far-reaching the impact of the decisions the Bank makes on behalf of society are, the Bank needs a strong culture of governance. We achieve this through a consensus-building approach, and a culture of constructive challenge, where we listen to a range of views from generalists, technical specialists, external committee members and non-executive directors.
Secondly, we focus on communication and engagement. Over the last few years, I have learned how critical it is to communicate and engage with a broad range of stakeholders – not just internally but also externally. Through collaboration, we are able to anticipate issues as we tackle complex problems. In our world of central banking, this collaboration is international.
For example, it can be the international coordination we do with the G20 countries and the International Monetary Fund. Last year, I had the opportunity to provide a CFO’s perspective at the G20 hosted in Indonesia, where the theme was “Recover together, Recover stronger”. There, I spoke about the importance of planning strategically and budgeting to ensure that as central banks, we are the right size to operate efficiently, while meeting our statutory responsibilities effectively.
And at the last IMF Finance conference, I spoke on the topic of financial governance and how we embed value for money principles as central bankers while respecting the pursuit of our policy objectives. There, I described the differences and commonalities in approaches that I have experienced first-hand in both the public and private sectors.
In a similar vein, I had a number of reflections after attending COP26, in Glasgow, where there was a united focus and a strong sense of hope globally across industries, businesses and charities to shape a viable future for all life on our planet and to shape a sustainable future for the generations to come.
I have also spent time with ambassadors to the UK and the Commonwealth and have challenged myself to consider the world through the eyes of different countries and regions.
Last year, I had the honour of addressing an audience of established and aspiring accountants at Mansion House on the importance of allyship. The unique occasion was facilitated by the Lord Mayor and the London Society of Chartered Accountants and brought together presidents and former presidents of international accounting bodies with students to build relationships and support the new generation of accountants and leaders.
Domestically, the Bank engages closely with businesses of all sizes as well as communities throughout the UK.
I recently spent time with the Board of a world-leading technology business to understand how they’re using quantum technology to solve everyday issues. And I regularly speak with chairs, CEOs and CFOs of FTSE 100 companies and public sector organisations about how they are managing the risks and opportunities presented by their business models.
When I spoke at the Institute of Directors Northern Ireland annual dinner in Belfast last autumn, I heard from a number of small and medium-sized businesses from the surrounding area about the challenges that they were facing.
Just the other day, I met with a charity which provides legal support for vulnerable people. I was moved to hear about the charity’s financial struggles and we discussed what options were available to make sure it could continue its vital work.
I also enjoy regularly meeting with young people and students at school and universities. These young people can be from a range of different socio-economic and ethnic backgrounds. When we speak about how to access career opportunities, I try to dispel myths and change perceptions about who can work in finance. It’s important for young people from all walks of life understand that finance, along with other industries that are perceived to be difficult to access, is not only open to them but a place where they can thrive.
This engagement helps me to consider how I approach some of the problems that the Bank is helping to solve.
I have spoken about our approach to leadership. I will now reflect on strategy. In my experience, once the target culture is established, organisations are in a strong position to deliver their strategy more successfully.
During the pandemic, as the CFO, it was my responsibility to lead on developing our strategy. This was critical to help us plan over the medium term and to prioritise and use our time and resources most effectively. This was despite not knowing how the pandemic would unfold across the world in the weeks and months that lay ahead.
We used our mission to drive our strategy. We considered what we wanted to achieve over the long term and then focussed on what we wanted to achieve in the medium term. We reflected on the timeless outcomes we were seeking and also the enablers that would need to be in place for us in order to deliver on these outcomes. This evolved into the seven strategic priorities published in our Annual Report in 2020. They were the following.
We then built on these strategic priorities, embedding them in the medium-term strategic plans of each of our business areas.
Key to the Bank being able to provide stability, is being ready to intervene at any time. Building resilience is therefore integral to the Bank’s strategy.
There are many strands to resilience, in a macro sense, at an organisational level and at a human level.
As a central bank, it is our job to ensure that the financial system is resilient to shocks. The resilience of financial markets have been tested over and over again; through the pandemic, the war in Ukraine, and again over the past two weeks with Silicon Valley Bank and Credit Suisse.
Christine Lagarde, President of the European Central Bank, made a speech to the European Systemic Risk BoardOpens in a new window in December last year, where she remarked that “there are two facets of resilience that are vital:
Resilience is key in helping the financial system to deliver on its ultimate goal of supporting the real economy.
By identifying and addressing vulnerabilities ahead of time, we can increase the resilience of the financial system, allowing it to withstand – rather than amplify – shocks.
Banks also have a key role to play in contributing to resilience by having good visibility of near-term liquidity risks and concrete plans to tackle them; strong cyber defences; and the ability to withstand fire sales and the associated mark-to-market hit on assets held on their balance sheets. If not managed properly, these are all types of risks that are particularly likely to amplify and propagate shocks through the financial system.”
Resilience in the context of CFOs
And what does resilience mean to us as CFOs?
CFOs are in the perfect position to steer organisations to mitigate vulnerabilities and adapt to the future.
And then there’s resilience in a human sense.
The World Economic Forum referenced in January this year: “We’re on the brink of a polycrisis”. So, what exactly is a polycrisis? As stated by the World Economic Forum, this is a new descriptor which refers to the “cascading and connected crises we find ourselves in at the beginning of 2023”… “to define the scale of the problems the world is facing.” “The cost-of-living crisis is the most immediate and severe global risk. Climate-related risks are the biggest future threat facing the world. A polycrisis could have catastrophic consequences including armed conflict.”
In my view, against this backdrop, it has never been more important than now for leaders to build organisational resilience through having an inclusive culture. A culture where diverse views are not just heard, but influence outcomes. A culture with equity, where people are treated fairly and consistently no matter who they are or where they are from. This will enable our organisations and society to deliver outcomes and drive growth for the wider economy, and in particular with a humanitarian focus.
Our Governor, Andrew Bailey set the vision for the Bank of England’s culture at the start of his term in March 2020: “To be a human, humble Bank in step with the changing world.” In line with this, my colleagues and I have been thoughtful about how we interact within the organisation and externally. We think about the human impact of our decisions, how we engage and how we collaborate with members of our society that we are here to serve.
We put this human, humble vision into practice externally through the Bank’s outreach initiatives. Bank colleagues, including its senior leadership, travel around the UK to listen and talk with local community organisations, businesses and members of the public in our citizens’ panels. Through this, Bank colleagues and our external Committee members are able to hear first-hand people’s concerns, and how the decisions we are making are affecting, people’s lives day in, day out. This intelligence informs both our policy decisions and our communications. Listening more than we speak is at the heart of how we lead.
Diversity, equity and inclusion are instrumental to our culture at the Bank. I mentioned earlier that I am the Co-Executive Sponsor of Diversity and Inclusion at the Bank. It is important that we have colleagues and people around the leadership table from a range of backgrounds and who think differently. That way, we can challenge each other’s assumptions and perspectives, drawing on diverse experiences and views to better serve society.
To support our colleagues in achieving this culture, we have introduced Our Bank Behaviours, which enable us to embed clear expectations across the employee lifecycle, which includes recruitment, performance management and development. We have been developing a stronger speak up environment, where we encourage our staff to speak up where they see something unusual or see people behaving in a non-inclusive way that makes others feel uncomfortable.
To see how we are doing, I spend a lot of time listening to staff from around the organisation. At the Bank, we benefit from the vital work of our strong employee networks. This enables us to progress the culture of the Bank and understand where we need to be better. We want our leaders to have empathy, kindness, compassion and courage. This is particularly important as we emerge from Covid.
As a society, we are no longer the same. We have seen the effects on people, mental health, on business and on our economy. We have learned the importance of coping with and adapting to challenges.
We have seen loss of life at an alarming rate. We have learned not to take things for granted, and the importance of self-care and wellbeing. As a society, we are more thoughtful about how we are spending our time. We have seen a shift towards people wanting to work with purpose.
Across society and across our organisations, we need to have empathy to take the time to understand what someone else is experiencing at home and at work. And to try to make the workplace inclusive so that people don’t feel they have to change who they are in order to fit in at work. We want everyone to feel that they belong, can be themselves and to celebrate each other’s differences. And to ensure that corporate titles do not have a bearing on who gets heard. Otherwise, we will not harness the capabilities of our workforce and we will lose the ability to be creative and think innovatively.
To conclude, let me summarise by emphasising that in these turbulent times, it has never been more important for leaders to develop a strong culture in which the strategy can flourish, and to build resilience in different forms. Through this, I believe we will be able to create better outcomes for society and for the world we live in.
In the words of the late, great poet, Maya Angelou:
“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
As leaders, how do we want to be remembered? What impression do we want to create? What steps do we need to take now to leave a lasting legacy for future generations?
Thank you for listening.
To close, I would like to thank all those who have helped with the speech, Jamie Bell, Matthew Dove, Mohini Gurung, Andrew Bailey, Robert Hyde, Stephen White, Jonathan Curtiss, Victoria Cleland, Jane Cathrall, Huw Pill, Saba Alam, Sarah John, Lisa Young and Paul McArdle.