NPSO Limited. Minutes of the meeting of the Board of Directors

Transcription

1 NPSO Limited Minutes of the meeting of the Board of Directors Directors Melanie Johnson (MJ) Independent Chair Paul Horlock (PH) CEO NPSO Support Vanessa Graham (VG) UK Payments Administration Limited, Company Secretary Chet Behl (CB) Legal Counsel Rob Stansbury (RST) Senior INED Peter Sparkes (PS) NPSO Adviser (Item 31) Anna Bradley (AB) INED Tim Yudin (TY) NPA Lead (Item 28) Peter Wyman (PW) INED David McPhee (DM) Interim Head of Policy (Item 27) Russell Saunders (RSA) NED Afua Gharban (AG) Secretariat Becky Clements (BC) NED 18. Opening items MJ opened the meeting and noted that a quorum was present in accordance with the Company s Articles of Association. Each Director present confirmed that the Register of Directors Interests circulated at the meeting was accurate in respect of their respective situational interests. It was noted that PW was no longer Treasurer of the University of Bath. Each Director present confirmed that they had no direct or indirect interest in any way in the proposed transactions to be considered at the meeting which they were required by section 177 of the Companies Act 2006 and NPSO s Articles of Association to disclose. The register of gifts and hospitality was presented and noted by the Board. The draft minutes from the 10 th January Board meeting were approved. The Board referred to the actions table, noting actions that were in hand and those that were completed. The action relating to the Vocalink manuals which was to hold a workshop with the CEOs of Faster Payments and Bacs, to develop NPSO s understanding of the arrangements, was carried forward. Letters had been sent to the Chairs and INEDs of the PSO Boards setting out the relationship between the NPSO Board and the relevant PSO Board during transition and meetings were held with the majority of the INEDs. Discussions were ongoing regarding the approach to membership of the Participant Council. 19. NPSO Internal policies for approval VG said that a suite of NPSO policies are being created by rebranding UKPA policies. The Conflicts of Interest Policy and the Anti-Bribery and Corruption Policy (which were approved at the January Board meeting) are being reviewed by the People Workstream which will take the NPSO policies through an employee attestation as part of the company s Governance process. Any changes to policies going forwards (including those highlighted as priorities by the Board) will be reviewed by the People Workstream and taken through the same governance and attestation process. The revised Performance Management and Whistleblowing policies will be presented to the Board for approval following this review. A bespoke Anti-Money Laundering policy as requested by the Board will also be presented (ACTION: VG) 1

2 20. Bacs and FP update CB provided an update regarding the synchronisation of Transition and Transfer (T1 and T2) and of the submission of evidence for the non-objection application to the Bank of England (BoE). There has been a discussion with the BoE on developments further to Guarantors appointing Allen and Overy (A&O) as their legal representative. Regarding the 7 banks represented by A&O, the proposal is to align the dates for signing transactions for the creation of subsidiaries with BoE non-objection, such that T1 and T2 take place on the same day, at the end of April. The Board APPROVED the timeline for the synchronisation of T1 and T2. RST referred to the section of the paper on Non-Bank Payment Service Providers ( Non- Bank PSPs ), participating in Bacs which suggested that they will have a settlement collateralisation account with BoE holding their own funds and that: - Phase one accommodates Non-Bank PSPs access using own funds, required by 1 April 2018 and - Phase two accommodates Non-Bank PSPs access using client funds, required by 1 October RST stated that the above seemed erroneous and wanted to ask Bacs why Non-Bank PSPs were accessing client funds for collateralisation purposes. CB agreed to check this. (ACTION: CB) 21. C&CCC option one - consolidated paper and Offer letter CB said A&O provided support in relation to discussions with C&CCC. The Offer letter refers to entering into a bilateral agreement with shareholders, to enable continued funding of various activities within C&CCC. The letter included financial approvals and noted the actions for which C&CCC was required to obtain approval from NPSO. The Board considered whether a debt write-off position could be built into the structure if there was insufficient takeup of the image clearing system. It was agreed not to seek to renegotiate the C&CCC historic funding arrangements and the Board was of a mind to keep a similar per-click costing although the flexibility to change it was built into the participation agreements. CB said at T2 NPSO would inform the PSR that C&CCC has transferred responsibility for operation of the Image Clearing System. Further to AB s suggestion, it was agreed to request for C&CCC to work on closure of the PCS around end-october/ November 2018, to include the requested date in the Offer letter and to circulate the updated letter for the March/ April Board meeting, (ACTION: CB) Following RST s request, CB agreed to update the Offer letter as follows: Under Section 5 - Transition: Update part (c) to reflect that C&CCC is already incorporated. Under Section 9D - Financial oversight: Update part (a) to note regular review of financial resources, rather than review on an annual basis. 2

3 22. UKPA update CB talked through the proposal for the ring-fencing of the pension scheme. CB said discussions with UKPA and the shareholders were taking place. Shareholders had asked A&O to act on their behalf. NPSO carried out due diligence, working with the Trustee and their Executive committee. The banks were to see the scheme through to buy-out. There were some comfort letters in place, with payment plans sitting beneath them that the banks were complying with, but there is a concern that the letters were not binding as some of them were not counter-signed by the banks. Not all current shareholders entered into these letters and it is also not clear the extent to which the shareholders would be jointly and severally liable in the event that one or more of them were to default. The Board considered the suggestion to arrange for UKPA to put new contractual documents in place, with payment plans appended. The Board agreed to accept the arrangements in respect of the pension fund and its trustees. It was agreed to organise signature of any unsigned comfort letters that were already in place and to ensure that all institutions had a letter in place. (ACTION: CB) CB gave an update on the renegotiation of leases at 2 Thomas More Square, London (2TMS). CB said NPSO reviewed the UKPA leases of the First, Second and Third floors at 2TMS, in the context of a potential assignment, either directly into NPSO or via a business and asset transfer from NewUKPA, which NPSO acquires as part of Transition (should the Company wish to structure the transaction in that manner). The landlord could impose any reasonable conditions on the assignment of the leases. The Board noted the options included in the paper and the proposal to have a discussion with the landlord to ascertain what will be expected of NPSO. The Board was comfortable with the arrangements in respect of the pension and the leases. 23. GDPR co-ordination within 2TMS CB said UKPA, on behalf of NPSO recently engaged Xcina Consulting (XC) to assist and advise on GDPR compliance, both for NPSO Limited and the wider NPSO Group post Transition. It was planned for XC to work closely with Internal Audit to review GDPR compliance for each of Bacs, FPS, C&CCC, UKPA and NPSO. The objective is to identify areas of commonality between each of the five entities, in order to achieve consistent approaches/ harmonisation where possible (for example, with policies or procedures), to ensure that the NPSO Group is on target for GDPR readiness by the May 2018 deadline. 24. Definitions CB referred to the section of the Legal paper on Definitions, which was circulated ahead of the meeting. The paper included definitions for the following: Service user, End user and Participant. Further to MJ s query, CB said the Service user category was to capture those that were providing services to participants. It was suggested that the term Service user would not be used as a standalone definition in any public facing documentation however as it was codified in FSBRA, references to that statutory definition could be incorporated into the definition of a Participant. 3

4 25. Guarantor application pack The Board agreed that a policy was required, to set out criteria to be met in order to become a Guarantor. RST said that the purpose of the policy/ criteria was to manage the composition of the Guarantor group. RST advised that the reference to eligibility criteria should not be used as this implied entitlement to become a Guarantor and MJ agreed. CB said it was desirable that the Guarantor group should be representative of the wide community of the Company s stakeholders whilst ensuring that the size of the Guarantor group should be manageable from an administrative perspective. CB agreed to present a draft policy to the Board outlining the criteria to be used by the Board in the election and retirement of Guarantors. (ACTION: CB) The Board noted the table showing details regarding Guarantor applications that was circulated ahead of the meeting. An application was received from [Redacted commercially sensitive]. There were application requests from [Redacted commercially sensitive], each being an institution that was not currently a Guarantor of an in scope company. It was agreed for RST to remain the sole guarantor for the moment. 26. INED meetings MJ stated that Bacs had handed over their correspondence with regulators and reported that a constructive discussion had taken place about the issues raised. (DM entered) 27. Letter to the PSR DM presented the paper that set out the planned approach, following receipt of the PSR s letter setting out its priorities. DM said following the January Board meeting, NPSO met with representatives from the PSR to discuss the PSR s expectations around embedding NPSO s strategic objectives, in a manner that was both workable for NPSO and satisfactory to the PSR. This was the first in a series of regular meetings to discuss the PSR s expectations and NPSO s proposed response. The PSR s preference is for the objectives to be included in NPSO s articles, as this is an approach used successfully in other regulated industries, but they recognise this is not workable for NPSO. NPSO proposed the following ( the approach to embed the strategic objectives ): Inclusion of the strategic objectives in the Terms of Reference (TORs) for both NPSO s Advisory Councils, the Board and each of the following NPSO Committees: Risk and Audit, Finance and Nomination and Remuneration. Any changes to the above TORs would be discussed at the NPSO Board and the PSR would be consulted on any proposed changes. In addition, NPSO will publish the ToRs on NPSO s website. The PSR is generally happy with the above approach, but would need to see the detail of NPSO s final proposal, plus an explanation of why inclusion of the strategic objectives in the articles was not practical, as part of NPSO s overall response before approving. 4

5 After due and careful consideration: IT WAS RESOLVED THAT the approach to embed the strategic objectives, be and is hereby approved. The Board noted the agreed timetable for progress, ahead of issuing the final response to the PSR and publishing the response. (DM left and TY joined) 28. NPA Programme TY presented the NPA (New Payments Architecture) Programme paper that was circulated ahead of the meeting. The paper provided; an update on progress with assessment of the Payment Strategy Forum (PSF) Blueprint and the mobilisation status of the programme that will complete the NPA Design, and recommended a governance structure for the programme and layout of the current programme funding position. The objectives of the NPA programme were: To complete the design of the NPA so that it enables the wider payments ecosystem, whilst ensuring alignment of all NPSO current and future activities that relate to that design. This includes appropriate alignment to the Bank of England s RTGS renewal programme. To identify and agree a plan to deliver the foundations for new capabilities (e.g. Confirmation of Payee) before the NPA is fully implemented in the ecosystem. To align to UK Finance Initiatives and ensure delivery of the Financial Crime solutions can be supported with required operating requirements agreed with the NPSO. The Board referred to the Governance proposal that was set out in the paper, which provided that an appropriate governance structure needed to be put in place for the NPA programme and the structure needed to balance the PSF s open and transparent approach, whilst ensuring it does not get held back by the need to engage extensively with stakeholders. The proposal was to set up an NPA Programme Board to report to the NPSO Board, which will be accountable for completing the NPA Design in an agreed timescale. The Board noted the current funding position set out in the paper. The NPA Programme team estimated that a budget of approximately [Redacted commercially sensitive] will be required to complete the assessment and early pursuance of the PSF Blueprint during It was requested for the Board to consider what practical steps it can take to identify the funds required to complete the NPA Design to the depth, quality and timescales that are expected by the external stakeholders. The Board noted the challenges that the Programme Team is facing in mobilising the NPA programme. The Board endorsed the Governance proposal and the recommended approach to setting up the NPA Programme Board. It was planned for draft a TOR and delegated authority for the 5

6 Programme Board to be included on the agenda for the March NPSO Board meeting, for approval. It was planned to appoint a Programme Director through an open and transparent process and TY would continue to act as Programme Director until a suitable candidate was identified. PH agreed to write to the schemes, requesting nominees for the Programme Board. (ACTION: PH) These nominees must be empowered by the schemes to provide all relevant information on the current scheme activities that relate directly or indirectly to the NPA or any quick wins that they are pursuing independently. It was noted that PH should also receive a written assurance from the schemes that they will not pursue any activities that relate to the NPA Design or quick wins without formal approval from the NPSO. This includes any further steps on procurement (ACTION: PH). NPA Programme - End User Needs TY presented the supplementary paper on End User needs (EUN). The paper provided the background on the pressing need for the delivery of the specific foundation requirements for Confirmation of Payee (CoP) along with the current readiness position of Request to Pay. In the case of CoP, this has been clearly positioned by the PSR as a service that is expected to be delivered in 2018, at least in the shape of API specification that the market can then take forward to develop propositions. Similarly, there is an expectation for a Request to Pay capability (i.e. ready for adoption) to be in place in The following recommendations were set out in the paper: Confirmation of Payee (Account Number Verification Service - ANVS) - It is recommended that NPSO, jointly with MPSCo, undertake a full investigation into the potential for ANVS to meet the immediate PSF (and PSR) defined Confirmation of Payee need. The investigation should also assess the suitability of other potential options. Confirmation of Payee (API based solution) - A full investigation is recommended to be undertaken by NPSO to plan for an API driven strategic solution alongside the investigation into ANVS and other options. Request to Pay (RtP) - FPS continue to drive the RtP activity. Therefore a progress tracking mechanism from FPS and a plan to be put in place to keep the NPSO informed and help to define the level and type of NPSO support, if required, is recommended. The Board noted the current CoP status and the progress on RtP and endorsed the recommended approach looking forward. (TY left) 29. Funding PW circulated a paper on the build-up of the FY18 (Financial Year) funding by company. The paper was included on the agenda for the recent NPSO Finance Committee meeting, for the approval of the 2018 Budget. Karen Milton, Finance Lead and her team were working on 6

7 obtaining budgets from scheme companies and carrying out a consolidation, recognising intercompany payments, e.g. UKPA. The NPSO and NPA budgets for FY 18 were looked at. [Redacted commercially sensitive]. The forecast for the following three years, from 2019 to 2021 was currently being carried out. [Redacted commercially sensitive] (RSA left) 30. Target Operating Model (TOM) and C-Suite appointments The Board noted the TOM 1.0 (Transition and Transfer) update paper that was circulated ahead of the meeting. PH talked through the progress with the recruitment of the NPSO Executive leadership team (the C-Suite appointments ): [Redacted commercially sensitive] After due and careful consideration: IT WAS RESOLVED THAT the above C-Suite appointments be and are hereby approved, subject to receiving non-objection to the appointments from the BoE. PH said NPSO was searching the market for a new permanent Head of Internal Audit. NPSO also planned to search the market for a Head of Procurement, for which the role description was being drafted. PH said work is being done on TOM 2.0 and security is being looked at. (PS joined) 31. Bank of England (BoE) readiness criteria update Referring to the paper, PS said prior to the transfer of PSO responsibilities of any recognised payment system to NPSO, the Bank will conduct a readiness assessment in order to nonobject to the transfer. FPS and Bacs are BoE recognised payment systems. There are 40 NPSO readiness assessment criteria identified in the letter to RST from Justin Jacobs, BOE which were tabled at the January NPSO Board. Each of the criteria were discussed in turn at a workshop with the BoE, Financial Markets Infrastructure Division (FMID) in January. Following the workshop with FMID, an internal review of the state of readiness of the evidence required, has resulted in a proposal to make documentary submissions with supporting dialogue in three tranches. The requirements relating to designation under the Settlement Finality Regulations (SFRs) were also raised at the workshop with FMID: A transfer of PSO responsibilities would require a letter (internally referred to as the attestation ) from the outgoing PSO to confirm that the requirements of the SFRs would continue to be satisfied, plus a similar letter from NPSO. The next meeting with FMID is scheduled for 19 th February. 7

8 Referring to the Addendum paper on Operational Readiness Assessment Criteria (ORAC), CB said the 40 criteria cover the following seven themes of NPSO s operations: Governance, Audit, Standards, Risk, Disaster Recovery, Finance, and Recovery & Resolvability. NPSO has agreed with FMID to submit responses to the ORAC in three fortnightly tranches as follows: Tranche 1 - Governance, Audit and Standards Tranche 2 - Risk and Disaster Recovery Tranche 3 - Finance and Recovery & Resolvability The Board noted the process outlined for the BoE ORAC criteria, ahead of the final submission in March (PS and PW left) 32. CEO s Report PH talked through highlights from the CEO s report that was circulated ahead of the meeting. [Redacted commercially sensitive]. In respect of Regulatory developments; the MD of the PSR, Hannah Nixon, appeared before the Treasury Select Committee in January, along with John Griffiths Jones, the outgoing Chairman of the FCA and PSR. There was focus at the session on the APP scam consultation and the expectations for the NPA and overlay services. PH said James Whittle, Head of Standards for the team recently transferred across from Payments UK to NPSO, was asked to Co-Chair the European API evaluation group. Meetings continued with key representatives of guarantor and participant organisations. [Redacted commercially sensitive]. 33. Programme Director s Report The Board noted the Programme Director s report that was circulated ahead of the meeting. PH said the Programme status was currently red, but it was expected for the status to be amber (with a dependency on settling the financial strategy plan) for the next Board meeting. 34. Risk and Audit Committee (RAC) Report RST said the RAC looked at a final draft of the Risk Framework document at the January meeting. Consideration (with a view to recommendation to the Board for final approval) of the final draft of the Risk Framework and Risk Appetite was targeted for the next RAC meeting. The consolidated audit plan for 2018 was agreed. There were a significant number of open items arising from historic audit reports. A request had been made to the audit committees of the PSOs to close as many open items as possible, in particular overdue items. (ACTION: PH, KW and RST to meet to go through the consolidated list of open items to reach an initial view as to the route to closure.) It was planned to organise a structured handover to NPSO of any items that were not closed in due course. The search for a Head of Internal Audit was to be progressed. 8

9 35. Finance Committee and Risk and Audit Committee Reports The Board noted the minutes of the January 2018 Risk and Audit Committee meeting and the 6 th December 2017 Finance Committee meeting that were circulated ahead of the meeting. 36. Any other business It was noted that the next Board meeting was scheduled to take place on 7 th March and an Extraordinary Board call was scheduled to take place on 15 th March, ahead of the final submission to the BoE. The Board also noted the 2018 calendar of Board and Committee meetings. It was planned for the Board Planning Day to take place next week. On the appointment of members of the End-User Council (EUC), AB was expecting to receive the shortlisting report soon from Saxton Bampfylde (recruitment firm). AB [Redacted commercially sensitive] would be involved in the recruitment process and would be interviewing candidates. AB would be Chairing mock EUC meetings. It was agreed that Participant Council recruitment should be speedily progressed. There being no further business the Chair closed the meeting. 9