here for

generations

Yorkshire Building Society

Annual Report and Accounts 2023

welcome

Introduction

Performance at a glance 2

Welcome from the Chair of the Board 4

Introduction from the Chief Executive 7

Financial statements

145

Income statements 146

Statements of comprehensive income 147

Balance sheets 148

Statements of changes in members’ interest and equity 149

Statements of cash flows 151

Notes to the financial statements 152

Other information

234

Annual business statement 235

Country-by-country report 237

Glossary 240

Contents

Strategic report

The external environment 12

Our purpose and strategy 16

Our ESG priorities 22

Engaging with our stakeholders 40

Our financial review 46

Risk overview 53

Governance

Our Board and Executive team 55

Corporate Governance report 64

Board Governance and Nominations Committee report 82

Audit Committee report 89

Risk Management report 97

Directors’ Remuneration report 109

Directors’ report 127

Independent auditors’ report to the members

of Yorkshire Building Society

135

performance at a glance

Statutory profit

before tax

Leverage

ratio

Core operating

profit1

Liquidity coverage

ratio

Cost to core

income ratio1

Average savings rate

differential2

Common equity

tier 1 ratio

Net Promoter

Score (NPS

450.3

£502.5m in 2022

6.2

6.2% in 2022

449.9

£425.6m in 2022

156.4

164.0% in 2022

41% in 2022

1.01

higher than market average

0.56pp higher in 2022

16.7

16.8% in 2022

+61

+54 in 2022

Member value

1 SeetheGlossarydefinitionsforalternativeperformancemeasures

2 YBSGroupaveragesavingsratecomparedtorestofmarketaveragerates.Source:CACI’sCurrentAccountandSavingsDatabase(CSDB),Stock.DataperiodJanuary–

December2023.

3 NetPromoterScoreandNPSaretrademarksofBain&Company,Inc.,FredReichheldandSatmetrixSystems,Inc.DataperiodJanuary–December2023,basedon

58,586responses.

4 BasedonBankofEnglandtotalindustrygrosslending.DataperiodJanuary–December2023.

5 Growthinmortgagebalancesexcludesfairvalueadjustmentsforhedgedriskonloansandadvancestocustomers.Prioryearcomparativerestatedonaconsistentbasis.

6 Source:YBSanalysisofBSAHouseholdsavings.DataperiodJanuary–December2023.

7 Carbonfootprintyearonyearmeasureonlyincludesdatawheredataisavailableforboth2022and2023.Theincreaseisduetoareturntobusinessasusualin2023

postthereductionintravelduetoCOVIDintheperiods2020-2022.TheSociety’soverallcarbonfootprintremainsbelowpre-COVIDlevels.Thefullbreakdownof

emissionsisavailableintheSECRpartoftheDirectorsreport.

Gross

lending

Gross mortgage lending

market share4

Growth in

mortgage balances5

New residential

mortgages provided

9.2

£10.3bn in 2022

3.9

3.1% in 2022

3.6

7.2% in 2022

44,000

47,000 in 2022

Place to call home

Savings accounts

opened

Savings balance

market share6

Growth in shares

balances

Average savings

rate paid

693,000

537,000 in 2022

2.3

2.2% in 2022

12.0

18.3% in 2022

3.43

over 2023

1.20% over 2022

Financial wellbeing

Carbon

footprint7

Landfill

diversion

+34

-79% in 2022

98.7

of waste

97.4% in 2022

Climate-related disclosures

2 | Introduction 3

Welcome

from the

Chair of

the Board

Welcometothe2023

AnnualReportand

AccountsforYorkshire

BuildingSociety.

Iampleasedtobeabletoreportthatthe

Societyhasdeliveredastrongsetofresults

duringaperiodofsomeeconomicturmoil.

Thiswillbemyfinalreportonthe

performanceoftheSocietyasIshall

besteppingdownafternineyearsas

ChairoftheBoardattheconclusion

oftheAnnualGeneralMeetingon

23April2024inaccordancewith

goodcorporategovernance.

Whilstagreatdealhaschanged

duringmytimeasChair,agreat

manyimportantcharacteristicsof

theSocietyhaveremainedthesame.

Wecontinuetobeamember-owned

mutualbuildingsocietywiththe

sameprioritiesthathaveguidedus

throughour160-yearhistory;helping

peopletohaveaplacetocallhome,

supportingthedevelopmentof

financialwellbeing,anddelivering

lastingvalueforourmembers.These

prioritiessitattheheartofour

purposetoprovideRealHelpwith

RealLife.

Thethingsthathavechangedsince

mybecomingChairincludeoursize

andscale(havinggrownourbalance

sheetfrom£38.2bnin2015,to

£61.0bn),ourdigitalandtechnological

capabilities,and,ofcourse,someof

theincrediblytalentedandcaring

peoplewhoservedtheSocietysowell

havenowretiredormovedontonew

challenges.Iwouldliketotakethis

Manyprospectiveborrowersalsoface

challengesashigherrates,coupled

withthepressuresonhousehold

incomes,canresultindifficulties

savingenoughforadeposit,or

meetingaffordabilitycriteria.Wehave

continuedtofocusondeveloping

newpropositionstosupportthose

segmentsofthemarketmost

impacted,includingthosethatalign

stronglytoourpurposesuchasfirst-

timebuyers.

Our long-term sustainability

Oneofthekeyconsiderationswhen

makingappointmentstotheBoard

isensuringthatwehaveadiverse

rangeofthought,supportedby

theappropriatelevelsofskillsand

experience.TheSocietyaimsfor

thehigheststandardsofcorporate

governanceandouroverriding

responsibilityistoensurethatwe

operateafinanciallysecureand

sustainablebusinessintheinterests

ofourmembership.OurBoardremains

committedtomaintainingarobustand

effectivegovernanceframework,which

supportsthedeliveryofourpurpose.

Indeliveringourpurposeofproviding

RealHelpwithRealLife,weseekto

haveapositiveeffectnotjustonthe

livesofourmembersandcustomers,

butmorebroadlyonsociety.Astrong

senseofsocialpurposehaslong

beenadefiningcharacteristicofthe

Society,andtodaywecanseethis

reflectedinouractivecommunity

programmes.Supportingcauses

relatingtoemployabilityskillsand

buildingfinancialwellbeingisone

Creatingasolidfoundationandthe

carefuldeploymentofourresources

arefundamentaltoensuringthat

weareabletocontinuetomeetour

purposeintheyearsahead.Asthe

initialphaseofourtransformation

journeycomestoaclose,ourfocus

turnstothenextstageofourgrowth

asanorganisation.Akeyelement

ofsustainabilityisensuringthatwe

keeppacewithtechnologicalchange,

andunderstandwhatourcustomers

needaswellasthewaysinwhichthey

wanttointeractwithus.Customer

expectationsareevolvingatan

increasingrate,andourcontinued

prioritisingoftransformationalchange

ofthewayswecangivebacktoour

communities,andIamproudofall

ofthecontributionsmadebyour

volunteersandpartners.Ourjourney

todeepenourunderstandingofthe

impactthatouroperationshaveonthe

naturalenvironmentalsocontinues,

assessingthepotentialrisksweface,

andtherolewecanplayinbuildinga

greenersociety.

recognisestheneedtoadvanceinthe

samedirectiontoremaincompetitive.

Toensurethatwearewell-equipped

forthisjourney,weareundertaking

significantfurtherinvestmentin

ourriskandcontrolframeworkand

havefinalisedthenextstageofour

strategythatwilltakeusinto2024

andbeyond.Itisimportantthatwe

findtherightbalancesothatweserve

ourexistingmemberswellandinvest

forourgrowth,whileatthesametime

ensuringthatwemaintainourlong-

termfinancialstrengthandstability.

opportunitytothankthemallfortheir

dedication,skill,andcommitment.

Apersistentthemeoverthecourse

of2023hasbeentheincreasedcost

oflivingandtherelatedchallenges

facedbyourmembersandbythe

communitiesweserve.Thelevelof

priceinflationbeganrisingsharply

in2022,andhasremainedaprimary

concernsince.Thelongerthe

cost-of-livingpressuresgoon,the

morepronouncedandwidespread

theireffectsbecome,requiringthe

Government,regulators,andtheBank

ofEnglandtomonitordevelopments

closelyandeffectchangeswherethey

deemnecessary.

Formuchof2023,BankRatehas

continuedtoincrease,nowstandingat

5.25%-alevelnotseenforanumber

ofyears.Interestrates,havingrisen

atasignificantmagnitudeandpace,

havehadapronouncedimpactonthe

marketsforsavingsandmortgages.At

timesthroughouttheyear,thedegree

ofuncertaintyaroundlikelypolicy

decisionshasresultedinthemarket

beinghighlyresponsivetothereleases

ofkeymacroeconomicdata.Asa

result,expectationsshiftedfrequently,

andsometimesmaterially,inshort

spacesoftime.

Forsavers,increasestointerest

rateshavebroughtsomegoodnews.

Significantincreasesintheratesof

returnavailableacrossthemarkethave

beenobserved,andattheSociety

wewerepleasedtohavebeenable

towidenouraveragesavingsrate

differentialtothemarketwhilstat

thesametimecontinuingtogrowour

savingbalances.Takentogether,these

haveenabledustoreturnmorevalue

toourmembersthaneverbefore.

Higherratesofinterestalsomean

anincreaseinthecostofborrowing,

whichposeschallengestomortgage

customers.Thosewhocurrentlyhave

amortgagefacemuchhigherrates

whentheirfixedtermscometoanend,

afterwhichtheirmonthlyobligations

couldincreasesignificantly.Wealways

seektoworkwithanyofourborrowers

whoareexperiencingdifficulties,and

itwillremainourprioritytohelpthem

tonavigatethesedifficultperiods.

Alignedtothis,wesigneduptothe

MortgageCharterinJune,alongwith

manyotherlenders,whichexpanded

therangeofoptionsavailableto

borrowers.

Changes to our Board and Executive team

AmongmykeyresponsibilitiesisensuringthattheBoardcomprises

memberswhoholdanappropriatelydiversecombinationofskillsand

experiencetooperateeffectively.Wehavecontinuedtoplacesignificant

focusonsuccessionplanningthisyearinordertoensurecontinued

effectivenessoftheBoardasweprogresstowardourstrategicgoals.

AnumberofchangeshavebeenmadetotheBoardandourExecutive

teamthisyear.

AsImentionedabove,afternineyearsasChairoftheBoard,Iwillbe

handingovertheroletoAnnemarieDurbin,whojoinedourBoardas

ChairDesignateinDecember2023.Iamdelightedtobeabletowelcome

AnnemarietotheBoardandtotheSociety,andIhaveeveryfaithinher

considerableabilitytoleadourBoardinnavigatingthechallengesofthe

yearstocome.

TheSociety’sChiefExecutive,SusanAllen,commencedherroleinMarch

2023,takingoverfromAlasdairLenmanwhoheldtheroleonaninterim

basisbeforereturningtohisroleasChiefFinanceOfficer.AlasdairhasannouncedhisintentiontoretireinJune

thisyearandIwouldliketotakethisopportunitytothankhimforhisoutstandingcontributiontotheSociety.The

BoardandIwillbepleasedtowelcomeTomRangerwho,subjecttoregulatoryapproval,willjointheSocietyasChief

FinanceOfficerlaterintheyear.

WewerepleasedtowelcomeDebraDaviestoourBoardasNon-ExecutiveDirectorinJuly2023.Debrawillbea

valuedadditiontotheBoard,bringingherextensiveexperienceandknowledgeofthefinancialservicessector,witha

particularfocusonremunerationandrisk.

IwouldalsoliketoextendawelcometoFraserIngram,whojoinedtheSocietythisyearasChiefOperatingOfficer.

FraserhasawiderangeofexperienceincludingbusinesstransformationandITandchangemanagement,whichwill

supportourorganisationgreatlyaswecontinueourchangejourney.

Annemarie Durbin

4 | Introduction 5

Welcome from the Chair of the Board (continued)

Regulatory factors

Keyupdatesfromtheregulatoryenvironmentthis

yearinclude:

•

TheFinancialConductAuthority('FCA')ConsumerDuty

cameintoforceforallon-saleproductsinJulythisyear,

withaseconddeadlinerelatedto‘closed’productsinJuly

2024.TheimpactoftheDutyisfar-reaching,withfirms

expectedtoembeda‘consumerfirst’approachintohow

theyruntheirorganisationsincludinghowtheypriceand

serviceproducts,howtheycommunicatewithcustomers,

andhowtheyprovidecustomersupport.Inrecentmonths,

theFCAhasbeenpayingparticularattentiontowhether

firmsaregivingcustomersfairvaluewiththeproductsand

servicestheyoffergiventhecurrenteconomicclimate.We

areengagingwiththeFCAtosharewiththemtheprogress

madetowardtheimplementationoftheDutyinadvance

ofthekeydates.

•

June2023sawtheintroductionoftheMortgageCharter

withthesupportoftheUKGovernment,theFCA,andthe

majorityofUKmortgagelenders.TheCharteroutlineda

setofstandardsthatlenderswilladopttohelpborrowers

whoareconcernedabouthighermortgageratesandthe

risingcostofliving.TheMortgageCharterisdesignedto

offermoreoptionstopeoplewhoarestrugglingwiththeir

mortgagerepayments,orareuncertainabouttheimpact

oftheirexistingfixed-ratedealcomingtoanend.

Facing the years ahead

TheoutlookfortheUKeconomyisalwaysexposedtoa

degreeofuncertainty;manyfactors,whethernationalor

international,canexertaninfluence.Thecurrentconsensus

viewamongeconomiccommentatorssuggeststhatthe

neartermwillbecharacterisedbytheongoingeffectsof

therisingcostoflivingandlimitedeconomicgrowth.This

islikelytocontinuetoposeconstraintsonthesizeofthe

mortgagemarketduetolowerconsumerdemand,and

reinforcesourneedtolendinapurposefulway.

Weanticipateanelevatedlevelofcompetitioninthemarket

forsavingsdeposits,havingalreadyobservedsomeofthese

pressuresinthesecondhalfofthisyear.Therequirement

forfinancialinstitutionstorefinancegovernmentfunding

aheadofitscontractualmaturityin2025hasresultedin

attimesdisruptivepricingstrategiesbeingemployedby

marketparticipants.Thispatternappearslikelytocontinue

into2024.

Inthecontextofthesepotentiallychallengingmarket

environments,itisimportantthatweresponsiblymanage

ourcostsasweaddressmanyofthesamechallengesfaced

byourmembersandcustomers.Wewillinvestpurposefully

inourtransformationprogramme,whichwillbeessential

inensuringwecontinuetomeetcustomerneedsand

expectationsnow,andinthefuture.

TheSociety’sbusinessmodelhasonceagaindemonstrated

itsresilience.Weclosetheyearinastrongfinancialposition

andreadytomeetthechallengesthatlieahead.Our

strategy,recentlyrefreshed,willseetheSocietyworking

collaboratively,inacleardirectiontowardfurtherimproving

onwhatwecandeliverforourmembersandcustomers.

Ithasbeenagenuinepleasuretohaveservedour

membershipoverthelastnineyears,andtohavehadthe

opportunitytoengagewithsuchatalentedanddiverse

rangeofpeople.Iwouldliketoconcludewithanoteof

gratitudetobothourmembersanddedicatedcolleagues

fortheirlong-standingtrustandsupport,andexpress

myfirmbeliefthattheYorkshireBuildingSocietyiswell-

equippedtosucceedasamutualbuildingsocietyformany

yearstocome.

John Heaps

ChairoftheBoard

Introduction from

the Chief Executive

Itismypleasuretopresentthe2023

AnnualReportandAccountsforthe

YorkshireBuildingSociety.

Asamutual,YorkshireBuildingSocietyisownedbyandrunforthe

benefitofourmembers.Ourrichheritagespans160yearsandwe

havedemonstratedasuccessfultrackrecordofprovidingRealHelp

withRealLifeforourcustomersoverthattime.

TheSociety’scommitmenttodeliveringforourmembersisevidentinthepassionand

enthusiasmshownbyourcolleaguesandteams,andthroughaculturethatplacesour

customersatthecentreofallthatwedo.Thechallengingeconomicbackdropofrecent

yearshasonlyreinforcedtheimportanceofourapproachtosupportingcustomers.

ThisreportmarkstheconclusionofmyfirstyearasChiefExecutive.Iamdelightedtolead

suchastrongandsustainableorganisation.Thegreatrangeofcompetitiveproductsand

servicesweofferarevaluedhighlybyourcustomers,andthestrengthofthefeedback

wehavereceivedshowsthattheywouldmorestronglyrecommendtheSocietytotheir

familyandfriendscomparedtolastyear.In2023,wewerealsoproudtoberecognisedas

aWhich?RecommendedProviderformortgages.

6 | Introduction 7

Introduction from the Chief Executive (continued)

Overthelastfewyears,ourmembers,

customers,andmanyothersacross

theUKhavehadtoadapttoavolatile

externalenvironment.Priceinflation

becameaglobalconcerninthefirst

halfof2022andremainsakeytheme

anddriverofmonetarypolicy.The

BankofEnglandcontinuestomonitor

developmentsintheeconomyclosely,

aimingtoreduceinflationtowards

theirmedium-termtargetof2%.Over

2023,BankRaterosefrom3.50%to

5.25%.

Thisenvironmenthascreated

challengesforthosewhoarelooking

tobuyahomeandthosewantingto

buildtheirfinancialwellbeing.

We are here to support our

members and customers

Amongourcoreprioritiesissupporting

andpromotingFinancialWellbeing.

Savingsbalancesrepresentaprimary

sourceoffinancialwellbeingand,at

timeslikethese,thepeaceofmind

thatcomesfromhavingarainy-day

fundcanmakeallthedifference.

However,althoughsavingsratesare

muchhigherthantheywereoneor

twoyearsago,weknowthatsaving

isnoteasyforall,especiallywhen

thecostofday-to-dayessentialsis

increasing.

Ourownresearch,publishedwithin

ourSavingtheNationreport8,

illustratedthedynamicsofsavings

behaviourintheUKoverthelast

fiveyears.Thereporthighlightedthe

wideninggapbetweenthosewhoare

abletosaveonaregularbasisand

thosewhoarenot.Italsocalledout

theneedtoraiseawarenessofthe

benefitsofproductslikeIndividual

SavingsAccounts('ISAs')andpointed

tostrategiestoestablishgoodhabits,

andtheresourcesavailabletosupport

customers.

Asamutual,weareproudtoprovide

valuetoourmembersbypaying

higherinterestratesonoursavings.

Over2023,theratesweprovidedwere

onaverage1.01percentagepoints

higherthanthemarketaverage,which

equatestoc.£441.1madditional

interestpaidtooursavers9.

We are a strong and

sustainable organisation

Wehavedeliveredanotherstrong

setofresultsfortheSocietyin

2023,furthersupportingour

financialposition,andourlong-term

sustainability.

Ourtargetedgrowthinretailsavings

droveanincreaseof£5.1bninsavings

balancesyearonyear.Whilstpaying

aboveaveragesavingsratestoour

customers,wealsomadeastrategic

decisiontocontinuemakingearly

repaymentsofgovernmentfunding.

ThevastmajorityofourinitialTFSME12

fundinghasnowbeenrepaid,ofwhich

£2.2bnwasrepaidin2023.Carryinga

loweramountofthisfundinghelpsto

mitigatetheriskheldonourbalance

sheetasthefirstmarket-widematurity

drawscloser,andmanylenderswillbe

seekingtorefinance.

2023grosslendingvolumeswere

£9.2bn(2022:£10.3bn)andnet

lendingwas£1.6bn(2022:£3.0bn).

Thisisagoodlevelofgrowthinthe

contextofthedisruptionstothe

mortgagemarketinlate2022,the

largerpopulationofmaturities,anda

reducedmarketsizein2023.

Netinterestmarginincreasedto

1.31%over2023(2022:1.30%).

Therateofbalancesheetgrowth

achieved,coupledwiththe

impactsoftherisinginterestrate

environment,hassupportedhigher

levelsofprofitin2023.Thisisalso

inthecontextofhavingcontinually

increasedoursavingsrates,aswell

asthecostimpactsoftheinflationary

environmentandaccelerated

transformationactivity.Coreoperating

profitfor2023was£449.9m,an

increaseof£24.3montheprevious

year,andstatutoryprofitbeforetax

was£450.3m(2022:£502.5m).Our

capitalgenerationremainssufficient

tosupportourfinancialposition,both

nowandunderourgrowthaspirations.

OurproactivityinpassingonBank

Rateincreasestooursavers,aswell

asthefournewmemberloyalty

productswelaunchedthisyear,

supportsthemeaningfulwidening

ofthisdifferentialyearonyear(0.56

percentagepointshigherover2022;

£198.6minadditionalinterest).

Providingsupporttoourborrowers

isalsoimportanttous.Researchin

ourHomeTruths10reporthighlighted

howhomeownershipismoving

furtheroutofreachformany.

ProductinnovationunderourPlace

toCallHomepriorityisoneway

thatweseektosupportprospective

borrowers.Wehavelaunchedproducts

throughourintermediarylender,

AccordMortgagesLimited(‘Accord’),

whichallowfamilymembersto

supportyoungergenerationsandwe

continuetoexplorewaystomakeour

productsavailabletoawiderrangeof

customers.

Wearealsomindfulofthechallenges

facedbyourexistingmortgageholders

andourteamshaveworkedhardto

understand,andrespondto,individual

circumstances.Weproactivelyreached

outtocustomersmostimpactedby

interestrateincreasesandwesigned

uptothegovernment-ledMortgage

Chartertohelpcustomersnavigatethe

highercostofliving.

We are committed to our

communities

Positivelyimpactingthecommunities

inwhichweoperatereflectsour

commitmenttoservingabroader

socialpurposeandwillremainakey

partofourfuturestrategy.

Oursupportforbuildingfinancial

wellbeingextendsbeyondtherange

ofcompetitivesavingsproductswe

offerintoourcommunityactivities,like

ouraward-winningpartnershipwith

CitizensAdvice.Inselectedbranches

acrossthecountry,representatives

fromCitizensAdviceofferfree,

confidentialadviceonmatters

includingfinancialwellbeing.

We have built strong

foundations

In2020,wesetoutaplantotransform

ourcapabilitiesandenhanceour

customerexperiencebytheendof

2023.WecalledthisourStrategic

Blueprint.AstheBlueprintcomesto

aclose,wearepleasedthatwehave

accomplishedmuchofwhatwesetout

toachieve.

Wedevelopedandlaunchednew,

betterwaystosupportourPlace

toCallHomepriority.Supported

byenhancedcapabilitiesanddata

analytics,webroadenedourmortgage

offering,makingitaccessibleto

awiderrangeofcustomersand

expandingourproductrange.Adeeper

understandingofassociatedrisksand

theirmanagementmeansthatweare

abletoacceptmoreborrowersthan

everbefore.Wehavebeenableto

launchtargetedproductstosupport

thosesegmentsthatarelesswell

servedbythewidermarket,suchas

thosewithlowercreditscores.

Thisserviceisavailabletomembers

andnon-membersalikeandisagreat

exampleoftargetedsupportinaction.

Feedbackshowsthatitismakingareal

differenceinlocalcommunities.

TheSocietyiscommittedto

maintainingabranchpresence.

Manyofourmembersvaluethe

personaltouchtheyreceiveinaYBS

branch,especiallywhentheyrequire

supportinmorecomplexsituations.

Ourresearchshowsthatbothlocal

branchesandpassbooksremainin

demandwithmorethanaquarterof

peoplesurveyedvisitingabranchonce

amonth,andoverhalfamillionofour

membersusingpassbooks11.Branches

alsoprovideanimportantlinkwith

ourlocalcommunities,astheCitizens

Advicepartnershipdemonstrates.

Ourflagshipvolunteeringprogram,

MoneyMinds,continuestoprovide

valuableresourcesonfinancial

educationandtohelppeopleto

prepareforwork.Thisisjustoneof

ourvolunteeringprogrammeswhich

enableourcolleaguestomakeareal

impactintheircommunities.

Iampleasedtoannouncethatthe

Society’slatestcharitypartneris

FareShare.FareShareisanational

networkofcharitablefood

redistributorswho,alongsideproviding

mealsforvulnerablepeople,strive

toalleviatetheimpact,androot

causes,offoodpovertyintheUK.

Thispartnershipalignsstronglyto

ourpurposeandvalues,andoffers

excellentopportunitiesforour

colleaguestocontributetowardsour

commongoals.FromNovember2023

untilJune2026,fundraisingactivity

anddonationsfromtheSocietywill

fundFareShare’sBuildingSkillsfor

theFutureprogrammewhichwill

providevaluablesupportformatters

relatingtofinancialhardshipand

employability.Weaimtoliftover

2,500peopleoutoffinancialhardship.

Ilookforwardtothepositiveimpacts

thatthiscollaborationwillbring.

Ouronlinesavingsexperiencewas

alsoakeyfocus,includinglaunching

ourmobileappin2020.Thestep-

changeinthelevelofgrowthachieved

inoursavingsbalances,andthe

continuedincreaseinourcustomer

satisfactionscores,aretestament

totheprogressmade.TheSociety’s

overallNetPromoterScore('NPS'),

whichisameasureofhowwillingour

customersaretorecommendusto

othersincreasedto+61in2023.This

isanincreaseof+7onourscorein

2022,and+10onthescorein2021.

Wealsocontinuetoreceiveexcellent

feedbackfrombrokerswhopraise

Accord’sswiftandhelpfulservice.

Wemustalwaysremainfocusedon

achievingthestandardsofservicethat

ourcustomersdeserve.Ifeverwefall

short,weactquicklyanddecisively.

Aftersomecustomeroutcomesdidnot

meetourinternalstandardsearlierin

theyear,weincreasedourfocuson

complainthandlingprocesses.Asa

result,customeroutcomesimproved

overthesecondhalfoftheyear,and

weremainfocusedonensuringgood

outcomesareconsistentlydelivered

toourcustomers.Wewillcontinueto

tacklechallengeslikethisheadon.

8 SavingtheNationreportavailableonourwebsite

9 YBSGroupaveragesavingsratecomparedtorestofmarketaveragerates.Source:CACI’sCurrentAccountandSavingsDatabase(CSDB),Stock.DataperiodJanuary–

December2023

10 HomeTruthsreportavailableonourwebsite

11 YorkshireBuildingSocietySavingssurvey:TheresearchwascarriedoutonlinebyOpinium.Allsurveyswereconductedbetween24thand27thOctober2023andthe

samplecomprisedof2,000UKadults.550,000membersofYorkshireBuildingSocietyusedapassbooktotheendofSeptember2023.

12 TFSME:TermFundingSchemewithadditionalincentivesforsmall-andmedium-sizedenterprises.

8 | Introduction 9

Introduction from the Chief Executive (continued)

OurMemberValuepriorityrepresents

thedutywehavetoourmembers

tooperatearesponsiblebusiness,

resilienttowhattheyearsaheadmay

bring.Thiscoverseverythingfrom

theproductsweoffer,totheservice

weprovideandhowwestewardthe

resourcesatourdisposal.

Ourmutualstructureallowsusto

makedecisionsintheinterestsofour

membership.Ihaveenjoyedhaving

openandhonestconversationswith

ourmembersinourbranchesacross

theUKandateventslikeYourTimeto

Talk.Insightintowhatmattersmost

toourmembersisabsolutelyvitalto

ensurethatwecontinuetoinvestin

therightareas.

Ourcapacitytoachievethegoalswe

havesetinOurStrategywillonlybe

fulfilledthroughtheabilityofour

colleaguestoreachforbetter,for

themselves,foreachother,andfor

ourmembers.Iamthankfulforthe

hardworkandgenuinecareforour

customersthattheydemonstrate

everyday.

We are strongly positioned

for the future

Withworldeventsdrivingcontinued

economicvolatilityandincreasing

levelsofcompetitioncompressingnet

interestmarginacrosstheindustry,

continuedchallengeslieahead.A

gooddealremainsdependenton

howtheinterestrateenvironment

evolves,andthespeedandefficacy

atwhichmonetarypolicyactioncan

returninflationtothelevelstargeted

bytheBankofEngland.Atthetimeof

writing,thecurrentsentimentofthe

We are ambitious about

the future

TheSocietyhasevolvedoverthelast

threeyears.Ofcourse,itisnotjust

ourorganisationthathaschanged,the

outsideworldlooksmuchdifferent

too.SincetheBlueprintwasset,the

environmentweoperatewithinisnow

fasterpaced,farmorechallenging,

andcustomerexpectationshave

continuedtoaccelerate.Aftertaking

timetocarefullyreflectonwherewe

arenowandwherewewouldliketo

be,aswellasdrawingonthewealth

ofexperienceofourcolleaguesand

members,wehaverefreshedour

strategyfor2024andbeyond.

marketindicatesapossibilitythatwe

havereachedtheendofthecycleof

increasestoBankRatethough,asever,

thisviewissubjecttochange.

Thefutureofthemortgagemarketwill

continuetobestronglyinfluenced

bytheinterestrateenvironment

anditsconsequencesforborrower

affordability,andthesupplyand

demanddynamicsinthehousing

market.Intheretailsavingsmarket,the

upcomingmaturityofTFSMEfunding

mayprecipitateanevengreater

degreeofcompetitionforbalances

thanthatobservedoverthesecond

halfof2023.

Insuchacontextitbecomes

increasinglyimportantthatweinvest

ourresourcespurposefullyand

selectively,focusingonthethings

thatwillbringthemostbenefittoour

membershipinthelongterm.Both

2022and2023representperiods

OurStrategyremainsfirmlycentred

onourpurposeofprovidingRealHelp

withRealLife.Ourvisionforthefuture

ofYBSisambitiousanditwillseeus

buildanagileorganisationthatcan

respondtomarketconditionsquickly

andhelpuskeepbetterpacewith

changingcustomerneeds.Itwillsee

usextendourreachtomorecustomers

anddomoretosupportourexisting

customerswhotrustusandwould

likeustohelpthemmeetmoreof

theirneeds.Customerexperiencewill

remainapriority,aswillsimplifying

ourinternalprocesses.

Thisnextphaseinourjourneywill

seeusgrowevenfurther.Toensure

thatwearewellpreparedforthis,

wecommissionedareviewofour

governance,risk,andcontrolsin2023.

Thisworkbuildsonourinvestments

insecurityimprovements,data

protection,andITriskinthelastfew

years,andisgoodpracticetoensure

thatourcapabilitiesremainresilient.

wherethelevelsofprofitsmadewere

higherthanhistoricallevels.Thiswill

helptoprotectthelong-terminterests

ofourmembership,providingstability

forwhentheanticipatedchallenges

crystallise,andallowingustoreinvest

inourproductsandservices.

Ittrulyisaprivilegetobeleadingthe

YorkshireBuildingSocietyintoitsnext

phase.Ilookforwardtocollaborating

withourmembers,ourBoard,andour

colleaguesacrosstheorganisation

asweunitebehindourrefreshed

strategicvision,andworktoevolve

theYorkshireBuildingSocietyinto

afuture-readyorganisation,fitto

provideevenmore

RealHelpwithReal

Life

forgenerationstocome.Thank

youforyourcontinuedsupportforthe

Society.

Susan Allen, OBE

ChiefExecutive

10 | Introduction 11

strategic

report

The external environment

TheSociety’soperations,andtheextentto

whichwecandelivervaluetoourmembership

overthelongterm,canbeimpactedby

factorsbeyondourcontrol.Forthisreason,

theexternalenvironmentinwhichweoperate

ismonitoredcloselyandcontinuously.

Identifyingandunderstandingrisksand

opportunitiesastheyemergeishowwecan

bestpreparefor,andadaptto,thechanging

externalcontext.

Economic and political overview

ManyofthefeaturesoftheUKeconomicandpolitical

landscapehavecontinuedalongthethemesestablishedin

2022.Theimpactofincreasedenergycostsanddisruption

totheglobalsupplychainbegantofeedthroughtoinflation

inwagesandthecostofservices,withthepeak12-month

ConsumerPricesIndex('CPI')inflationstandingat10.4%in

February202313.Inresponse,theMonetaryPolicyCommittee

('MPC')electedtoincreaseBankRatefivetimesinsuccession

uptoandincludingitsAugustmeeting,increasingfrom

3.50%astheyearopened,to5.25%14.AttheSeptemberand

Novembermeetings,theMPCchosetomaintainBankRate

atitscurrentlevel,pausingthecycleofincreaseswhichwas

previouslyunbrokensinceearly2022.Thisdecisionfollowed

thereleaseofinflationdatawhichshowedheadlineand

servicesCPIinflationhadfallenbacktoalevellowerthanhad

beenexpected.

Overtheremainderoftheyear,12-monthCPIfellfurther

to4.0%bytheendoftheyear,withanexpectationfrom

theUKGovernmentthatitwillreducetobeinlinewiththe

2.0%targetin2024.Theimpactofinflationarypressures

onhouseholdincomeshasbeensevereformany,withthe

increasedcostofeverydaygoodsandservices,coupledwith

highermortgageorrentalpayments,forcingmanytousetheir

savingsorborrowtomeeteverydayrunningcosts.Therateof

inflationoutpacedwagegrowthformuchoftheyear,andonly

inthesecondhalfwasrealwagegrowthobserved.

Thebroadconsensusviewamongeconomists

isthattheUKissetforaperiodofminimal

economicgrowthduetothegreatercostof

investmentinahighrateenvironment,coupled

withissuesinthelabourmarketaroundkey

skillsandproductivity.Asaconsequence,the

marketexpectationnowincludesapossibility

ofratecutsonthehorizon,thoughhow

closelythepolicydecisionsmaderesemble

thisexpectationissubjecttoahighdegreeof

uncertainty.

InNovember2023,theChancellorofthe

ExchequerdeliveredtheAutumnStatement.

Thispackagesetoutanumberoftaxmeasures

designedtostrengtheneconomicgrowth

throughsupportingBritishbusinessesand

increasingthenumberofpeopleinwork.

Thestatementalsoannouncedarangeof

administrativechangeswhichmakethetax

systemsimplerandmoremodern,ensuring

businessescaninteractwithitmoreeasily.

Thepoliticallandscape,bothwithintheUK

andglobally,remainsuncertain.AUKgeneral

electionisexpectedtotakeplaceduring2024

andaUSelectionisdueinNovember,bothof

whichmayhavesomebearingonthelevelof

volatilityinthemarkets.Theongoingmilitary

activitiesinUkraineandGazacontinuetobe

asourceofglobalpoliticaltension,withthe

timingofacessationintheseconflictshighly

uncertain.

The wholesale funding market

Wholesalefundingmarketssawseveralperiods

ofvolatilityanddisruptionthroughoutthe

courseof2023.Thespringbankingcrisis

thatbeganintheUS,alongwithongoing

conflictsinbothUkraineandtheMiddleEast,

servedtodampeninvestorconfidence.These

events,alongsidebroadervolatilityinthe

macro-economicbackdropresultedinmultiple

periodswheretheconditionsforaccessing

wholesalefundingmarketswereunfavourable.

Despitethis,thevolumeofissuancein

securedfundingmarketsincreasedin2023

asinstitutionscontinuedtorefinanceTFSME

borrowingsaheadofcontractualmaturitiesin

2025.Thisplacedincreaseddemandonthe

CoveredBondmarketinparticular,thoughthe

higherlevelofsupplyhasbeengenerallywell

absorbed.Thistrendisexpectedtocontinue

in2024assignificantrefinancingactivityis

requiredacrossthemarket.

The UK mortgages market

Thedegreeofchangethehousingmarket

hasbeensubjecttoinrecentyearshasbeen

significant.Aperiodofstable,historicallylow

interestrateshasbeensucceededbyone

inwhichBankRatechangesaremuchmore

frequentandbringgreaterconsequences.With

theinflationaryandcost-of-livingpressures

havingledtoBankRatestandingover5.00

percentagepointshigherthanthatinDecember

2021,theimpactonmortgageaffordabilityand

itsconsequencesforthelevelofdemandinthe

markethasbeenconsiderable.

2023openedinthewakeoftheimpacts

oftheeconomicdisruptionexperienced

inlate-2022,resultingfromtheAutumn

budgetannouncements.Althoughthere

weresomepositivesignsofthemortgage

marketrecoveringinthefirsthalfoftheyear

–customerrateshadbeguntoreduce,and

lendersresumedtheirpresenceinhigher-LTV

segmentsfromJanuary–muchof2023has

remainedcharacterisedbyvolatility.

Asmarketsandlendersreactedtothechanging

externalenvironment,fundingcostswere

subjecttofrequent,andsometimesmaterial,

changes.Themarketcontinuallyrevisedits

expectationsofthefutureratepath,factoring

inthelatestmacroeconomicdataandlatest

monetarypolicyaction.Thesefluctuations

haveadirectbearingonthestabilityof

mortgagepricingand,assuch,repricingactivity

continuedatgreatpaceandregularity.

Mortgagecustomerratescontinuedtotrend

upwardinthefirsthalfof2023,before

beginningtograduallydeclineoversubsequent

months.Evenso,thecostoftakingout

mortgagesissignificantlyhigherthaninrecent

years,whichisapotentialcauseforconcern

forthoseseekinganewmortgageandthose

withanexistingmortgageapproachingtheend

itsfixedterm.Potentialforhigherrepayment

obligations,combinedwiththeincreasedcost

ofliving,ledtheGovernmenttoannouncethe

MortgageCharterinJune2023.Thecharterset

outtoreassureandsupportborrowerswhoare

facingdifficulties,settinganumberofuniversal

standardsforlenderstoimplement.Anumber

oflenderssigneduptotheMortgageCharter,

includingYBS,representingaround90%of

themarket15.

Comparedto2022,thesizeofthemarket

formortgageshasreduced,illustratingthe

pressuresthatnewborrowersarefacingasthey

eitherexercisegreatercaution,findthemselves

unabletosave,orhavedifficultymeeting

lendingcriteria.Amoreacuteimpacthasbeen

seeninthemarketforbuy-to-letmortgages,as

affordabilityconsiderationscandirectlylimit

theamountlandlordscanborrow.

13 https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/

consumerpriceinflation/december2023

14 https://www.bankofengland.co.uk/monetary-policy-summary-and-

minutes/2023/september-2023 15 https://www.gov.uk/government/publications/mortgage-charter/mortgage-charter

12 | Strategic report 13

The external environment (continued)

Inturn,thislowerlevelofdemandhas

servedtosteadilyreducehouseprice

growthoverthecourseoftheyear.

AccordingtotheOfficeforNational

Statistics,averageUKhouseprice

annualinflationhasbeengenerally

slowingsinceJuly2022whenthe

rateofgrowthwasashighas13.8%;

thelatestdataavailableatthetime

ofwritingshowstherateforthe12

monthstoNovember2023asa2.1%

decrease16.

Theoutlookforthemortgagesmarket

heavilydependsonthefutureinterest

rateenvironment.Intheshortto

mediumterm,itislikelythatboth

existingandprospectiveborrowers

willcontinuetofacechallengesamid

thiscontextofuncertainty.Inaddition,

becauseofthelong-heldcustomer

preferenceforfixed-ratemortgages,

theimpactsofthehigherinterestrate

environmentwillbestaggeredover

time,withsomeofthisimpactyetto

beseen.

The UK savings market

Inthefirsthalfoftheyear,fixed-rate

productscontinuedtoincreasein

popularity,alignedtothehigher

interestrateenvironment.Thisledtoa

premiuminpricingforthosewiththe

abilitytolockmoneyawayforaperiod

oftime,anddroveashiftincustomer

preferences.Acrossthemarket,

depositbalanceswereobservedto

migrateawayfromcurrentaccountsor

variable-rate,easyaccessalternatives.

Therateandpaceatwhichthe

changestoBankRatehavebeen

passedthroughtovariablecustomer

rateshasdifferedacrossthemarket,

sometimessignificantlyso.Astheyear

progressed,agreaterproportionof

themorerecentBankRateincreases

wasobservedtobepassedthrough

tocustomersasthegenerallevelof

competitionforattractingdeposits

heightenedfurther.

Thedriversoftheincreasein

competitiveintensityarelikelymany,

thoughoneimportantfactoristhe

overallsizeofthesavingsmarket.

Despitethehigherinterestratesof

recentyearsleadingtogreaterinterest

capitalisation,overallgrowthappears

tohavebeenlimitedaspeoplefind

themselveslessabletosaveamidthe

tohelpborrowerswhoareworried

abouthighermortgageratesandthe

risingcostofliving.TheMortgage

Charterisdesignedtooffersome

consistentandclearoptionsto

peoplewhoarestrugglingwiththeir

mortgagerepaymentsoranxious

abouttheimpactoftheirexisting

fixed-ratedealcomingtoanend.YBS

areamongthelendersthatsigned

uptotheCharterandwebelievethis

providesavaluableadditiontothe

supportavailabletocustomerswho

arestrugglingwiththerisingcostof

mortgages.

Confirmation of Payee

YBSimplementeditsConfirmationof

Payeeservice.Thisallowscustomers

tocheckifthebankaccounttheyare

sendingfundstomatchesthename

theyareexpecting.YBSwaspartofthe

secondphaseofproviderswhowere

directedtoimplementthisservice

(thesixlargestbankinggroupsbeing

partofthefirstphase).Confirmationof

Payeeprovidescustomerswithmore

comfortwhentheyarepayingpeople

orbusinessestheyhavenottransacted

withbefore.Itallowsthecustomerto

checkthattheyhaveentereddetails

correctly,aimingtopreventthem

beingsubjecttofraud.

Economic Crime and

Corporate Transparency Act

TheEconomicCrimeandCorporate

TransparencyAct2023('theAct')

receivedRoyalAssentinOctober

2023.TheActintroducessignificant

powerswhichwillallowUKauthorities

toproactivelytargetorganised

criminalsandothersseekingtoabuse

theUK’sopeneconomy.Companies

Housewillreceiveenhancedabilities

toverifytheidentitiesofcompany

directors,removefraudulent

organisationsfromthecompany

criminalinvestigationagencies.

TheActalsomakessignificantchanges

tothelawofcorporatecriminal

liabilitybymateriallyexpandingthe

scopeofpersonswhosecriminal

conductcanbeattributedtoa

companyandbyintroducinganew

offenceoffailingtopreventfraud.

Largecorporations,includingYBS,have

thepotentialtobeimpactedbythese

changesasprosecutorswillbebetter

abletoholdthemaccountableshould

malpracticeoccur.

broadercontextofinflationaryand

cost-of-livingpressures.

Savingsprovidersalsocameunder

greaterscrutinyfromboththemedia

andregulatorstodemonstratethat

thebenefitsofhigherratesare

beingpassedonatanappropriate

level,atatimewheretheinterest

rateenvironmentsupports

incomeperformanceacrossthe

bankingindustry.Alongsidethe

implementationofthefirststageof

theConsumerDuty,whichbrought

afocusonfirmsprovidingfairvalue

tocustomers,inJuly,theFCAalso

publishedareviewofthecash

savingsmarket.Thisreviewfurther

emphasisedfairvalue–bothinthe

differentialbetweennewandexisting

customerrates,aswellasthelevelof

benefitsaversreceivefromincreases

toBankRate.

Thebankingsectorisalsopreparing

forthematurityofTFSME,the

government-backedfundingscheme

whichprovidedsystemicliquidity

totheindustryattheonsetofthe

pandemic.Schemeparticipantsare

intheprocessofrefinancingtheir

drawings,throughacombinationof

retailsavingsandwholesalefunding.

Bythefourthquarter,themarkets

forbothfixed-andvariable-rate

savingsproductshadbecomehighly

competitive,withsomeinstitutions

takingpricingpositionssignificantly

aheadoftherestofthemarket.

Lookingforward,itappearsunlikely

thattheintensityofcompetitionfor

savingsbalanceswilllessenin2024.

Ifthecentralbankinginterventions

aresuccessful,inflationarypressures

willsubsidegradually.Ifandwhen

theinterestratepathstartsreducing,

thismaydrivedifferentdynamicsfor

bothcompetition,andforcustomer

behaviours.

Regulatory overview

Relevantupdatesfromtheregulatory

environment:

Financial Conduct Authority

('FCA') Consumer Duty

TheFCAConsumerDuty('theDuty')

cameintoforceforallon-sale,or

‘open’,productsinJuly2023.Asecond

deadlineisapproachingtoensureall

Diversity equity and

inclusion in the financial

sector

TheFinancialConductAuthority,

PrudentialRegulationAuthority,and

BankofEnglandjointlypublished

adiscussionpaper(DP2/21)on

DiversityandInclusion('D&I')inthe

financialsectorinJuly2021and

havesincefollowedthisupwitha

publicconsultationinSeptember

2023.Theregulatorssetoutpolicy

optionsincluding,amongothers,the

useoftargetsforrepresentation,

measurestomakeseniorleaders

directlyaccountableforD&Iintheir

firms,linkingremunerationtoD&I

metrics,andtheregulators’approach

toconsideringD&Iinnon-financial

misconduct.

TheregulatorsbelieveincreasedD&I

willadvancetheirstatutoryobjectives

byresultinginimprovedgovernance,

decisionmaking,andriskmanagement

infirms,inturnleadingtoamore

innovativeindustrythatprovides

productsandservicesbettersuitedto

thediverseneedsofcustomers.

Theproposalsincludethatfirmswill

berequiredtoreflectD&Iintheir

Board-levelstrategy,haveD&Itargets,

‘closed’productsarecompliantwith

theDuty,by31July2024.Thismeans

thatfirmsmustensurethesamehigher

standardsofconsumerprotection

areinplaceforallproductsthatare

nolongeronsalebutarestillbeing

serviced.

TheimpactoftheDutyisfar-reaching,

withfirmsexpectedtoembeda

‘consumerfirst’approachintohow

theyruntheirorganisationsacrosshow

theypriceandserviceproducts,how

theycommunicatewithcustomers,and

howtheyprovidecustomersupport.

Oneyearonfromtheinitial

implementationoftheDuty,firmswill

beexpectedtoprovidetheirBoard

withthefirstannualassessmentof

howthefirmismeetingtheDuty,

andreportonanyareasofpotential

harmtocustomers.Whereissues

areidentified,aplantoaddress

theseshouldbeincluded.TheFCA

recognisesthatlastingchangecan

onlytakeeffectwhenafirmchanges

itsculture,behaviour,andprocesses

usingatop-downapproachwithstrong

seniorchampioningandoversight.

Inrecentmonths,theFCAhasbeen

payingparticularattentiontowhether

firmsaregivingcustomersfairvalue

withtheproductsandservicesthey

offergiventhecurrenteconomic

climateandvolatilitywithinflationand

interestrates.Theregulatorintendsto

moveatpacetohighlightfirmswhere

weaknessesexistandholdtheirsenior

leaderstoaccountwheretheyarenot

deliveringgoodconsumeroutcomes

withintheirareasofresponsibility,

inlinewiththeSeniorManagersand

ConductRuleDutyofResponsibility

andtheConductRules.

YBShasengagedwiththeFCAtoshare

withthemtheprogressmadetoward

theimplementationoftheDutyin

advanceofbothofthekeydates.YBS

alsocommissionedanindependent

reviewofitsConsumerDutyMI(and

supportingframework)andtheoverall

positionofYBSConsumerDuty

project.

Mortgage Charter

June2023sawtheintroductionofthe

MortgageCharterwiththesupport

oftheUKGovernment,theFCA,and

lenders.TheCharteroutlinedaset

ofstandardsthatlenderswilladopt

reflectD&IinappropriateSenior

ManagementFunctionresponsibilities,

includenon-financialmisconductin

theirConductRulesconsiderations,

andsubmitanannualregulatory

return.

AtYBS,weareguidedbyaclearset

ofbehaviours.Akeypartofhowwe

seektodemonstratethesebehaviours

istoworktocreateafullyinclusive

environmentforallourcolleagues,

customers,andcommunities:onethat

istrulyrepresentativeofmodern-

daysociety.StrivingtoensureYBS

iswelcomingtoandrepresentative

ofthecommunitiesweserve,and

thatweattract,retain,anddevelop

ourtalent,willonlyleadtogreater

success.Wearesignatoriestothe

WomeninFinanceCharter,theRace

atWorkCharter,haveachievedLevel

2:DisabilityConfidentEmployerand

areworkingtowardLevel3:Disability

ConfidentLeader.

TherecommendationsmadeintheFCA

andPRAconsultationpapersbroadly

aligntotheSociety’sdirectionof

travelforDiversity,Equity,&Inclusion

('DE&I').Wewillfullyconsiderthe

recommendationsaspartofourDE&I

Strategyreviewandmeasures,which

waspresentedtoESGCommitteein

December2023.

16 https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/september2023

14 | Strategic report 15

Our Purpose and Strategy

The Yorkshire Building Society exists to provide our

members and customers Real Help with Real Life.

The actions we take are in service of

achieving this purpose. Our three core

priorities underpin this purpose, and are:

helping people to have a place to call home,

helping to support and build greater financial

wellbeing, and delivering value for our

members over the long term.

Our business model

TheSocietyoperatesasimplebusinessmodel.Asamember-

ownedmutualweexisttoprovidethosesavingwithus

asafeplacetokeep,andearnintereston,theirdeposits.

Thesesavingsbalancesarethenprimarilyusedtofund

mortgagelending,enablingcustomerstosecureaproperty

theycancallhome.Alongsidesavingsdepositsfromour

members,theSocietyaccessesthewholesalemarketsfor

additionalfundingandtoprovidediversityandstabilityto

ourbusiness.

Wealwaysactinthelong-terminterestsofourmembership.

Aswedonothaveexternalshareholders,thelevelof

profittheSocietygeneratesisrequiredtobesuchthatour

financialpositionremainssecure,thatsufficientcapitalis

generatedtosupportourgrowthplans,andthatwecan

continuedevelopingproductsandservicesthatfulfilthe

needsofourmembersandcustomers.

How our

business is

funded

•

Savingsbalancesfrommembers

andcustomersareheld,afterbeing

depositedthroughourbranchesor

online(c.79%).

•

Ourcapitalreserves,predominantly

comprisingprofitsgeneratedfrom

previousyears(c.5%).Capital

providesprotectionandflexibility

againstthepossibilityoflossesor

unforeseenevents.

•

Additionalfundingisraisedthrough

thewholesalemarketsbyissuing

bondsordebtsecurities(c.14%)as

wellasdrawingsfromGovernment

fundingschemeswhereapplicable

(c.2%).Thisprovidesdiversification

andpreventsoverrelianceonanyone

sourceoffunding.

How this

funding is

used

•

Providingresidentialmortgages

toowner-occupierandbuy-to-let

customers(c.75%)andproviding

commercialmortgagesthroughour

specialisedlendingchannel(c.3%).

•

Ourlendingstrategyistobalanceour

lendingacrosssegmentswhichservea

largeproportionofthemarketaswell

asspecificallytargetingthosesegments

whicharealignedtoourpurposeor

currentlyunderserved.Beingselective

aboutthesegmentsinwhichwechoose

tocompetecanbeasourceofvalue

generation–valuewhichcanthenbe

sustainablyreturnedtoourmembers.

•

TheSocietyholdscashandTreasury

Investments(c.22%).Thepurposeof

holdingsufficientHighQualityLiquid

Assets(HQLA)istoensurethatwecan

meetourobligationsastheyfalldue,

tocomfortablyexceedtheminimum

thresholdsprescribedbyregulators,and

tosupportfinancialstabilityasinvested

assetsalsoprovideincomeandrisk

diversification.

How our

income is

earned

•

Income,intheformofinterest,is

receivedfromourmortgagecustomers,

aswellasfromtheliquidasset

investmentsheld.

•

Theinterestreceivedisoffsetbythe

interestwhichisduetoourdepositors

andinvestorstoarriveatnetinterest

income.

•

Asmallproportionofourincome

(lessthan1%)isnon-interestincome,

generatedfromsecondarylinesof

businesssuchascommissionearnedin

relationtoinsuranceproducts.

How we

spend and

invest

•

Ourrewardandremunerationpolicies

aredesignedtoattractandretain

colleagueswhopossesstherequisite

skillsets.

•

Toremaincompetitivedisciplinedcost

managementisessential.Overthelong

termweaimtoreduceouroverallcosts

toimproveourefficiency,acceptingthat

additionalinvestmentswillbemadein

thepursuitofourstrategicobjectives.

How we

manage our

long-term

stability and

sustainability

•

Weprioritisetherobustnessofour

systemsandframeworkswhicharein

placeforthemonitoringofrisks.We

ensurethatourliquidityandcapital

positionsaresufficientandabove

regulatoryrequirements.

•

Weinvestinourstrategically

importantcapabilities,includingour

TransformationRoadmap.Strategic

investmentensuresthatweevolve

alongsidetheexpectationsofthe

marketanditscustomers.

•

Ahighstandardofcorporategovernance

ismaintained,asiscompliancewith

lawsandregulations.

•

Appropriateprovisioningisheldinthe

eventthatcreditlossesarerealised.

•

TheSocietyembracesoursocialand

environmentalresponsibilitiesand

regularlyengageswithourwider

stakeholdergroups.

Our business model

16 | Strategic report 17

Our purpose and strategy (continued)

Our purpose

Ourthreecorepurposepriorities

guidewhereourfocusisplaced,

includingwhendevelopingnew

productpropositionsandundertaking

transformationactivities.

Place to call home

Helpingpeopletohaveaplacetocall

homeisalong-standingaimofYBS.Asa

buildingsociety,weexisttobringhome

ownershipwithinreachofmorepeople

throughourresponsiblemortgage

lending.OurPlacetoCallHomepriority

coversexistinghomeownerswhoare

lookingtorefinancewithus,aswell

asfirst-timebuyerswhoareseeking

totakethatfirststepontheproperty

ladder–bothofwhicharegroupswho

havefacednewchallengesoflate.The

Societyalsolendstothebuy-to-let

sector,allowinglandlordstoprovide

rentalaccommodation.

Thoseremortgagingfacesubstantially

higherinterestratesandtherefore

increasedmonthlyrepayments.First-

timebuyersmayfindgreaterobstacles

intheirpaththanbefore–intheraising

ofdeposits,andindemonstratingthey

canmeetaffordabilitycriteria.

Ourpropositiondevelopmentcentres

aroundthreekeyconsiderations:

•

Our purpose-offeringproductsthat

provideRealHelpwithRealLifeand

helpmorepeoplehaveaplaceto

callhome,

•

Optimising our existing capabilities

-developingpropositionswhilst

ensuringthatweunderstandandwe

managetheassociatedrisks,

•

Offering propositions that enable

us to compete-allowingusto

differentiateourbusinessfromthe

restofthemarketandcompete

sustainably.

Financial wellbeing

FormanypeopleintheUK,building

andprotectingtheirfinancial

wellbeinghasbecomemoreimportant

thanever.Whethertheyaresaving

tocoverunexpectedbills,avoiding

potentiallyexpensiveformsofdebt,or

simplytofeelsecureintheirpersonal

finances.

AlongwiththeBuildingSocieties

Association,weplayedanactiverole

inchampioningUKSavingsWeekin

September2023.Thetargetaudience

forthisinitiativeisthe11.5million

adultsintheUKwhohavelessthan

£100ofsavingstofallbackoninan

emergency.Theinitiativeaimstohelp

peopleunderstandhowtodevelop

andbuildasavingshabit,something

thathasaclearalignmenttoour

purpose.

Werecognisetheneedtokeepup

withevolvingcustomerneeds,and

ourtransformationprogrammehas

deliveredtangiblecustomerbenefits

in2023,withtheintroductionof

amoreaccessible,user-friendly

experienceandaraftofnewfeatures

foroursavingsapp.Thisincludes

easierfeedbackoptionstogetin

touchorraiseconcerns,andproviding

customerswithwhattheyneedto

managetheiraccountonlineoron

theapp,throughagreaterrangeof

self-servicefunctionality.Wewill

continuetoexpandandenhance

thefunctionalityavailableto

customers.Ourprogresssofarhas

beenrecognisedbycustomersandis

reflectedintheNPSofourmobileapp

increasingfrom+48to+63.

Wehavesupported263,000peopletoward

greaterfinancialwellbeingthisyear,

comparedto248,000in2022.

Propositionsdeliveredduringtheyear

includeanexpansionoftheCascade

Scorerisk-basedpricingproducts

toinclude95%LTV,whichoffers

productstocustomerswhomeet

alowerscorecardcriteriathanour

standardlending.Alongsidethis,policy

enhancementshavebeenakeyfocus,

withimprovementsinlendingtypes

suchastheself-employed,interest

onlyandcontractors.TheSociety’snew

inter-generationalproposition,Joint

Borrower-SoleProprietor,waslaunched

in2023,andallowscustomerstoadd

afamilymembertotheirmortgage

toimprovetheiraffordability.Rising

housepricesandthegrowingcostof

livingmeanspeopleareincreasingly

reliantuponfamilymemberstoprovide

supporttomeettheirfinancialgoals,and

supportingtheseunderservedsegments

ofthemarketalignsstronglytoour

purpose.

Ourtransformationjourneyfor

mortgagesremainsafocus,withactivity

underwaytoutiliseourMortgageSales

Origination(MSO)platformfurther.YBS’s

directlendingarmwassupportedbythe

implementationoftheMSOsystemfor

telephoneapplications,aligningwith

theapplicationprocessusedbyAccord.

Thiswilldeliveranimprovedapplication

processandincreasedefficiency,

allowingadvisorstohavemorequality,

focusedconversationswithcustomers.

Inordertosupportourexistingmortgage

customers,weformedadedicated

workinggroupthatreviewedand

proactivelycommunicatedwiththose

borrowerswhomaybemostimpacted

byasignificantincreaseintheirmonthly

repayments,withaviewtohelping

themreachasustainableandaffordable

solution.TheMortgageCharterwas

implementedduringJuly2023,withthe

aimofprovidingadditionalsupportto

existingcustomersatproductmaturity.

Followingimplementation,thenew

processeshavebeenmonitoredto

developimprovedinsightinrelationto

customerbehaviourandexperience.

In2023,wehavehelped52,000people

tohaveaplacetocallhomethrough

ourresidentialmortgages,ourbuy-to-

letmortgagestolandlords,andsocial

housinglending17(2022:55,000).

Goodprogresshasbeenmadein

ourcustomerpaymentsprocesses,

althoughourworkinthisarea

alsohighlightedthecomplexityof

thechangesweneededtomake.

ConfirmationofPayeeisaname-

checkingserviceforUK-based

paymentsthatallowsuserstoverify

thattheaccountdetailsmatchthose

intendedwhenanewpayeeisset

up.Thiswillhelpcustomersavoid

accidentallymisdirectedpayments,

aswellasprovidinganotherlayerof

protectionagainstfraudandscams.

InJune,welaunchedournewvirtual

assistant.Thisassistscustomers

withISAjourneys,cards,FSCSand

fraudtopicssocustomershavethe

optiontoaskquestionsaboutthese

topicswithoutneedingtoverifytheir

identity.Ifthevirtualassistantcannot

answerthequestion,orthecustomer

decidestheywanttospeakwithus,

theyalsohavetheoptiontoconnect

withacolleagueviaournewlivechat

serviceduringCustomerServices

openinghours.

Ourcommunityactivitiesalsoalign

toourfinancialwellbeinggoals.

Moreinformationonourcommunity

activitiescanbefoundintheEngaging

withourstakeholderssection.Through

oursavingsproductsandcommunity

initiatives,wehavesupported263,000

peopletowardgreaterfinancial

wellbeingin2023,comparedto

248,000in2022.

Member value

Asabuildingsociety,weexisttoserve

ourmembership,aswedonothave

externalshareholders.Ourdecisions

haveanappropriatelong-termfocus,

andouraimistosustainablyreturn

value.Onewayweaccomplishthisis

throughofferingrewardingratesto

thosesavingwithus.Weachievethis

throughthedevelopmentofmember

loyaltypropositions,whichoffer

competitiverates,andthroughpassing

onincreasestoourvariable-rate

customerswhenBankRateincreases.

Thereisalwaysabalancetobestruck

whenconsideringthescaleand

timingoftheseincreasesasallofour

decisionsneedtosupportourlong-

termsustainability.Thisisimportantin

protectingthestrengthofourfinancial

positionandallowingustocontinue

investinginoursecurityandrisk

managementprocesses,andultimately

providegreatproductsandservices.

OuroverallNPScouldbeconsidered

aproof-pointofhowwellweare

balancingthesedecisionsandwe

haveimprovedourperformancewhen

comparedtolastyear,withparticularly

goodprogressbeingmadeintheareas

ofsavingsanddigital.

Wedohoweverknowthatwedonot

alwaysgetitrightandthatthereis

alwaysroomforimprovement.Our

intentionwillalwaysbetoprovide

thebeststandardofservicepossible,

butsometimeswefallshortofthe

qualitythatourcustomersexpectand

deserve.Wewillcontinuetomonitor

keymetricsforcustomersatisfaction

andevolveourapproachaccordingly.

17 Placetocallhomemeasurebasedonaverageresidentsinpropertiesagainstwhichloanshavebeenadvanced

intheperiod(excludingremortgagesandfurtheradvancesbutincludingbuy-to-letandsocialhousing).

18 | Strategic report 19

Our purpose and strategy (continued)

Our strategy

SincetheSociety’sfoundingover160yearsago,

ourfundamentalpurposehasnotchanged;we

existtoprovideRealHelpwithRealLife.Our

strategyontheotherhandisadaptedmoreclosely

toourcurrentenvironmentandcapabilities.

In2023,theBoardwerepleasedtoapprovethe

newOurStrategy,whichsetsthedirectionforthe

futureoftheSociety,2024andbeyond.

The end of the Strategic Blueprint

2023markedthefinalyearofourStrategic

Blueprint,whichwaslaunchedin2020.Having

investedourtimeandresourcesinachieving

ourstrategicprioritiesofSavingsSupercharged,

PurposefulAnalytics,andUnbelievablyEasyand

Efficient,theSocietyasitstandstodayismuch

differenttothatofthreeyearsago.

Ourdigitalcustomerexperienceismuchimproved,

ourdataandanalyticalcapabilitiesareadvancing

ournewproductdevelopment,andprogresshas

beenmadeinsimplifyingandharmonisingsomeof

ourprocesses.

Theexternalcontextwithinwhichweoperatehas

alsoevolvedoverthecourseoftheyearsunder

theBlueprint.Whilstitisnotpossibletopredict

thefutureorcontrolexternalfactors,wecanbuild

anorganisationthatrespondsquicklytochanging

marketconditions,andtoevolvingcustomer

expectations,allsupportedbyaculturethat

reachesforbetter.

Thisiswhy,in2023,wehaveundertakenarefresh

ofourstrategy,whichwillservetounderpinthe

ambitiousnextphaseoftheSociety’sgrowth.

The four strategic pillars

OurStrategyisarticulatedthroughfourpillars:

Thefirstwillseeusextend our customer reach and deepen the impactwehaveontheirlives,whetherthrough

rewardingloyalty,orthroughspecificmortgageandsavingspropositionsthatworkinharmony.

Thesecondpillarwillseeuscreate joyful experiencesforourcustomersthataresimpleandfreefromstress

whethertheyareinteractingwithusinperson,online,orbyphone.

Thethirdseekstopromoteanambitious culturewithintheSociety,onethatenablesustomovetogetheratpace.

Withinthispillarareourfourexistingbehaviours,whichreflecttheprinciplesthatguideouractionsonaday-to-day

basis,andwhichremainakeycomponentofhowwewillunlockourculturalpotential.

Lastly,thefourthpillarfocusesonbuilding a future-ready Society.Thisincludesimprovingourabilitytoscaleas

wellassimplifyingsomeoftheinternalprocessesandproceduresthatwehavenotyetbeenabletooptimise,and

improvingthematurityofourcontrolenvironmentinrespectofdisclosuresandregulatoryreporting.Ournextphase

willseeusgrowevenfurther,andthispillarseekstoensurethatwearewellpreparedforthisfutureandfittoserve

moregenerationstocome.

The beginning of Our Strategy

ProvidingRealHelpwithRealLifespeakstoourmutualvalues,and

remainsfirmlyatthecentreofallthatwedo.OurStrategywillsee

theSocietyaimhigher,andprovidesaNorthStartowhichallofthe

decisionswemakewillbealigned.

For2024,wehaveidentifiedthreeterritorieswhichrepresentareas

wheretheSocietycanstandoutfromtherestofthemarketandmake

arealdifferenceforourmembers,forourcustomers,andforsociety

morewidely.

Our three territories

We care

about people

We say it

straight

We reach

for better

We make it

happen

Thisisaboutfostering

humanconnection

bothwithintheSociety

andwithout.Itmeans

actingwithempathy

andbeingawareofthe

impactthataction,or

inaction,canhaveon

others.

Theabilitytohave

honest,straightforward

conversationsbuilds

trustandgetsresults.

Thismeansspeaking

upwithpositiveintent,

andbeingopenand

preparedforfeedback

whetherpositiveor

negative.

Weshouldaim

forcontinuous

improvement

acrossalllevelsof

theorganisation.

Reachingforbetter

invitescolleagues

tobeinnovativeand

empowersthemto

takeresponsibilityfor

theirownlearningand

development.

Thisisaboutmovingat

paceandwithpurpose,

focusingonremoving

anybarriersthatexist,

adaptingtochallenges,

andultimatelyfinding

solutions.

Standing with savers

Throughourproductsandpropositions,competitiverates,

andusingourplatformtosupportthenation’ssavers.

Helping first homes happen

Throughourlendingdecisionsandtargetedproduct

development,aswellasworkingtosupportthosefacing

challengesinfindingaplaceonthepropertyladder.

Financial education

Throughcommunityengagement,andprovidingaccessible

resourcestosupportgreatereducationinmattersofmoney

managementandpersonalfinances.

Double reach

and deepen impact

Create joyful

experiences

Cultivate an

ambitious culture

Build a future

ready Society

20 | Strategic report 21

Our ESG

priorities

Workinginharmony

alongsideourthreecore

purposeprioritiesare

ourthreeresponsible

businesspriorities,which

formourstrategyfor

Environmental,Social,

andGovernance('ESG')

matters.Theserepresent

thetopicsofthemost

materialrelevanceto

theSocietyandour

operations,having

beenidentifiedthrough

stakeholderengagement.

Ourresponsiblebusiness

prioritiesareInvesting

inourpeople;Operating

responsibly;andBuilding

agreenersociety.

Investing in our people

Ourpeopleareourgreatest

asset;withoutthem,wewould

notbeabletoprovidethelevel

ofservicethatourcustomersand

membersdeserve.Toensurewe

haveanengagedandmotivated

workforceweinvestinour

colleaguesallowingthemto

thriveinanenvironmentwhere

theycanbeattheirbest.

More detail on the topics

relating to our Investing

in our people priority

can be found in our 2023

ESG report, which will be

available on our website

mid-2024.

Wellbeing

Thehealthandwellbeingofour

colleaguesisasimportantto

usnowasiteverhasbeen.Our

approachtosupportingwellbeing

focusesonfourpillars:mental

health,physicalhealth,financial

health,andsocialhealth.This

year,wepublishedaseriesof

guidesbringingtogetherallof

theinformationandsupport

colleaguesneedtoimproveand

maintaintheirwellbeingacross

eachofthesepillars.

Theimportanceweplaceon

colleaguewellbeingisalso

reflectedinourbenefitandleave

policies.Arangeofbenefitscan

bepurchasedviamonthlysalary

deductionsovera12-month

period,andincludediscounted

accesstocriticalillnesscover,

privatemedicalinsurance,and

Diversity, Equity, & Inclusion

TheSocietyhasevolvedourapproachfrom

Inclusion&Diversity('I&D')toonethat

encompassesDiversity,Equity,andInclusion

(DE&I).Thisisalignedtotherecognition

thatinordertofosteraninclusiveplaceof

work,thereexistsaneedtoofferinitiatives

orinterventionsaimedtowardensuring

allcolleaguescan,andwantto,fulfiltheir

careerpotentialwithus.Thesemayneedto

varydependingontheindividualneedsor

circumstancesinordertoensureafairoutcome

forall.

Governance, strategy, and DE&I

measures

In2023,wehavestrengthenedthegovernance

ofDE&Ibysplittingwhatwasonecommittee

intotheDE&IWorkingGroupandtheDE&I

Forum,withthelatterreportingintoourESG

Committee.Thesechangeswillbeformalised

aspartofathree-yearstrategyfrom2024,and

willempowertheWorkingGrouptodeliver

change,whiletheroleoftheForumwillbe

providingchallengeandmonitoringwider

strategicprogress.Wehavealsoenhanced

accountabilityacrossalllevels,integrating

aDE&IobjectiveintoourLeadingforValue

bonusplan.WesetoutDE&Imeasuresas

partofourstrategy,whicharereviewedeach

quarter,andpresentedtotheDE&IForumto

measureprogresstowardourplans.

Eachyear,weconductanannualDE&I

engagementsurveytogathercolleagueviews

onhowinclusiveanddiversetheenvironment

atYBSis.The2022surveyinformedourareas

offocusin2023:recruitment,opportunities,

anddata.Robustdataandreportingon

colleagueandapplicantdemographics

hasallowedustomeasuretheinclusivity

ofourcultureandbegintoaddressareas

ofunderrepresentation.Ourprocessesfor

attractionandrecruitmentthemselveswere

alsoafocus,ensuringhiringmanagersare

equippedtofacilitatereasonableadjustments

throughouttheinterviewandonboarding

process.Wealsowantedtoprovidebetter

visibilityofinternalcareeropportunitiesfor

colleaguesacrossthebreadthoftheSociety.

Together,theseimprovementshelpedusto

improvetheoverallcolleagueexperience,as

wellasinformingourrefreshedDE&Istrategy.

Wewereabletomeasureprogressagainst

ourareasoffocuswiththelatestDE&Isurvey,

whichwasconductedinNovember2023.We

maintainedourscoreof8.8andourplace

intheupperquartileoffinancialservices

organisations.72%ofcolleaguescompleted

thesurvey,upfrom62%in2022andwe

haveseenanincreaseincolleaguessharing

theircharacteristics,specificallythosewitha

hiddendisabilityandcaringresponsibilities.

Colleague engagement

Weplacegreatemphasison

ourcolleaguesfeelingvalued,

listenedto,andfairlyrewarded

forthecontributionstheymake.

Aworkplacethatsucceeds

inmeetingallofthesewill

demonstratehighlevelsof

contentment,productivity,and

engagement.

Anannualsurveyisourprimary

meansthroughwhichthelevels

ofengagementacrosstheSociety

aremeasured,whichislater

supplementedbyperiodic

check-ins.

In2023,90%ofcolleagues

completedtheannualsurvey,and

theSociety’soverallengagement

scorewas8.6(2022:8.6)which

maintainsourpositioninthetop

quartileforengagementamongst

financialorganisations18.Our

employeeNPS('eNPS')improved

to+68(2022:+66),which

keepsusfirmlyinthetop5%of

financialorganisations.

ahealthcashplan.Inaddition,

allcolleagueshaveaccessto

awellbeingplatformwhich

providesalibraryofcontent

includingsleeptools,emotional

resilienceguidance,and

educationalvideosontopics

likemenopause,nutrition,and

neurodiversity.

Asameansofgaugingwhether

ourcolleaguesarereceivingthe

rightlevelsofsupport,weclosely

monitorkeymetrics,including

thelevelsofabsence.The

sicknessratein2023was4.23%

(onarolling12-monthbasis)

comparedto4.43%in2022.We

willcontinuetomonitordata

foranyemergingtrends,andto

informourongoingcommitment

tocolleaguewellbeing.

Theresultsandcolleaguefeedbackhavebeen

usedtovalidateourrefreshedDE&Istrategyfor

2024.

Colleague networks

Wehavefivecolleaguenetworks:Accessibility,

Ethnicity,Parents&Carers,Proud,and

Women.Eachofthenetworksaresupported

byseniorleadersponsors,andtheco-Chairs

ofthenetworksregularlyinteractwiththe

DE&Iforum.ColleagueNetworkshavebeen

instrumentalineffectingpositivechangeand

advancingourinitiativesinpromotingdiversity,

equity,andinclusion.Notablecontributions,

amongothers,includetheAccessibility

Network'ssupportfortherefurbishmentof

ourBradfordoffice,theEthnicityNetwork's

improvementstocontemplationandprayer

facilities,andtheWomen'sNetwork's

contributiontoreshapingourabsencepolicy

andmenopauseguides.

Reporting & accreditations

Overthepast12monthswehaveretainedour

placewithintheTop10employersforWorking

Familiesforthethirdyearrunning,continued

toworktowardachievingDisabilityConfident

LeaderLevel3,andhavecontinuedourwork

inconnectionwiththeRaceatWorkCharter

commitments.

Our2023GenderPayGapreportshowed

23.4%and23.8%formeanandmedian

respectively(2022:25.7%and24.0%).We

haveseenareductioninourGenderPayGap

forthepastfiveyears,themaindriverofwhich

continuestobetheimbalanceofwomenand

menatdifferentlevelsoftheorganisation.

AlignedtoourcommitmenttotheWomen

inFinanceCharter,wearebuildingatalent

pipelineforseniormanageranddirectorroles,

andweregularlyreviewourtalentdatawith

seniorleaders.Wehavemadeprogressinthis

area,asevidencedinthereductionofour

GenderPayGapandtheachievementofour

WomeninFinancetargetofa50:50splitat

gradeEandabovelevel.

Learning and development

Allcolleagues,nomattertheircurrentlevel

intheSociety,areencouragedtoundertake

professionaldevelopmentandprogresstoward

theircareergoals.Inordertoreachthemost

people,throughthemostconvenientmeans,

weutiliseablendedapproachthatcombines

face-to-faceworkshops,virtualworkshops,

andonline-basedresources.Thisempowers

colleaguestoworkontheirindividual

developmentinawaythatsuitsthem.

In2023,akeyfocuswasimprovingour

understandingofbothcurrentandfutureskill

requirements.Wehavesupportedbusiness

areasthroughaskillsdiagnosticthataimedto

Topromoteanopenand

supportiveculture,weseekto

embraceandunderstandarange

ofperspectives,offeringvarious

platformsforcolleaguestoshare

theirthoughts.OurColleague

Forumwasestablishedin2019

andhostsregulardiscussions

betweencolleagues,senior

leadership,andmembersof

ourBoard.Theseconversations

ensurethatthevoicesof

everyonecanbeheard,and

provideanopportunityfor

actionstobetakenbasedon

theirinput.Twiceayear,we

alsoholdsessionstofacilitate

opencommunicationbetween

Non-ExecutiveDirectors,and

themembersofourteamswho

areintegraltotheday-to-day

operations.

Maintaininggoodlevelsof

engagementisanongoing

processandwecontinually

assess,anddeveloptoolsto

furtherenhance,howengaged

andvaluedourcolleaguesfeel.

18BenchmarksourcedfromPeakon.

22 | Strategic report 23

Our ESG priorities (continued)

identifycurrentskillproficiencylevels,

comparedtoourfutureneeds.

Skillsrelatingtodigitalliteracy

anddataanalytics&insightswere

identifiedasprioritiesforourroadmap,

whichwillbedevelopedthrough

bothself-ledandprogramme-based

learning,includingapprenticeships.

Ourapprenticeshipschemescontinue

toprovidecolleagueswithan

opportunitytogainaprofessional

qualificationwhilstlearningonthe

job.Weareproudthat60colleagues

areactivelystudyingthroughvarious

apprenticeships,whichincludes24

colleaguesdevelopingtheirdata

capabilitythroughbothLiteracyand

FellowshipProgrammes.

Ournewlylaunchedmentoring

platform,madeavailabletoallYBS

colleagues,alsorepresentsauseful

tooltobetterenablethesharingof

knowledgeandexpertiseacrossthe

business,aswellassupportingtalent

mobility,andourDE&Iagenda.

Ourpeopleleadershaveimportant

rolestoplayinsupportingour

teams,inmanagingpeoplerisks,and

supportingourbusinessthrough

changesofallkinds.In2024,wewill

focusontheintroductionofleader-

specificprogrammes,whichwill

complementourexistingframeworks

andguidesandcontinuedeveloping

ourtalentandtalentpipelines

asourorganisationcontinuesits

transformationjourney.

Reward & recognition

Itisimportantthatourcolleaguesare

fairlyrewardedfortheircontribution

totheSociety’sabilitytodeliver

exceptionalproductsandservicesfor

ourmembersandcustomers.In2023,

wemadesignificantinvestmentsin

basepay,providingeligiblecolleagues

witha6%increase,supplementedby

anadditional1%whichleaderswere

abletoallocateonadiscretionary

basiswherefurtheradjustmentswere

feltnecessary.Wealsoreinforcedour

supportforthosecolleagueswithin

thelowestpaybands,introducing

aSociety-wideminimumsalaryof

£22,000.Thissupportedcolleagues

amidstinflationaryandcost-of-living

pressures,aswellasaligningtoour

commitmenttomaintainwagesator

abovetheRealLivingWage.

TheRemunerationPolicyhasbeen

reviewedin2023forallcolleagues

andtheDirectorsRemunerationPolicy

issubjecttoanadvisoryvoteatthe

2024AnnualGeneralMeeting.

Further details of this review

are covered in the Directors

Remuneration report.

Ourcommitmenttocolleague

recognitioncontinuestoevolve.In

2023,weinitiatedapilotprogramme

foranewapproachtorecognitionled

bypeopleleaders.Theoutputofthis

pilothassupportedthedesigning

anddevelopingofanewrecognition

frameworkfor2024.Thenew

frameworkrecognisesthe‘how’-how

ourcolleaguesmakedecisions,how

theycollaborateandhowtheynurture

innovation.Thiswillenablemore

flexibleandtimelyrecognitionfocused

acrossalllevelsoftheorganisation.

Operating responsibly

Asamutual,wehaveadutytooperate

responsibly.Havingrobustgovernance

andproceduresinplaceallowsusto

meetregulatoryrequirements,and

protectcustomers,colleagues,andthe

Societyfrompotentialrisks.

Risk management

TheRiskManagementreportdetails

ourEnterpriseRiskManagement

Framework,aswellasarticulating

theprincipalriskstowhichweare

exposedandhowtheyaremitigated.

Human rights

InherentwithinourpurposeofReal

HelpwithRealLifeisacommitment

thatthewayweconductourbusiness

shouldnotnegativelyimpactthe

humanrightsofothers.Thisincludes

howweinteractwithourcustomers,

colleagues,andcommunitiesaswellas

thewaywemanageoursupplychain.

The Society’s Modern Slavery Act

Transparency Statement, which

describes the steps put in place

to prevent slavery and human

trafficking in our supply chain, or

any part of our business, can be

found on our website.

Anti-bribery and anti-

corruption

TheSocietyisboundbythelaws

oftheUK,includingtheBriberyAct

2010,andisregulatedbytheFinancial

ConductAuthority;bothofwhich

conveyresponsibilitiesforidentifying

andmanagingrisksinrespectoffraud,

bribery,andcorruption.TheSociety

takesazero-toleranceapproachto

suchrisksandenforcescompliance

viasystems,processes,andour

internalcontrolframework.These

includemandatoryannualcolleague

trainingandawarenessinitiatives,

awhistleblowingprocedure,and

regularreviewsofourFinancialCrime

Policy,whichincludesourAnti-Bribery

andAnti-CorruptionStandard,our

approachtothemanagementofrisks

undertheUKCorporateCriminal

OffenceofFailuretoPreventthe

FacilitationofTaxEvasionlegislation,

andotherrelatedpolicies.

Rating Provider Rating/Score Scale (best to worst)

MSCI* AAA AAA–CCC

MorningstarSustainalytics** 12.9 0–100

S&PCorporateSustainabilityAssessment(CSA) 51 100–0

CDP*** Submitted-NotScored AtoF

ISSESG C A+toD-

Moody’sAnalytics 67 0–100

* TheusebyYorkshireBuildingSocietyofanyMSCIESGRESEARCHLLCoritsaffiliates('MSCI')data,andtheuseofMSCIlogos,trademarks,servicemarksorindexnames

herein,donotconstituteasponsorship,endorsement,recommendation,orpromotionofYorkshireBuildingSocietybyMSCI.MSCIservicesanddataarethepropertyof

MSCIoritsinformationprovidersandareprovided‘as-is’andwithoutwarranty.MSCInamesandlogosaretrademarksorservicemarksofMSCI.

informationanddataareproprietaryofSustainalyticsand/oritsthird-partysuppliers(ThirdPartyData)andareprovidedforinformationalpurposesonly.Theydo

notconstituteanendorsementofanyproductorproject,noraninvestmentadviceandarenotwarrantedtobecomplete,timely,accurateorsuitableforaparticular

purpose.Theiruseissubjecttoconditionsavailableathttps://www.sustainalytics.com/legal-disclaimers.

***DuetothetransitiontothenewEnvironmentalSustainabilityTeam,theSocietywasnotabletocompletethesubmissionintimetoberated.However,afull

submissionwascompletedafterthedeadlineandisavailableonCDP’swebsite.

Non-financial reporting measures

PresentedbelowaretheSociety’smostrecentratingsfromnon-financialreportingagencies.

Weareproudthat60colleaguesareactivelystudyingthroughvarious

apprenticeships,whichincludes24colleaguesdevelopingtheirdata

capabilitythroughbothLiteracyandFellowshipProgrammes.

24 | Strategic report 25

Building a greener society

Aspartofour2023AnnualReportandAccounts,wepresentanupdateonourcommitmenttoBuildingagreenersociety,

developingonthefoundationlaidoutinour2022TaskforceonClimate-relatedFinancialDisclosure(‘TCFD’).

ThisreportisstructuredtoshowtheSociety’sunderstandingoftherisksassociatedwithclimatechange,andhowtheSociety

hascontinuedtoadheretotheFinancialStabilityBoard’sTCFDrecommendationsfordevelopingclimateandenvironmental

disclosures.TheSocietyremainscommittedtoprogressingfurtheronthepathtofullcomplianceinatransparentway.

ThetablebelowillustratestheintegrationofTCFDrecommendationsacrosstheAnnualReportandAccounts:

Contents

Disclosure pillar Recommendation Reference

Governance

•

DescribetheBoard’soversightofclimate-relatedrisksand

opportunities.

•

Describemanagement’sroleinassessingandmanaging

climate-relatedrisksandopportunities.

See Climate

governance in the

Building a greener

society report.

Disclosetheorganisation’s

governancearound

climate-relatedrisksand

opportunities.

Strategy

•

Describetheclimate-relatedrisksandopportunitiesthe

organisationhasidentifiedovertheshort-,medium-,and

long-term.

•

Describetheimpactofclimate-relatedrisksandopportunities

ontheorganisation’sbusinesses,strategies,andfinancial

planning.

•

Describetheresilienceoftheorganisation’sstrategy,takingin

toconsiderationdifferentclimaterelatedscenarios,including

a2°Corlowerscenario.

See Strategy in the

Building a greener

society report.

Disclosetheactualand

potentialimpactsof

climate-relatedrisksand

opportunitiesonthe

organisation’sbusinesses,

strategy,andfinancial

planningwheresuch

informationismaterial.

Risk Management

•

Describehowtheorganisation’sprocessesforidentifyingand

assessingclimate-relatedrisks.

•

Describetheorganisation’sprocessesforidentifying,

assessing,andmanagingclimate-relatedrisksareintegrated

intotheorganisation’soverallriskmanagement.

•

Describehowprocessesforidentifying,assessing,and

managingclimate-relatedrisksareintegratedintothe

organisation’sriskmanagement.

See Risk management

in the Building a

greener society report.

Disclosehowthe

organisationidentifies,

assesses,andmanages

climate-relatedrisks.

Metrics and Targets

•

Disclosethemetricsusedbytheorganisationtoassess

climate-relatedrisksandopportunitiesinlinewithitsstrategy

andriskmanagementprocess.

•

DiscloseScope1,Scope2and,ifappropriateScope3,

greenhousegas(GHG)emissionsandtherelatedrisks.

•

Describethetargetsusedbytheorganisationtomanage

climate-relatedrisksandopportunitiesandperformance

againsttargets.

See Metrics & targets

in the Building a

greener society

report, alongside the

SECR section of the

Directors report and

Renumeration report in

the Directors’ report.

Disclosethemetricsand

targetsusedtoassess

andmanagerelevant

climaterelatedrisksand

opportunitieswheresuch

informationismaterial.

Climate governance

Board and executive oversight

TheBoardassumesultimateaccountabilityforaddressingclimatechangerisksandopportunitiesandissupportedbythe

governancestructurelaidoutabove.RegularBoardmeetingsarecomplementedbytheexistinggovernanceframework,which

activelymanagesclimatechangerisksonaday-to-daybasis.ProgressagainsttheSociety’sclimatecommitmentsandinternal

plansaresharedwiththeBoardanditssub-committees.

In2023,theSocietycontinuedtoembedclimatechangeandenvironmentalgovernanceintothecorporatestructure.We

continuetoassignkeyaccountabilitiesinenvironmentalstewardshipandclimatechangerisks,inorderthataclearsenseof

ownershipandresponsibilityisdemonstratedacrosstheSociety.

Senior management accountability

TheaccountabilityfortheseniormanagementfunctionremainssharedbetweenourChiefFinanceOfficerandourChiefRisk

Officer.Thiscollaborativeapproachensuresthatallelementsofenvironmentalandclimate-relatedmattersarecaptured

withintheaccountabilitydocuments.

TheChiefPeopleOfficerisExecutiveCommitteesponsorforoverarchingESGreporting.

Group Risk

Committee

Executive Risk

Committee

Audit

Committee

YBS Board

Asset and Liability

Committee

Executive

Committee

Environment, Social and Governance

Committee

Providesclimateriskoversight

andsetsGroupriskappetite.

Managementofthegovernance

frameworkforclimaterisk.

Non-financialdisclosurein

relationtoenvironment,social

andgovernanceagenda.

Ultimateaccountabilityoffinancialrisksforclimatechangeandassociated

responsibilities.TheBoardissupportedbythebelowsub-committees:

Focusonfinancialrisksarising

fromclimatechange.

Oversightofimplementation

ofenvironmentalstrategyand

approvalofclimateriskmatters

forrecommendationtotheBoard.

Delegatedauthorityfrom

ExecutiveCommitteetosupport

theBoardinoverseeingthe

environmentalstrategy.

Our ESG priorities (continued)

26 | Strategic report 27

Operational working groups and forums

In2023,weenhancedtheapproachtogovernancebelowthelevelofcommitteestostrengthenouroverallclimate

governance.Twoworkinggroupswhichmeetonalternatemonths,andaforumthatmeetseverytwomonthssupportfocused

workonthekeyclimateandenvironmentalchallengesthattheSocietyfaces.

Strategy

The YBS team

Themostprominentmilestonefor

2023hasbeentheestablishment

ofadedicatedEnvironmental

Sustainabilityteam,comprisingone

SeniorManagerandthreeManagers,

whichwasfullyresourcedin2023Q4.

Aspartoftheembeddingofthisteam,

thefoundationshavebeenlaidto

integrateenvironmentalsustainability

throughouttheorganisation,which

wehaveconsideredfurtherwithinthis

report.

DuringQ4of2023,thenewteam

bolsteredexistingprocessesto

monitorourScope1andScope

2emissionsandimproveour

understandingofclimatechange

riskandopportunitiesacrossthe

breadthoftheSociety.Byexpanding

ourresources,wehavebeenableto

increaseourcapabilitiestomeasure,

monitor,andeffectivelymanage

themultifacetedimpactsofclimate

change.Thisincludesembeddingthe

ambitiontoreachNetZeroby2050

withinourFinancedEmissions.

The Society's interpretation of

Net Zero means a focused effort

to significantly reduce our carbon

footprint across all Scopes.

Identifying and assessing the

impacts of climate risks

On the Group

Climatechangeposesarisktothe

Society,bothintheshort-termas

economiesandindividualstransition

toalowcarboneconomy,andover

thelongertermasextremeweather

eventsareexpectedtobecomemore

frequent.Tounderstandthesizeof

thisrisk,wehavedevelopedinternal

climatemodels,whichaligntothe

BankofEngland’sClimateBiennial

ExploratoryScenarios(‘CBES’).

Ourmostrecentclimatescenario

exercisewasundertakenin2022

andweplantorefreshthemodels

during2024.Ourscenariomodel

isbuiltaroundexistingcreditrisk

stresstestingmodelswithamodular

designtoaddcomponentsspecifically

forassessingtheimpactofclimate-

relatedrisks.Theclimate-related

riskcomponentsofthemodelsare

integratedintotheProbabilityof

DefaultandtheLossGivenDefault

modelstoenabletheimpactofsuch

risksoncreditlossestobegenerated

overshort-,medium-,andlong-term

timehorizons19.Currentlyourclimate

scenariomodelisbuiltonanincurred

lossbasis,anddevelopmentis

underwaytoalignthistoIFRS9.

Ouranalysis,basedonastaticbalance

sheet,usedthird-partydatatomodel

theCBESscenariosovervarioustime

horizons,upto30years.Physical

risksconsideredincludedflooding,

subsidence,andcoastalerosion.

TransitionrisksusedEPCdatato

understandtheriskofretrofittingand

potentialstrandedassetassessments.

The2022scenarioanalysisincludes

assumptionsthatdonotaccountfor

theabilityoftheSocietytomanageits

balancesheeteffectivelyor,account

formortgageredemptionandnew

lending.Evenonthisbasis,theoutputs

showminimalexposuretopotential

lossesoverthemediumandlong-term.

ThisresultisreflectedintheSociety’s

decisiontonotchangeitsbusiness

planningactivitiesmateriallyin

responsetoclimatechange.Alongside

therefreshedscenarioanalysis,our

considerationofmateriallossesand

ourriskappetitewillbereviewed.

For further detail on the scenario

analysis undertaken in 2022

please see the Strategic report

of our 2022 Annual Report and

Accounts20.

Tobetterunderstandandmodel

theSociety’slong-termexposureto

climaterisk,adynamicversionofthe

modelwasdeveloped;thisallowedthe

modeltoapplyassumptionsforloan

redemptionsandnewlending.This

improvedthemodel’sabilitytoreflect

thegrowthplans,andisthereforea

moreaccuraterepresentationofthe

Society’sbalancesheetinthefuture,

thoughitisworthyofnotethatthe

modelsarestillintheirinfancyand

assuchhaveseverallimitations,

including:

•

Underestimation,asscenariosdonot

accountforpotentialclimatetipping

points,afterwhichclimatechangeis

likelytoaccelerate.

•

Thetimehorizonsusedaremuch

longerthantraditionalfinancial

models,exposingthemtoincreased

riskfromforecastassumptions.

•

Dataisbeingusedinwaysfor

whichitwasnotdesigned,an

examplebeingEPCdata(seeEnergy

PerformanceCertificates).

•

Theinabilitytoback-testclimate

scenariomodellinginordertogauge

theaccuracyofresults.

Allmodelrisks,includingdataand

assumptions,aremanagedinternally

throughtheSociety’sModelRisk

Framework,whichisembeddedinto

theEnterpriseRiskManagement

Framework.Themodelsaredeveloped

byanindependentteamallowingfor

challengearoundtheirlimitations

andoutputs.TheSociety’sability

tocontinuouslyevolvetheclimate

modelswillbenefitfromtheadditional

resourceofadedicatedclimate

modeller,whowillberecruitedat

thestartof2024.In2024,weaim

toupdatethemodeloutputs,review

thescenariosbeingutilised,and

identifyfurtherscenariosrelevant

totheSociety’sportfolio.The

modelswillcontinuetobeusedfor

theclimatesectionoftheInternal

CapitalAdequacyAssessmentProcess

(‘ICAAP’),whichmeasurestheamount

ofcapitalholdingsrequiredtoprotect

theSocietyfrompotentialriskwhilst

remainingfinanciallystable.

On our customers and

members

Wearecommittedtoassistingour

customersastheytransitiontoa

low-carbonsocietyandenhancethe

energyefficiencyoftheirhomes.

TheSocietycontinuestodevelopa

customerNetZerotransitionplan,

focusingonsupportingthosewiththe

highestexposuretotherisksstemming

fromthistransition.Webelievethat

thetransitiontoaNetZeroeconomy

shouldbefairandjustforall,andwe

recognisethepotentialchallengesthat

manywillfaceinreachingthatgoal.

BybalancingthepursuitofScience-

BasedTargetswithourcommitmentto

providing

RealHelpwithRealLife

,we

prioritiseavoidingactivitiesthatmay

harmthesocialandfinancialwellbeing

ofourcustomers.

BoththeEnvironmentalandClimateRiskworkinggroupsarechairedbytheManagerswithinEnvironmentalSustainability

andarecrucialinprioritisingrelatedworkstreams.

EachCommittee,Forum,andWorkingGroupisfocusedondeliveringchangealignedtoourClimateCommitments.Asthe

Society’sunderstandingofclimatechangerisksandopportunitiesdevelops,sotoowillourapproachtogovernance.A

primarywaythatwewillstrengthenourclimategovernanceduring2024isbyprovidinginformationandtrainingoncarbon

literacyacrosstheSociety.

Environmental Sustainability

Working Group

Climate Risk

Working Group

Environmental Sustainability Forum

TheEnvironmentalSustainabilityWorking

Groupconsistsofsubjectmatterexperts

fromacrosstheSocietytodelivertactical

andstrategicchangewithregardto

understandingandreducingouroperational

emissions.

TheClimateRiskWorkingGrouputilises

subjectmatterexpertsfromacrossthe

Societytodelivertacticalandstrategic

changewithregardstounderstanding

andreducingourFinancedEmissionsand

exposuretophysicalrisk.Itincludesafocus

onlendingpoliciesandnewproducts.

TheESGCommitteehasdelegatedauthorityfromtheExecutiveCommittee

toconsiderandprovideguidanceonmattersrelatingtotheenvironmentand

climatechange.ItmeetseveryothermonthandbringstogetherC-suitelevel

representationfromacrosstheSociety.In2023,theCommitteemet11times

andreceivedsixpapersrelatingtoenvironmentalmatters.TheCommitteeis

chairedbytheSociety’sChiefExecutive.

TheEnvironmentalSustainabilityForumbringstogetherdirectorsandseniorleadersfromacrossthe

Societytoprovideopportunitytochallengeandreviewtheapproachtakenindeliveringourclimate

strategy,priortopresentationatESGCommittee.TheforumischairedbytheSeniorManager–

EnvironmentalSustainability.

ESG Committee

Setting ESG strategy and direction

Delivering updates on progress and metrics

19Horizons:Short0-5years;Medium5-15years;Long15+years.

20AnnualReportsandAccounts2022(ybs.co.uk)

Our ESG priorities (continued)

Building a greener society(continued)

Climate governance(continued)

28 | Strategic report 29

Identifying and assessing climate

opportunities

For our organisation

TheSocietyrecognisesthatclimatechange

offersopportunitiesforthosethatcan

recogniseandactonthem.ForYBSthis

includesincreasedoperationalresilience

andcostsavingsastheSocietytransitions

tolow-carbontechnologyandsustainable

practices.Byconsideringclimatechange

inouroperationalplanningandrisk

management,theSocietycanbebetter

preparedforpotentialextremeweather

eventsandsupplychainvulnerabilities.

Climatechangealsoprovidesan

opportunityfortheSocietytobolsterour

reputationasanorganisationwithastrong

socialpurposebyaddressingourimpact,

beingtransparentaboutourprogress,and

supportingourcustomerswithtransitional

changes.Thiswouldenhancethepositive

relationshipswehavewithourcustomers,

members,andcolleagues.

For our colleagues

Ourcolleagueswillplayapivotalrolein

contributingtooursustainabilityjourney

andclimateinitiatives.Wehavemade

noteworthyprogressinfosteringcolleague

engagementacrossalldepartments,

includingourbranchnetwork.In2023,we

embarkedonajourneytoraiseawareness

onenvironmentalsustainabilitythrougha

seriesofeducationalblogs,insights,and

interactivepolls.

In2024,wewilllaunchtheClimate

Championnetwork,whichisdesignedto

workinharmonywiththenormalroles

andresponsibilitiesofourcolleagues.

Sustainabilityisnotastandaloneeffort,but

ratheranintegralpartofeveryrolewithin

ourorganisation.TheClimateChampions

willleadbyexample,inspiringothersto

adoptsustainablepracticesandhighlighting

potentialopportunitiesandchallengesthat

maynothavebeenconsidered.Thenetwork

willbekeytodeliveringcarbonliteracy

upskillingacrosstheSociety.Itisintended

thatthiswillsupportcolleaguestomake

informeddecisionsaroundenergyuseand

wastemanagement.

Risk management

Climate-related financial risks

Climate-relatedfinancialrisksarecharacterisedbytheiruncertainty,whichaddscomplexitytotheir

managementandmodelling.Riskismanagedonanongoingbasisthroughpolicies,governance,and

riskappetitestatements,whicharticulatethelevelthatisacceptabletotheSociety.Thefinancialrisks

associatedwithclimatechangecanbecategorisedaseitherphysicalortransition,withthetwobeing

stronglyinterrelated.TheSocietyseekstoidentifyandunderstandallkeyrisksunderthesecategories,

includingtheirimpactonourabilitytoserveourmembersandcustomers.Ourapproachtomanaging

theseriskswillmaturealongsideourunderstandingofthem.

Physical risk

Physicalrisksarisefromchangestotheenvironmentthatmaydamagetheintegrityofaproperty,

includingspecificweatherevents(acuterisks)andlong-termchangesintheclimate(chronicrisks).This

impactstheSocietybyalteringthevalueofassetsheldandincreasingthecreditriskofourcustomers.The

topthreephysicalriskswehaveidentifiedarenotedinthetablebelow.

TheSocietyquantifiesphysicalrisksthroughdataprovidedbyathird-partysupplier,Hometrack,which

coversallthreeoftherisksshownintheprecedingtable.Thedataincludesaviewofhowtheriskwill

changeunderseveralclimatescenariosandtimehorizonsandisprovidedonaregionalbasis,whichis

updatedquarterly.UsingthisdatatobenchmarkYBSagainsttheUKaverageshowstheSocietyhasa

slightlylowerthanaveragelevelofriskacrossallofthethreephysicalrisks.

Asthephysicalrisksmanifest,theycanimpactotherriskareas:

Credit riskisincreasedasdamagedhomesreduceinvalue,andownershavereducedabilitytopayorfind

challengesinsecuringinsurance.Thismayincreasethelikelihoodofdefault.

Operational riskisincreasedasweathereventsmaydamageourbranches,offices,orsupplychain.Our

employee’shomesmaybeimpacted,impactingtheirabilitytowork,andourcustomers’homesmaybe

impactedwhichwoulddriveupcallvolumes.

Capital riskincreasesasphysicaldamagetohomescandeterioratebalancesheetassets.

Workstreams to manage the risks and opportunities associated with flooding, subsidence and coastal

erosion are discussed and prioritised within the Climate Risk Working Group (see Climate governance).

For our customers and members

Thetransitiontolow-carbonhomes

requiresustosupportourcustomersand

membersinnewways.Wehavelaunched

ourfirstmortgagepropositiondedicatedto

improvingenergyefficiencywithinhomes

andcollaboratedwiththeEnergySavings

Trust(‘EST’)toprovidecustomerswithan

assessmenttoolonhowtheycanreduce

theirenergyconsumption.Sincethetool

waslaunchedinNovember2022,2,545

peoplehaveusedittoassesshowtheycan

makehomeenergyefficiencyimprovements.

OurpartnershipswiththeBuildingSocieties

AssociationandGreenFinanceInstitute

allowustotakepartinandbenefitfromthe

collectiveexperienceandlearningsofour

industry.Theseforumshavehighlightedto

theSocietythatthemarketforgreenretail

productsisstillemerging,withlowcustomer

demandatpresent.Thesettingofclear

strategyandpolicydirectionfromtheUK

Governmentwillenablethismarkettogain

tractionandprovidesimpleandaffordable

productsthathelpdecarbonisehomes.

Additionally,guidancefromregulators,

suchastheFinancialConductAuthority’s

anti-greenwashingguidance21,isvaluablein

helpingtheindustrytransitiontoagreener

economywithintegrity.

Throughout2024,weplantoincrease

theamountofinformationonthistopic

availabletoourcustomersthroughour

website,supportedbysocialmediaactivity

tounderstandwhatkindofinformationour

customersvaluemost.Wewillalsocontinue

toreviewourproducts,bothmortgages

andsavings,inlinewiththedemandin

themarkettoensurethatwesupportthe

reductionofemissions.

Coastalerosionis

exacerbatedbyextreme

weatherevents,andusually

resultsinthecomplete

lossofapropertyunless

government-funded

defencesareputinplace.

Localauthoritiesincoastal

areas,togetherwiththe

Government’sDepartment

forEnvironment,Foodand

RuralAffairs(‘DEFRA’),create

ShorelineManagementPlans,

whichsetoutastrategyand

actionplanforhowcoastal

riskswillbemanaged.These

canprovideinformation

abouthowcoastalerosion

willimpacthomesbutare

subjecttochange.

Subsidenceiscausedbythe

shrinkingofsoilbeneath

ahome,whichislikelyto

becomemorecommonin

droughtconditionsbrought

onbyclimatechange.It

resultsincrackedwallsand

foundations,damagingthe

integrityofthebuilding.

Bettertechnological

solutionsarenowinplace

torectifysubsidence,and

theissueiscurrentlytreated

byinsurersasaone-off

damagerepairwitha10-year

uncertaintyperiod.

Currentlynogovernment-

backedsupportexists

forhomesexperiencing

subsidence,andthereare

noknownproposalsto

introducesuchascheme.

Floodingisoneofthe

biggestclimatechangerisks

intheUK,andistherisk

mostcloselyassociatedwith

climatechangeinthepublic

perception.Itisexpected

tooccurwithincreasing

frequencyandseverityinthe

future.

FloodRecurrentlyprovide

government-backed

reinsuranceforfloodriskfor

mostproperties,butthisis

duetostopin2039.Thisis

anexampleofhowchanges

ingovernmentpolicy(a

transitionrisk)canalterthe

impactofaphysicalrisk;

sincemanyhomesinflood

zoneswouldlikelyface

unaffordablehomeinsurance

withoutasimilarscheme.

Flooding Subsidence Coastal erosion

21GC23/3:Guidanceontheanti-greenwashingrule|FCA

Our ESG priorities (continued)

Building a greener society(continued)

Strategy(continued)

30 | Strategic report 31

Transition risk

Transitionrisksarisefromchangesinthewidereconomyasitmovestowardalow-carbonstate,includingchangestoclimate

policyandregulation,technologydevelopments,andshiftingconsumerattitudes.TransitionriskimpactsYBSbypresenting

uncertaintyforthefuturestateoftheeconomic,regulatory,andmarketlandscapes,andresultsindifferentbusinessthreats

andopportunities.Thetoptransitionriskswe’veidentifiedarenotedinthetablebelow.

Climate risk exposure and risk appetite

TheSocietymanagestherisksarisingfromclimatechangethroughitsriskappetitestatements.TheSocietyisworkingto

evolvethesestatementsovertheshortterm;thecurrentstatementsaresetoutinthefollowingtable.

Impacts on Accord

TheSocietyconsidersclimateriskataGrouplevel,whichincorporatesallbrandsandsubsidiariesincludingAccordMortgages

anditscustomers.

Horizon scanning

Tokeepabreastofnewregulation,includingpolicychangesandlegislationthatrelatetoclimate-relatedfinancialdisclosures

orgovernmentpolicyrelatingtohousing,theSocietyundertakeshorizonscanningactivitiesonaregularbasis.

Metrics and targets

Addressingclimatechangeisnotonlyasocietalissueofgreatimportance,butisalsoessentialforourlong-term

organisationalsustainability.Therefore,wecontinuetodesignandembedmetricstomonitorprogressagainstclimatetargets.

Furthertothis,climateriskisamongseveralmeasureswithintheSociety’sLeadingforValuebonusscheme.

For further information on this scheme please refer to the Directors remuneration report.

Our carbon footprint

TheSociety’soperationalcarbonfootprintis4,206tonnesofcarbondioxideequivalent(‘tCO2e’)24.Thistotalfootprint

includesourScope1,Scope2,andScope3emissionsforthereportingperiodJanuary–December2023,asdetailedbelow25.

Transitionrisksmayberevealed

throughotherriskareas:

Credit riskcouldincreaseduring

theshifttoalowcarboneconomy,

forexample,duetojoblossesor

changestohouseholdincome.It

mayalsoimpactonthevalueofthe

propertyifnewlegislationaround

energyefficiencymakestheproperty

undesirable.

Operational riskmayoccurifsupply

chainsareimpactedbythechanges,

whichcouldresultincostincreases.

Transitioningtoalow-carboneconomy

couldalsoimpactotherfinancialrisks

suchasliquidityandmarketrisk.Shifts

intheeconomycanhaveabearingon

financialmarkets,potentiallycausing

interestratevolatilitywhichcould

impacttheSociety’sfinancialstability,

orourabilitytoaccessfunding

markets.

Astheindustryconsiderswaysto

protectagainstclimateriskand

encouragesustainablefinance,there

isariskthatcapitalregulationcould

change,increasingtheamountof

capitalitwouldbenecessaryto

hold.TheSocietyperformsanICAAP

annually.IntheICAAP,weconsider

thepotentialimpactofphysicaland

transitionalrisksofclimatechange.

Itisourintentiontointroducemore

quantitativedisclosuresintheshort-

termasourmodellingmethodologies

evolveovertime,includingpublication

ofourFinancedEmissionsinthe2023

ESGreport(expectedJune2024).

Workstreams to manage the risks

and opportunities associated with

economic and regulatory change

are discussed and prioritised

within the Climate Risk Working

Group (see Climate governance).

Climate risk and Enterprise

Risk Management Framework

(‘ERMF’)

Climatechangeisidentifiedasa

cross-cuttingriskinourERMF,which

istheoverarchingframeworkused

toidentify,assess,andmanagerisks

totheSociety.TheERMFsetsthe

expectationthatallriskcategory

ownersconsidertherisksarisingfrom

climatechangewhenconstructing

andrenewingtheirriskpolicies.

Inaddition,theEnvironmental

&ClimateChangeRiskPolicy22

(‘ECCRP’)wasdesignedtomanagethe

Society’senvironmentalandclimate

changestrategycommitments.All

riskpoliciesarereviewedatleast

annuallytoensurethatemerging

risksarecaptured.Maintainingthe

ECCRPillustratesanevolutioninour

approachtobetterintegrateclimate

considerationswithinouroperational

framework,andwehavedecided

todiscontinueourEnvironmental

ManagementManualasaresult.

Climateriskisincorporatedinthe

ERMFinlinewiththePRASupervisory

Statement(SS)3/19,includingthe

DearCEOandDearCFOletters

releasedbythePRA,whichprovide

furtherguidanceforfirms.TheECCRP

isownedbytheEnvironmental

Sustainabilityteam,withany

materialchangesand/orpolicy

renewalsapprovedbyExecutiveRisk

Committee.TheSocietyrecognises

thattheunderstandingofclimate

risks,andtheimplementationofany

mitigants,willdevelopovertimeas

weprogressthroughthisjourney

andenhanceourunderstandingand

approach.Throughout2024,the

EnvironmentalSustainabilityteam

willworkwithriskownerstofurther

developunderstandingofhowclimate

changewillimpactthemanagement

andmeasurementofeachrisk.

Climateriskhasbeenintegratedinto

thethreelinesofdefencemodel

employedbytheSociety,withboth

Second-andThird-Lineteamshaving

conductedreviewsoftheFirst-Line’s

approachtomanagingclimaterisk

in2023.

More detail can be found in the

Risk Management report.

Economic downturn Regulatory change

DependingontheroutetakenbytheUKtotransition

toalow-carboneconomy,thecountrymayexperience

economicgrowthorslowdown,includingchangestothe

unemploymentrateandpropertyprices.

TheUKcentralanddevolvedgovernmentscontinueto

alterthecourseoftheclimatepolicylandscape.This

impactstheobligationsplacedonlenders,landlords,and

homeownerstounderstandandreducetheemissions

associatedwithbuildings.

22Ourpolicies|CorporateGovernance|YourSociety|YBS

23 Automotive;powerutilities;landtransport;andlogistics;agriculture;construction;oilandgas;airlinesandaerospace;buildingmaterials;shipping;chemicals;

miningandmetals.

24 TheSocietyusesabothamarket-basedandlocation-basedmethodologytoreportitscarbonemissionshoweveryoucanfindourlocation-basedcarbon

footprintwithintheDirectors’report.

25 Thisfootprintwasproducedinaccordancewith‘GHGReportingProtocol-CorporateStandard’methodology.

Principal risk Risk appetite statement

Strategic risk NoneoftheSociety’sdirectlending,includingtoCommercialproperties,supports

developmentinsectorsoftheeconomywhichcarryheightenedrisk23.TheGroupdoes

notengageinprojectfinanceandwouldnotsupportaprojectthatdirectlyharmsthe

environment.However,theGroupisnotabletoruleoutindirectinvolvementthroughthird-

partyinvestment.

Retail & commercial

credit risk

TheSociety’slevelofexposuretotransitionandphysicalriskswillcontinuetobestress

testedincompliancewithPRASS3/19toensurethatitdoesnotknowinglythreatenthe

Society’sfinancialsustainability.ThisapproachissetoutintheEnvironmentalandClimate

ChangeRiskPolicy(seeEnterpriseRiskManagementFramework).

Compliance & conduct

risk

Wewillonlyofferproductsandservicesthatmeetcustomerneeds,andwherewecan

manageanyconductriskswhicharise,includingconsiderationofcustomervulnerabilityand

impactsonandofclimatechange.Iffailuresoccur,weproactivelyidentify,establishtheroot

causeof,andtakeremedialaction.

Operational risk Wewillseektolimit,understand,andmitigateexposuretoclimatechangerisk.TheSociety

iscommittedtoreducingitsimpactontheenvironmentandthisincludesensuringthatits

suppliersarealsoactivelytakingstepstoreducetheimpacttheyhaveontheenvironment.

Scope 1

5 tCO2e

Scope 2

0 tC02e

Scope 3

4,201 tC02e

Directemissionsfromourown

operationsandassetsthatwe

directlycontrolorown,suchas

gasusage.

Indirectemissionsassociatedwith

thepurchaseofelectricityinour

operations.

Indirectemissionsfromsources

notownedorcontrolledbyusbut

arepartofourvaluechain.This

includesemployeecommutingand

wastegeneration.

Our ESG priorities (continued)

Building a greener society(continued)

Risk management (continued)

32 | Strategic report 33

Progressing our Scope 3 disclosures

TheSocietycontinuestoimprovethequalityofourdisclosuresbyincreasingthecoveragerelatingtoScope3emissions,

withtheintentionthatmaterialremainingcategorieswillbecalculatedanddisclosedby2025,ifnotbefore.During2023,

theSocietyworkedincollaborationwithanexternalsustainabilityconsultanttocalculateourbaselineoperationalScope3

emissions,andwearepleasedtohaveexpandedourdisclosurestoincludeemissionsgeneratedfromouremployeesthrough

bothworkingfromhomeandtheircommutejourneys.

Werecalculatedour2022supplychainemissionsbasedonspendfactorstohighlightwhereweneedtofocusourattention

withinourprocurementprocess.Thissupplychainanalysisisinitsearlystages,andweareactivelypreparingtoengagewith

oursuppliers,aswellasexternalpartners,tofurtherourunderstandingofoursupplychainemissions.Intheinterim,wewill

beusingthesefiguresinternallytoidentifyareasforimprovementandserveasafoundationforemissionreductionplans.

In2023werecalculatedourFinancedEmissionsacrosstheresidentialmortgageportfolioandwillbepublishingtheminthe

ESGreportwhichisduemid-2024.

Carbon reduction plans

Scope 1 and 2

ThepathtoNetZerosetsouttherouteandtimingof

reducingtheSociety’scarbonemissionsasfaraspossible,

andonlythenconsideringcarbonremovals.TheSociety

remainscommittedtoitsNetZerotargetforScope1

andScope2operationalemissionsof2035orsooner.

Supportingthis,wehavecontinuedtoprocureelectricity

andgasbackedby100%RenewableEnergyGuarantees

ofOriginandRenewableGasGuaranteesofOrigin

certificates.In2023,theSocietycompletedseveralretrofit

improvements,includingupgrading31branchestofullyLED

lightingsystems,withafurther48branchestobecompleted

by2025.In2024,theSocietywillfinalisetheNetZeroplan

forthesescopesandwillbedisclosingshort-termtargets

andapproachesonceimplemented.

TheSocietytookthedecisiontonotrenewanycarbon

offsettingcontractsin2023toallowustoconsiderour

NetZeroapproachandprioritiseemissionreductions,prior

tooffsetting.ThisapproachwillalsodeepentheSociety’s

understandingofeffectiveandpurpose-drivenoffsetting

projects.

Scope 3

TheSocietymaintainsthe2050NetZeroambitionfor

allapplicableoperationalemissions,andisdeveloping

acomprehensivereductionstrategyinsupportofthis.

Thisroadmapisexpectedtobecompletebymid-

2024andisbeingdevelopedinconjunctionwithour

externalsustainabilityconsultants.Theresultwillyield

recommendationstoaddressoursustainabilitytargets,

ensuringthatourjourneytowardsNetZeroremainswell

informedandeffective.

During2023,wecontinuedtoresponsiblymanageour

operationalandcapitalprojectwaste,andweremain

committedtomakingsurethatatleast97%ofour

operationalwasteisdivertedfromlandfill.Only1.3%of

thewastegeneratedwasdirectedtolandfill,reflectingour

commitmenttominimisesuchdisposal.

Notably,asignificant98.7%ofourwastewasrecycled,

recovered,orreusedandthereforedivertedfromlandfill

sites.

ForCategory15FinancedEmissions,theSocietyis

committedtosupportingtheUKGovernment’sambitionto

beNetZeroby2050.In2024,wewillexploreopportunities

tosupportcustomerstodecarbonise,howeverourability

toreduceoverallFinancedEmissionswillonlybepossible

withstronggovernmentpolicy.RetrofittingtheUK’sentire

residentialpropertyrequireseffectiveleadershipthat

demonstratesthebenefitsofreducinghouseholdemissions.

Thisapproachneedstosupporthomeowners,construction

industrydevelopments,andthedecarbonisationof

electricitynetworks.Anapproachofthisnaturewillnot

onlyreducetheSociety’semissionsbutthatofthewhole

country.

Upstream emissions

Scope 3 Category26 Sub-Category Status Data Quality27 tCO

1. Purchased goods &

services

Procurementandsupply

chainofgoods

2022spendbased

emissionsfactors

calculated

Low Initial

understanding

2. Capital goods Procurementandsupply

chainofgoods

2022spendbased

emissionsfactors

calculated

Low Initial

understanding

3. Fuel & energy

related activities

Extraction,productionand

transportationoffuelsand

energypurchasedinthe

reportingperiod

Externallypublished High 240tCO

4. Upstream

transportation &

distribution

Supplierdelivery

emissions

Initialunderstandingof

theavailabledata

Low Notcalculated

5. Waste generated

in operations

Wastedisposaland

treatmentinoperations

Capitalproject

waste

Endoflifecustomer

communications

Externallypublished

data

Externallypublished

data

Initialunderstanding

Low 21tCO

Notcalculated

6. Business travel Businessrelatedtravel

activity

Externallypublished Medium 292tCO

7. Employee

commuting &

working from

home

Colleaguecommuting

Workfromhomeenergy

emissions

Externallypublished Medium 3,648tCO

8. Upstream leased

assets

Operationofassetsleased

duringreportingperiod

Initialunderstanding Medium Notcalculated

Downstream emissions

Scope 3 Category Sub-Category Status Data Quality tCO

9. Downstream

transportation and

distribution

Transportationand

distributionofproducts

andservicessoldduring

thereportingperiod

Initialunderstandingof

theavailabledata

Low Notcalculated

10 - 12. Processing/Useofsold/

Endoflifeofproducts

sold

Notapplicable Notapplicable Notapplicable

13. Downstream

leased assets

Operationofassetsowned Initialunderstandingof

theavailabledata

Low Notcalculated

14. Franchises Notapplicable Notapplicable Notapplicable Notapplicable

15. Investments Propertiesfinanced,and

otherapplicablesecurities

financed,throughthe

Society’soperations

Calculateddata

andgainedinitial

understanding

Medium TofollowinESG

report

26 Scope3figuresarecalculatedonamarket-basedemissionsbasis.AssuranceofallourcarbonfootprintcalculationsandmethodologydetailscanbefoundintheSECR

sectionoftheDirectorsreport

27 Dataqualityreflectstheavailabilityandcompletenessofdatausedtocalculateemissions(lowtohigh)

Our ESG priorities (continued)

Building a greener society(continued)

Metrics and targets (continued)

34 | Strategic report 35

Energy Performance Certificates

(‘EPCs’)

EPCscapturetheenergyefficiencyofa

propertyandactasaproxyforunderstanding

theemissionsthepropertygenerates.They

alsoprovideinsightonhow,throughretrofit,

theproperty’senergyefficiencycouldimprove.

Therefore,thedatacanbeusedtounderstand

thepotentialrisktheSocietyfacesshould

property-relatedregulationchangeand

theopportunitiesavailabletosupportour

customerstransitiontoamoreenergy

efficienthome.

ThereareseveralknownlimitationstoEPC

data,whichshouldbeconsideredwhen

gaininginsightormakinganydecisions

fromthem.Firstly,theratingreflectsthecost

toheatahome,ratherthantheemissions

generatedfromit.Therefore,alow-carbon

homedoesnotnecessarilyrelatetoabetter

EPCrating28.Additionally,aratingisonly

requiredwhenahomeissoldorlet,andis

onlyvalidfor10years,reducingthenumber

ofpropertieswithavalidrating.Finally,some

oftherecommendationsincludedonanEPC

canbeprohibitivelyexpensiveimprovement

measures,bringingintoquestionthefeasibility

ofthepotentialrating.

TheSocietyusesEPCdatatounderstandthe

exposuretotransitionriskandopportunity

withintheloanportfolio.EPC’sarethe

underlyingdatatoolthatcanhelpus

understandtheclimate-relatedopportunities

(seeStrategy).In2023,wehaveEPCdatafor

59%ofourresidentialmortgagebook(‘match

rate’),ofwhich42%areEPCCorabove.

Bothfigureshaveincreasedsince2022,and

throughout2024wewillseekopportunitiesto

improveourEPCcoverage.

Ofthepropertiesinourresidentialmortgage

bookwithavalidEPC,98%showpotential

toberatedCorabove.Thisdemonstratesthe

scaleofchangepossiblewithinresidential

property,butalsotheurgentneedforgood-

qualityandscaledretrofitsupplychains,to

enablenation-wideupgradestohomesto

meetNetZerotargets.Inmanyways

theretrofitmarketisstillemerging,and

thereforeitisvitalthatstrategy,direction,

andfundingaresetthroughgovernment

policiesandleadershiptoensurethatsupply

meetsdemand.

Retail EPC Coverage

Proportion of residential mortgage book

with a valid EPC

Outercircle:2023|Innercircle:2022

ValidEPC NoEPC

EPCCorabove EPCDorbelow

Proportion of properties with a valid

EPC that have EPC C or above

Outercircle:2023|Innercircle:2022

ValidEPC

59%

EPCCor

above

42%

NoEPC

43%

EPCDor

below

61%

ValidEPC

57%

EPCCor

above

39%

NoEPC

41%

EPCDor

below

58%

28WhyEPCsaren'treadyforlow-carbonheating-Which?News

2023 2022

Current EPC Potential EPC Current Potential

Total

Owner-

occupied BTL Total

Owner-

occupied BTL Total Total

A 418 397 21 16,413 14,922 1,491 331 14,409

B 20,946 18,415 2,531 95,171 71,800 23,371 18,689 92,906

C 46,256 32,127 14,129 47,041 35,157 11,884 41,126 44,592

D 69,014 52,611 16,403 3,268 2,507 761 68,693 3,198

E 21,325 17,040 4,285 308 258 50 22,150 265

F 3,516 3,371 145 44 41 3 3,648 40

G 778 731 47 8 7 1 784 11

Total with EPC 162,253 124,692 37,561 162,253 124,692 37,561 155,421 155,421

Properties without valid EPC 110,469 98,972 11,497 117,610

Our ESG priorities (continued)

Building a greener society(continued)

Metrics and targets (continued)

36 | Strategic report 37

Our top 10 climate commitments

AchieveNetZeroScope1andScope2

emissionsby2035,andNetZeroScope3

operationalemissionsby2050.

Maintaina100%renewableoperationalenergy

supplyinlinewithRE100requirements.YBS

willmovetowardsnon-burninggreenenergy

andinstallheatpumpsystemsinallproperties

wherethisisfeasible.

Addonlyhybridorelectricvehiclestoourfleet

from2025,workingtowardsafullelectricfleet

assoonasoperationallypossible.

Improveclimatechangeresilienceacross

allareas.

Targetandmaintainaminimumannual

landfilldiversionrateof97%.

Implementfurtherpoliciestoprevent

lendingorinvestingineconomicsectorsthat

haveaheightenedclimateriskand/orare

environmentallydamaging.

LaunchacustomerNetZerotransitionplan,

increaseunderstandingofourfinanced

emissions,andsupportourcustomerswiththeir

NetZerotransition.

Supportcustomerstomakebetterenvironmental

choicesbyhelpingthemunderstandclimate

changeandhowitimpactshousing.

Launchamember-focusedNetZero

transitionplan,whichwillincludegreen

savingsproductinitiatives.

Continuetomakeprogresstowards

alignmentonourTaskforceforClimate-

relatedFinancialDisclosureswithbest

practiceandcreateaplatformontheYBS

websitetoshowcaseourprogressandfuture

plansonclimatethinking.

NET ZERO

pathway

TheSocietyaimstoalignitscommitmentswithourtransition

plansandallshort-,medium-,andlong-termtargets.As

aresult,weanticipatestreamliningthesecommitments

graduallytomirrortheprogressmadeandtheactionsthatare

yettobetaken.

Environmental progress and achievements

2012-2020:

Inthisperiod,weinitiatedcarbonfootprintdisclosures,

supportedlocalcommunities,adoptedrenewableelectricity,

andintroducedvariousgreeninitiatives.Ourcommitmentto

sustainabilitywasformalisedthroughthelaunchofBuildinga

greenersociety.

2021-2022:

Inrecentyears29wehavedeepenedourcommitmentto

Buildingagreenersocietybycollaboratingwithlocalclimate

commissionsandtransitioningtomorerenewableenergy

sources.Participationinclimatescenariosandasignificant

carbonreductioninourdirectemissionshighlightedour

dedicationtomitigatingenvironmentalimpact.Weinitiated

ourunderstandingofoursupplychainemissionsandenacted

lendingrulesagainstsectorsknowntobeenvironmentally

harmful.Furthermore,wecommittedtoresponsiblebanking,

improvedourbranchinfrastructure,anddevelopedthe

capabilitytounderstandFinancedEmissions.

2023:

TheSocietycontinuestosupportwiderNetZeroambitions

throughongoingpartnershipswiththeBuildingSocieties

Association(‘BSA’)andtheYorkshire&HumberClimate

Commission(‘YHCC’).ThroughtheBSAwecanexert

governmentalinfluencethroughacollectiveindustryvoice,

whileYHCCallowsustoutiliseourskillsetstosupportlocal

climateaction.Aspartofthiscommitment,wehaverenewed

oursponsorshipofYHCCforafurther3years,to2026.

EstablishingtheEnvironmentalSustainabilityteamduring2023

underpinsourcommitmenttoenvironmentalsustainability.

Thisdedicatedresourcewillprovidetheexpertiseandfocus

requiredtoeffectivelymanageandmitigateenvironmental

risks,whilstalsoidentifyingopportunitiesfortheSocietyto

furtheralignYBSwithdisclosurerecommendationsandglobal

sustainabilityobjectives.

29 Youcanfindfurtherdetailsofourprogressupto2022intheBuilding

aGreenerSocietySectionofthe2022AnnualReportandAccounts

availableonourwebsite.

Our ESG priorities (continued)

Building a greener society(continued)

38 | Strategic report 39

Engaging with our

Stakeholders

TheSociety’skeystakeholdergroupsaresetoutinthetablebelow.Thesearegroupsthateitherhaveaninterestin,orare

impactedby,ouroperations.Weactivelyconsidertheneedsofthesegroupsinthecourseofourdecision-making,andwe

makeuseofavarietyofmeanstoensurethatwecontinuetomeetthechangingexpectationstheyhaveofus.

More information on our stakeholder engagement and Our ESG priorities will be made available in our 2023 ESG report.

Key

stakeholders

Who they are How we listen and

engage

What they expect from YBS Material ESG topics

identified

Members and

customers

•

Members

•

Mortgages

andsavings

customers

•

Commercial

lending

customers

•

Registered

providersof

SocialHousing.

•

Memberevents(Your

TimetoTalksessions,

in-branchevents).

•

AnnualGeneral

Meetings.

•

OurMemberPanel,

MyVoice,andregular

surveysoncustomer

experienceand

brand.

•

Directengagement

throughspecialist

teams(face-to-face,

onlinewebchat,

telephonecalls,

letters,emails,and

socialmedia).

•

Offergoodvalueand

flexiblesavingsaccounts

andmortgages

•

Deliverhelpful,effective,

approachable,friendly,and

efficientservice

•

Investintheproductsand

servicestheyneedtogain

betterfinancialwellbeingor

secureamortgage

•

Runastrong,secure,and

sustainablebusinessintheir

long-terminterests

•

Demonstrateactionto

supportawidersocietal

purpose

•

Provideadaptablesupport

tocustomersinvulnerable

situations

•

Investintransformingour

digitaloffering.

•

Sustainablehomes

•

Flexibleaccess

toproductsand

services

•

Homeownership

•

Businessresilience

•

Dataprivacyand

informationsecurity

•

Communityimpact

•

Financialresilience

•

Financialinclusion

•

Vulnerablemember

support

•

Responsiblelending

•

Alignmentto

purpose.

Colleagues

•

Allcolleagues

•

Contractors

•

Agency

colleagues.

•

ColleagueForum,

whichisattended

byaNon-

ExecutiveDirector

forWorkforce

Engagement

•

Focusgroupsand

surveys

•

ChatPackstrategy

updates

•

Colleagueeventsand

virtualconferences

•

Intranet(liveQ&As,

news,blogs)

•

PeopleExperience

Forum

•

Directengagement

throughleadership

teams

•

Colleaguelistening

groupswithNon-

ExecutiveDirectors

•

Colleaguenetworks.

•

Provideaforumwhereviews

areheardbothintermsof

theirexperienceatYBSand

alsobusinessstrategy

•

Treatpeoplewithempathy,

respect,andfairness

•

Encourageandsupporttheir

developmentandtraining

•

Providefairrewardand

remunerationpolicies

•

Supportagoodwork-life

balance

•

Careabouttheirphysical,

mental,andfinancial

wellbeing

•

Provideaninclusiveculture

wherediversityisvalued

andcelebrated.

•

Businessresilience

•

Responsible

operations

•

Alignmentto

purpose

•

Pathwaytonet-zero

•

Impactofclimate

change

•

Diversity,equity,

andinclusion

•

Colleaguehealth

andwellbeing

•

Talentattractionand

retention

•

Communityimpact

•

Dataprivacy

andinformation

security.

Key

stakeholders

Who they are How we listen and

engage

What they expect from YBS Material ESG topics

identified

Government

and Regulators

•

Central

andlocal

Governments

•

Financial

Conduct

Authority

•

Prudential

Regulation

Authority

•

Information

Commissioner’s

Office

•

Payment

Systems

Regulator.

•

Directengagement

throughspecialist

teams(face-to-face,

telephonecalls,

letters,emails)

•

Engagingwith

consultations,

includingthrough

industrybodies

•

Monitoring,engaging,

andcomplyingwith

regulatorychange

andreporting.

•

Actwithinthelawand

regulationandinthe

interestsofourcustomers

•

Operationalresilience

•

Swiftlyandproactively

resolvecustomerissues

•

Befinanciallystrongand

securebymaintaining

adequateresources

includingcapitaland

liquidity

•

Actwithintegrityand

transparency.

•

Businessresilience

•

Responsible

operations

•

Pathwaytonet-zero

•

Sustainablehomes

•

Diversity,equity,

andinclusion

•

Dataprivacyand

informationsecurity

•

Responsible

lending.

Investor

Relations

•

Wholesale

investors

•

Ratings

agencies.

•

Directengagement

throughface-to-face

meetingsandevents

•

AnnualReportand

Accounts

•

Regulatory

NewsService

announcements

•

Investorreporting.

•

Offerappropriatelypriced

debtsecuritiesinthe

wholesalemarketswhich

adequatelyrewardthemfor

thelevelofrisk

•

Operateinaprudent

manner,protectingour

financialsustainabilityand

abilitytoserviceourdebt

•

Actresponsiblyinwholesale

markets

•

Provideregularinformation

andupdatesonourstrategy,

financialperformance,and

principalrisks

•

Sharedetailsofourfunding

strategyandtheexpected

volumesofsecuritiesbeing

issued

•

DemonstrategoodESG

practices,validatedbyNon-

FinancialRatingsAgencies.

•

Businessresilience

•

Responsible

operations

•

Pathwaytonet-zero

•

Impactofclimate

change

•

Diversity,equity,

andinclusion

•

Sustainablehomes

•

Financialresilience

•

Financialinclusion

•

Responsible

lending.

Partners

•

Brokers

•

Agency

proprietors

•

Suppliers

•

Tradeunions

•

Industrybodies.

•

Directengagement

throughspecialist

relationship

management

teams(face-to-face

meetingsandevents,

telephonecalls,

letters,emails).

•

Besimpleand

straightforwardtodealwith

•

Collaborateastrusted

partnerstoachievemutual

success

•

Deliverhelpful,effective,

approachable,andefficient

service

•

Demonstrateactionto

supportawidersocietal

purpose.

•

Businessresilience

•

Responsible

operations

•

Supplychain

engagement

•

Dataprivacy

andinformation

security.

Communities

•

Thelocal,

regional,

andnational

communities

inwhichwe

operate

•

Charitiesand

community

groups.

•

Charitable

partnerships

•

Arangeofinitiatives

tosupportthe

Bradfordcommunity

atalocallevel

•

Financialeducation

initiativesincluding

MoneyMinds.

•

Investresourcesinsupport

ofthesocialeconomic

welfareofcommunities

•

Demonstrateactionto

supportawidersocietal

purpose

•

Provideaninclusiveculture

wherediversityisvalued

andcelebrated.

•

Sustainablehomes

•

Flexibleaccess

toproductsand

services

•

Homeownership

•

Communityimpact

•

Financialresilience

•

Financialinclusion

•

Talentattractionand

retention

•

Diversity,equity,&

inclusion.

40 | Strategic report 41

Engaging with our stakeholders (continued)

Our Communities

Throughourcommunity

programmes,weaimtohave

apositiveimpactacross

thenationasweprovide

peoplewithrealhelptoward

improvingtheirfinancial

wellbeing.

Tomaximisethereachofour

programmes,wecollaborate

withnationalpartners,provide

fundingforlocalcharitiesthrough

theYorkshireBuildingSociety

CharitableFoundation,andoffera

rangeofvolunteeringoptionsfor

ourcolleaguestoprovidepractical,

hands-onsupportwheretheyliveand

work.Financialwellbeingprogrammes

liketheoneswesupporthaveonly

becomemoreimportantandmore

necessaryinrecentyears,giventhe

financialandeconomicchallenges

facinghouseholds.Asaresultthe

numberofpeoplewesupportedin

2023increasedto105,000(2022:

96,000).

More detail on the topics relating

to our community activities can

be found in our 2023 ESG report,

which is available on our website

ybs.co.uk.

Purposeful partnerships

Workingalongsidecarefullyselectedpartnersallowsustodeliverexperthelpand

supporttothosewhoneedit,attherighttimeandintherightplace.

Citizens Advice

Ouraward-winningpartnershipwithCitizens

Advicecontinuedtogofromstrengthtostrength

in2023,withtheSocietyincreasingthefunding

tosustainthisvaluableservice.Representatives

fromCitizensAdvicehavebeenpositioned

withinselectbranchlocationstoofferfree,face-

to-face,independentadviceonawiderange

ofissues,withaparticularfocusonfinancial

wellbeing.Thisserviceisaccessibletotheentire

community,whethertheyareYBSmembersornot.

Duetothesuccessofthispartnershipin2022,andthegrowinglevels

ofdemand,wehaveexpandedtheprogramtoencompass46locations

acrossScotland,Yorkshire,theNorthwest,EastAnglia,andtheSouthwest.

Feedbackfrombranchcolleaguescontinuestohighlightthepositive

impacttheserviceishavingincommunities,andthankstotheSociety’s

increasedinvestmentintheservicein2023,thepartnershiphelped3,800

clients–morethandoublethenumberinthepreviousyear.

SincethestartofthepartnershipinMay2021,wehavehelpedto

unlockover£2.5mworthofestimatedadditionalincomeforclients,

whichrepresentsincometheycouldexpectiftheyactontheadvice

given,oftenrelatingtomissedbenefits,ortaxcreditsandgrants.

Free for everyone,

ﬁnding a way forward at

Age UK

Ourpartnershipwiththeleadingcharityforolderpeople,AgeUK,

concludedinJune2023,andwetakeimmenseprideinthecontributions

madeduringourtwo-and-a-half-yearcollaboration,whichreachedatotal

of£1.02million.Donationsfromourcustomers,andmembersofthe

public,combinedwiththelaunchofaninnovativesavingsaccountand

additionalfundingfromtheYorkshireBuildingSociety,helpedtofundAge

UK'sBuildingBetterLivesprogramme.

Thisserviceplayedavitalroleformanyduringchallengingtimes,

includingtheCOVID-19pandemicandtheongoingcost-of-livingcrisis.

Thisinitiativewasdesignedtoprovideone-to-onesupportsessionswith

trainedadvisors,focusingonaddressingfinancialhardshipresultingfrom

significantlifeeventssuchashealthdiagnoses,thelossofapartner,or

changingcareneeds.Inthecourseofthispartnership,weareproudtosay

thatover4,900olderindividualsreceivedsupport,andmorethan3,600

benefitclaimsweremade.

Good Things Foundation

In2023,wecontinuedtoworkwithGoodThings

Foundation,supportedbylocalcommunitypartners,

tohelpdeliveressentialdigitalskillstrainingtoBlack,

Asian,andethnicallydiversepeopleinBradford.The

projectaimstohelppeopleacquireandimprovetheir

digitalskillsandisspecificallytargetedtowardethnic

minoritycommunitieswherethesocialexclusionand

skillsgapsmaybemorepronounced.

Theprogrammesupported489peoplein2023(2022:

442),72%ofwhomsaidtheyfeelmoreconfidentusing

adigitaldeviceandtheinternet,and73%saidtheyfelt

thedigitalskillslearnedhaveenabledthemtoapplyfor

ajobortrainingthattheywouldnothavebeenableto

dopreviously.

FareShare

InNovember2023,welaunchedournewcharitypartnershipwithFareShare,the

UK’sbiggestcharityfightinghungerandfoodwaste.TheimportantworkFareShare

undertakeinvolvesredistributingsurplusfoodtoover8,500localcharitiesand

communitygroups,supportingthousandsofvulnerablepeopleeveryweek–not

justwithfood,butwithskillstohelpliftthemselvesoutoffinancialhardship.

Ourgoalistoraise£1milliontofundFareShare'sBuilding

SkillsfortheFutureprogramme.

Wekickedoffthepartnershipwitha£150,000donationtoFareSharein2023,

andaddedtofundraisingeffortsfromcolleaguesandmembers,wehavesofar

raised£184,670towardsourgoal.Thisinitiativewillsupport2,500peopleand

helptopreparethemforemployment.Throughcommunityoutreachprograms

andanintensiveemployabilityprogramspanningLondon,Bristol,MiltonKeynes,

Leeds,Barnsley,Edinburgh,andCardiff,weaimtohelpindividualsregaintheir

financialindependence.ThispartnershipwillrununtilJune2026,andwelook

forwardtowhatourcollaborationwillbeabletoaccomplish.

Engaging with

our stakeholders

(continued)

42 | Strategic report 43

Yorkshire Building Society

Charitable Foundation

TheCharitableFoundationisan

independent,registeredcharitywith

itsownBoardofTrustees,ofwhich

YorkshireBuildingSocietyfundsthe

runningcosts.

TheCharitableFoundationis

predominantlyfundedbymembers

optingintotheSmallChangeBig

Difference

Scheme,whichenables

themtodonatetotheFoundationthe

penniesfromtheinterestearnedon

theirsavingsaccounts,orrounding

uptheirmortgagepaymentstothe

nearestpound.Asattheendof2023,

923,000accountsweresignedup,

and£358,000wasraisedforthe

Foundation(2022:829,000accounts,

and£308,000raised).

In2023,inorderthatthefunding

isdirectedtoareaswhereitismost

needed,theBoardofTrusteesagreed

tofocustheFoundation’ssupporton

areasofdeprivationandcharitiesthat

supportmarginalisedgroups.Similarly,

smaller,grassrootscharitiesareoften

beneficiariesoftheFoundation’s

supporttoensurethatdonations

makethebiggestdifference.The

Boardalsoincreasedthemaximum

donationamountto£2,500andmade

applicationguidelineslessrestrictive

togivecharitiesgreaterfreedomto

spenddonationsflexibly.Asaresultof

thesechanges,in2023theFoundation

donated£285,000,distributedamong

257charities(2022:£283,000).

Eachyear,theSocietydonates

£100,000totheCharitable

Foundation’sRealHelpforRealLife

Fund.Thefundingdonatedin2022

wasdistributedtofourprojectsin

November,deliveringsupportforthose

experiencingfinancialhardshipand

supportingpeoplewithemployability

skills.Thecharitieshavebeencarefully

selectedtohelpreachunderserved

groups,suchasvulnerableyoung

peopleandthosefromethnicminority

communities.

•

AlbertKennedyTrustwasawarded

£29,000tosupporthomelessand

vulnerableLGBTQIA+individuals

inManchester,providingaccess

toemergencysupportand

accommodation.

•

BradfordFoodbankreceiveda

donationof£10,680tofundastaff

memberataJobClubandITHelp

Hubforthoseusingthefoodbank.To

date,thishassupported153people,

with10securingemploymentand8

intofurthereducationortraining.

•

TheFoundation’spartnershipwith

RefugeeActionlaunchedin2021

hascontinuedandwillnowrununtil

2024.Thecharityhasbenefited

from£60,000todatewhichhas

fundedanemployabilityskills

coursefor79refugeesandthose

seekingasylum-thePathwaysto

WorkProject.Societycolleagues

arealsomentoringrefugeestohelp

themintosecureemploymentafter

re-settlingintheUK,andtosupport

theirindependence.

•

Vulnerableindividualsinadeprived

areaofHullhavebeensupported

intoemploymentandtraining

opportunitiesthankstoa£28,000

donationtotheVulcanLearning

Centre–helping332peoplein2023.

Afurther£100,000wasdonatedto

theFoundationin2023whichwillgo

towardsprojectsin2024.

Colleagues in communities

Eachcolleagueemployedbythe

Societyisprovidedanallowanceof

upto31hoursperyeartovolunteer

acrossourcommunityprogrammes.

In2023,23%ofcolleagues

volunteered,collectivelycontributing

6,500hourswhichis19percentage

pointshigherthanin2022.The

Society'svolunteeringeffortsinitially

focusedonfinancialeducationand

employabilityskills,howeverinthe

autumnof2023,ourfocuswidened

toincludeaddressingfinancial

hardship.Thisbroaderapproach

allowedcolleaguestoutilisetheir

skillsandtimetomeetimmediate

needsinlocalcharitiesandcommunity

organisations.Colleaguescanalsouse

theirvolunteerallowancetosupport

theSociety’scharitypartner,FareShare,

andusetheirprofessionalskillsto

providepro-bonosupport,becomea

trustee,schoolgovernor,ormentor.

Ourflagshipvolunteeringprogram,

MoneyMinds,teachesyoungpeople

aboutmoney,andpreparesthemfor

work.In2023wecontinuedtodeliver

hundredsofsessions,reaching16,000

childrenandyoungpeopleagedfive

tonineteen(2022:16,000).UKSavings

WeektookplaceinSeptember2023,

andoverthecourseofthemonth

branchcolleaguesdeliveredover

200sessionstoover3,100people.

Therecentexpansiontoincludean

onlineplatformprovidededucators,

parents,andcaregiverswitharesource

forenhancingfinancialliteracy,both

withintheclassroomandwithout.

OurEmergingTalentprogram

representsaninnovativecollaboration

withtwocarefullyselectedschools

andcollegesinBradford,prioritising

institutionswithasignificantnumber

ofstudentsonapupilpremiumgrant,

orsituatedindiversecommunities.It

deliverstailorededucationalsessions

focusedonemployabilityskillsand

meaningfulworkplaceexperiences,

preparingstudentsfortheworldof

work.In2023,theprogramevolvedby

introducingatwo-dayemployability

programwithAQA-certifiedworkshops.

Thisdevelopmentenabledusto

support82studentsandtheoutcomes

wereresoundinglypositive,as

evidencedbythefeedbackreceived

frombothstudentsandtheteachers

involved.

Community contribution

Weusethefollowingmethodology

tocalculateourtotalcommunity

contribution,usingthreecategories:

•

YBSdonations–includescash

contributions(themonetary

amountdonatedtocharitiesand

goodcausesandthemoneyspent

tofundcommunityprojectswith

partners),employeetime(the

costofthetimethatanemployee

spendsonvolunteering)andin-kind

giving(contributionsofproducts,

equipmentandservicesandother

non-cashitemstocharitiesandgood

causes)directlypaidbyYBS.

•

Customerandcolleague

donations(leverage)–includes

cashcontributions(themonetary

amountdonatedtocharities

andgoodcauses)andin-kind

giving(contributionsofproducts,

equipmentandservicesandother

non-cashitemstocharitiesand

goodcauses)fromcolleaguesand

customers,facilitatedbyYBS.

•

YBScosts–includesthecosts

incurredbytheSocietytofacilitate

ourcommunityprogrammes,

includingstaffcostsandother

managementoverheads.

*CharitabledonationspaidtoGoodThingsFoundation(2022and2023)

Community

Contributions

£000

2023 2022

YBS Donations

Customer

Colleague

YBS

Costs Total

YBS Donations

Customer

Colleague

YBS

Costs TotalCharitable Community Charitable Community

AgeUK

175 - 119 26 320 272 - 139 18 429

TheFoundation

100 - 358 - 458 100 - 308 12 420

Othercharity

15 - 65 - 80 100 - 66 - 166

CitizensAdvice

521 - - 14 535 299 - - - 299

Employability/digitalskills*

90 - - 59 149 109 64 - 18 191

Inkinddonations

- 97 15 - 112 - 92 19 - 111

Volunteeringtime

- 141 - 4 145 - 110 - 1 111

Other

- 15 - 588 603 - - - 624 624

Total

901 253 557 691 2,402

880 266 532 673 2,351

Engaging with our stakeholders (continued)

Our Communities(continued)

44 | Strategic report 45

TheSociety’sstrategyforparticipating

inthemortgagesmarketisunchanged:

wecontinuetobalanceserving

largesectionsofthemarketthrough

high-qualitymortgages,atrelatively

lowloan-to-valuecategories,with

morespecificofferingsthattarget

underservedsegments.Thisallows

ustooperateresponsiblyandwithin

riskappetite,whilstworkingtoward

deliveringonourpurpose.

Inthecontextofareducedmarket

sizeaseconomicfactorsservedto

subduethelevelofactivity,strong

levelsofgrosslendingwereachieved

bytheSociety.Totalgrosslendingwas

£9.2bnin2023(2022:£10.3bn).The

disruptionstothelendingmarketin

Q42022ledtoalowernewbusiness

pipelinebeingcarriedintotheyear,

butstrongapplicationperformance

fromQ12023onwardcompensated

forthisinitialshortfall.

Mortgages performance

Theshareoftheresidentiallending

marketcapturedhasincreased0.8

percentagepointscomparedto2022,

andhascontinuedtobesupportedby

theperformanceofAccordbuy-to-let

whichwasrelaunchedearlyin2023.

TheAccordresidentialrangehasbeen

buoyedbyitsexcellentreputationfor

serviceandflexibility,alongwiththe

breadthofourpropositions,allowing

Accordtocontinuetoperformwellin

anincreasinglycompetitivemarket.

Theprofileofmaturitiesfromour

mortgagebookledtoalarger

populationcomingtotheendoftheir

fixed-ratetermscomparedto2022.

Inturn,thiscontributedtoalower

netlendingvolume,whichalignsto

expectations.Netlendingwas£1.6bn

in2023(2022:£3.0bn).

Wehaveobservedchangesin

mortgagecustomerbehaviourrelating

topricesensitivity;thisislikelyto

bepartlyaresultofhigherinterest

ratesmakingthechoiceofmortgage

providermoreconsequential,and

alsopartlytheintroductionofthe

MortgageCharterprecipitatingproduct

switchingactivity.Thesefactors,and

theirrelatedoperationalimplications,

continuetobetrackedandmonitored.

More information on the external

mortgages market can be found

in The External Environment

section, and more information on

our Place to Call Home priority

can be found in the Our Purpose

section.

Mortgages 2023 2022

Grosslending £9.2bn £10.3bn

Netlending £1.6bn £3.0bn

Growthinmortgagebalances* 3.6% 7.2%

Marketshareofresidentialgrosslending 3.9% 3.1%

OUR

FINANCIAL

REVIEW

TheSocietyhasdeliveredstrong

growthintheyear,withshares

balanceshavingincreased£5.1bn

(2022:£6.5bnincrease)representinga

growthrateof12.0%(2022:18.3%).

Sustainingahighrateofgrowthhas

allowedtheamountofvaluereturned

toourmembersthroughsavings

ratestoincreasemeaningfully.This

isdemonstratedthroughawidening

ofthedifferentialinouraverage

savingsratewhencomparedtothe

marketfrom0.56%to1.01%.This

equatestoc.£441.1mofadditional

valuereturnedtomembers(2022:

£198.6madditionalvalue).Providing

thissupporthasbeenparticularly

importantatatimewhenthe

increasedcostoflivingismakingit

difficultformoreand

morepeople.

Thesavingsmarketin2023continued

tobeheavilyinfluencedbytherising

BankRateenvironment.Sincethestart

oftheyear,wehaveincreasedour

variablesavingsratesinresponseto

BankRatefourtimes,increasingrates

acrossallsegmentstosupportboth

newandexistingmembers.

Inahighinterestrateenvironment

theutilityofIndividualSavings

Accounts(ISAs)isgreaterand,as

such,theperiodleadinguptowhen

subscriptionscanbemadeforthe

newtaxyear,usuallybetweenMarch

andMay,seesamarkedincreasein

Savings performance

activityfromsaversandfromsavings

providers.Inflowsofnewmoneyover

thisperiod,drivenbyourmarket-

leadingLoyaltySixAccessISA,aswell

asourcompetitivelypricedLimited

AccessISAandfixed-rateISArange,

contributedtothegrowthinthefirst

halfof2023.

Oursavingsrangeremainssupported

bypurpose-ledpropositions,with

atotalof8variationsonloyalty

productsbeinglaunchedintheyear

(4products,withvariationsacross

bothbranchandonlinechannels).

Aregularsaverthatwillformacore

partofourrangewasalsoaddedin

June,offeringahigherinterestrate

forthosewishingtostarttheirsavings

journey.Separately,oursmarter-tiered

products,whichpayahigherratefor

thelowestbalancetier,havebeen

well-receivedbycustomers.

Ashiftinthecompetitivedynamicsin

thesavingsmarketwasobservedwhen

comparinghalvesoneandtwoof

2023.Thegenerallevelofcompetition

forbalancesintensifiedsignificantlyas

theyearprogressed,withnewproducts

puttingupwardpressureonthetop-of-

the-marketratesacrossbothfixed-and

variable-ratesegments.Thisdrovean

increaseinoutflowandareductionin

newmoneyinflow,leadingtoamuch

slowerrateofgrowthinthesecond

halfoftheyear.

Wedonotexpectthedegreeof

competitionforsavingsdeposits

tolesseninthenearfuture,given

thesizeableTFSMEbalancesthat

themarketwillneedtorefinance

overtheshortandmediumterm.

Lookingahead,ourfocuswillbe

tosupportourlong-termmembers

withfurtherloyaltypropositions,and

maintainstableacquisitionpricingto

demonstratesustainablegrowth.

More information on the external

savings market can be found

in The External Environment

section, and more information on

our Financial Wellbeing priority

can be found in the Our Purpose

section.

Sincethestartoftheyear,wehaveincreasedtheratesonourvariable-rate

backbookinresponsetoBankRatefourtimes,increasingratesacrossall

segmentstosupportbothnewandexistingmembers.

Savings 2023 2022

Sharesbalancegrowth 12.0% 18.3%

Sharesbalancegrowth £5.1bn £6.5bn

Averagesavingsratedifferentialtothemarketaverage 1.01pp 0.56pp

Marketshareofretailsavingsbalances 2.3% 2.2%

*Growthinmortgagebalancesexcludesfairvalueadjustmentsforhedgedriskonloansandadvancestocustomers.Prioryearcomparativerestatedonaconsistentbasis.

46 | Strategic report 47

Our Financial Review (continued)

Financial performance

ThefiguresbelowareconsolidatedamountsinrespectofYorkshireBuildingSocietyanditscontrolledentities(‘theGroup’).

Thefinancialresultsachievedin2023demonstratesustainedgrowthandstronglevelsofprofitability,setinthecontextof

therisinginterestrateenvironmentandincreasinglychallengingmarketconditions.Wehavedeliveredtheseresultswhilst

continuingtorewardourmemberswithcompetitiveratesandmanagingtheinflationarypressuresonourcosts.Thestrong

growthinoursavingsbalanceshasenabledustorepayafurtherportionofgovernmentfundingatatimewhenthemarket

requirementtorefinanceiselevatingcompetitionforfunding.Theresultingstrengthofcapitalandliquiditypositionswill

supporttheSocietyinnavigatingthechallengesahead.

2023 2022

Statutoryprofitbeforetax £450.3m £502.5m

Coreoperatingprofit £449.9m £425.6m

Netinterestmargin 1.31% 1.30%

Costtocoreincomeratio 42% 41%

Managementexpenseratio 0.56% 0.54%

Liquiditycoverageratio('LCR') 156.4% 164.0%

Liquidityratio 23.3% 23.3%

Commonequitytier1capitalratio 16.7% 16.8%

Leverageratio(UK) 6.2% 6.2%

2023 2022

£m Statutory

Remove non-

core items Core Statutory

Remove non-

core items Core

Netinterestincome i 786.0 (2.3) 783.7 724.1 (2.4) 721.7

Fairvaluegainsandlosses ii (5.5) 2.2 (3.3) 75.6 (74.9) 0.7

Netrealisedgains 1.6 - 1.6 2.9 - 2.9

Otherincome 4.3 - 4.3 8.8 0.3 9.1

Total income/core income 786.4 (0.2) 786.2 811.4 (77.0) 734.4

Managementexpenses (332.7) - (332.7) (298.7) - (298.7)

Impairmentoffinancialassets (4.0) - (4.0) (6.0) - (6.0)

Movementinprovisions iii 0.6 (0.2) 0.4 (4.2) 0.1 (4.1)

Profit before tax/core operating profit 450.3 (0.4) 449.9 502.5 (76.9) 425.6

Thenotesbelowexplaintheadjustmentsmadetostatutoryprofitbeforetaxtoarriveatcoreoperatingprofit:

i) Historicalfairvaluecreditadjustmentsonacquiredloans.

ii) Removedfairvaluevolatilityi.e.gainsandlossesonderivativesnotqualifyingforhedgeaccounting,andonnon-coreequityinvestments.

iii) Non-coreelementsoftherestructuringprovision.

Summary Balance Sheet

Net interest income

Netinterestincomewas£786.0min

2023,increasing£61.9myearonyear

(2022:£724.1m),andrepresentsan

improvednetinterestmarginof1.31%

(2022:1.30%).Furtherincreasesto

BankRatealongwithgrowthinboth

mortgageandsavingsbookshave

servedtoincreasenetincome,despite

aseriesofrateincreasestothe

savingsbackbookandwideningour

differentialtotheaveragemarketrate.

Ourstructuralhedgingportfolio

contributed£215.7mofgrossinterest

incomein2023(2022:£67.6m).

Grossstructuralhedgecontributions

representtheincomeearnedfromthe

fixedreceiptsontheswapswithinthe

portfolios.

Fair value gains and losses

Afairvaluelossof£5.5mwasrecorded

in2023(2022:£75.6mgain).Themost

significantdriveroftheyear-on-year

changeinfairvaluegainsandlosses

relatestoderivativesnotinhedge

accountingrelationship,including

swapsenteredintotohedgethe

mortgagepipelineaswellasshorter-

termswapstohedgefixed-ratesavings

balances.Whilstswapsratesremained

volatilein2023,themovementacross

theyearhasbeenlesssignificant

thanin2022,inturnhavingalower

Core operating profit

OurfinancialperformanceisreviewedregularlybyourBoardusinganumberofmeasures,includingstatutoryprofitbefore

taxandcoreoperatingprofit.Coreoperatingprofitisanalternativeperformancemeasurewhichexcludesitemssuchasfair

valuevolatilityandmaterialone-timechargesthatdonotreflecttheGroup’sday-to-dayactivities.OurBoardconsiderscore

operatingprofittobeanappropriatemeasureoftheunderlyingperformanceofthebusiness.

Statutoryprofitbeforetaxin2023was£450.3m(2022:£502.5m)andcoreoperatingprofitwas£449.9m(2022:£425.6m).

Thedifferencebetweenstatutoryprofitbeforetaxandcoreoperatingprofitismuchlowerin2023thanthepreviousyear;

2022sawalargefairvaluegainrelatingtoswapsnotinhedgeaccountingrelationships.

Goodlevelsofsavingsbalancegrowthwereachievedagainintheyear,althoughheightenedmarketcompetitionsawthe

rateofgrowthslowinthesecondhalf.Mortgagegrowthwasmoresubduedthanlastyear,withalowerapplicationpipeline

carriedintotheyearasaresultofmarketdisruptiontowardtheendof2022.Inaddition,2023sawahigherlevelofmortgage

maturities,whichservedtosuppressnetlending.AsatDecember2023theSociety'sretailloantodepositratiostandsat

98.2%(2022:106.4%).

impactonthefairvalueoftheinterest

rateswapsnotdesignatedinthe

accountinghedge.Moredetailon

thefairvaluegainsandlossesinthe

periodisavailableinNote5.

Other income

Otherincomereceivedintheyearwas

£4.3m(2022:£8.8m)andincludes

incomefromoursecondarylinesof

business,includingcommissionfrom

insurancebrokering,whichareless

materialinnature.

Management expenses

Overallmanagementexpenseswere

£332.7min2023(2022:£298.7m).

Anumberoffactorshaveinfluenced

thisoutcome,includingthegrowthof

thebusiness,increasedpurposeful

investmentinchangeactivities,and

theeffectofinflationarypressureson

ourcostbase.

In2023,£63.8mwasinvestedin

changeactivitieswhichisamaterial

increasefrom£54.6min2022.This

aimstoacceleratethedeliveryof

futurebenefitsandenableusto

commencethesecondphaseof

ourprogramme.Themainactivities

acceleratedin2023relatedto

paymentsfunctionalityandjourney

andexperienceimprovementsfor

savingscustomers.

Giventheelevatedlevelsofprice

inflationobservedinthewider

economy,wemadethedecisionto

awardasalaryincreasewhichwas

higherthaninatypicalyeartohelp

ouremployeesdealwiththecost-

of-livingpressures,andtomaintain

acompetitivepositioninthelabour

market.Highinflationalsodroveup

someofourthird-partycostsata

greaterratethanusualasaresultof

contractualobligations.Thishasled

toanincreasedcosttocoreincome

ratioof42%,up1percentagepoint

on2022.

Impairment of financial

assets

Atotalnetimpairmentchargeof£4.0m

(2022:£6.0mcharge)wasrecordedin

theperiod.Moreinformationonthe

impairmentoffinancialassetscanbe

foundinNotes2and7tothefinancial

statements.

Provisions

Areleaseof£0.6mwasrecognisedin

theperiodrelatingtoprovisionswhich

includecustomerredress,restructuring

andotherspecificitems(2022:£4.2m

charge).

£bn

2023

2022

Liquidassets 12.8 12.5

Loansandadvancestocustomers 46.8 45.2

Fairvalueadjustmentforhedgedriskonloansandadvancestocustomers (0.6) (1.5)

Otherassets 2.0 2.6

Total assets 61.0 58.8

Shares 47.1 42.0

Wholesalefundingandotherdeposits 7.8 11.6

Subordinatedliabilities 1.6 1.0

Otherliabilities 0.8 0.8

Total liabilities 57.3 55.4

Members’interestandequity 3.7 3.4

Total members' interest, equity and liabilities 61.0 58.8

Summary Income Statement

48 | Strategic report 49

Liquidity

Liquiditylevelsremainstrong,witha

liquiditybalancesheetratiostanding

at23.3%(2022:23.3%),anda

LiquidityCoverageRatioat156.4%

(2022:164.0%).Strongsavings

inflowsintheyearhavehelpedto

facilitatefurtherrepaymentofTFSME

funding.Sufficientheadroomto

regulatoryrequirementsforliquidity

wasmaintainedthroughout2023.

Ourinvestmentportfoliowasfurther

diversifiedintheyear,inlinewithour

balancesheetstrategy.

High-qualityliquidassets('HQLA')

balancesstoodat£10.7bnasat31

December2023(2022:£11.0bn).44%

oftheHQLAportfolioisratedasAAA

(2022:38%),withtheremainderrated

betweenAA+andA.

Loans and advances to

customers

Therateofmortgagebookgrowth

achievedwas3.6%(2022:7.2%).

Thecreditqualityofourmortgage

bookismonitoredusinganumber

ofindicatorsonaregularmonthly

basis.Animportantindicatoristhe

percentageofoutstandingretail

mortgagebalancesinarrearsby

threemonthsormore(including

possessions).Thequalityofour

loanbookhasremainedstrong;the

proportionofloansmeetingthese

criterianowstandsat0.39%byvalue

(2022:0.31%).

Theindustryaverageformortgage

arrearsismeasuredasthenumberof

accountsinarrearsbythreemonths

ormore(includingpossessions).At

0.50%(2022:0.44%)ourperformance

continuestoremainbetterthanthe

industryaverageof0.87%(2022:

0.74%).Moreinformationonarrears

canbefoundintheDirectors’report

andinNote31tothefinancial

statements.

InadditiontotheICAAP,theSociety

regularlyoperatesadditionalinternal

stressteststoensurethatsufficient

capitalisavailablethroughout

theplanninghorizon.Reverse

stresstestingallowstheSocietyto

understandthepotentialscenarios

andriskdriversthatcouldcausethe

potentialfailureoftheSociety,andto

ensurethatsufficientmitigationsare

inplace.

Specific details on capital

management can be seen in the

Society’s Pillar 3 disclosures

available on the Society’s

website.

Capital ratios

TheSociety’sCET1ratioatyear-end

2023stoodat16.7%,showinga

marginaldecreasefromtheprior

year(2022:16.8%).TheSociety’sUK

leverageratiowasmaintainedat6.2%

(2022:6.2%).

Whilstnomaterialdeterioration

inthecreditperformanceofour

mortgagebookhasbeenobserved,

risksarepresent,andthelevelof

arrearswillcontinuetobemonitored

closelythroughourestablishedrisk

managementprocesses.Therealso

existsthepotentialforaffordability

andcost-of-livingchallengesto

influenceourmortgagebookthrough

futurehousepricemovements.Asof

December2023,theaverageindexed

loantovalueofourmortgagebookis

49.0%(December2022:46.8%).

Asaproportionofgrossmortgage

exposure,ECLcoverageis0.1%,

(December2022:0.1%).Costof

risk,ascalculatedbyexpressingthe

impairmentchargefortheyearover

theaveragebalanceintheperiodwas

0.01%(2022:0.01%).

Wholesale funding

Followingaperiodofdisruptionto

wholesalemarketstowardtheend

of2022,theSocietysuccessfully

issuedwithintheRMBS,coveredbond

andseniornon-preferredmarkets

in2023.Theseissuancesrepresent

acontinuationofthestrategyto

maintainapresenceinourkey

issuancemarketsandensureaccessto

adiverserangeoffunding.

In2023,werepaidafurther£2.2bn

inrespectofthegovernmentfunding

scheme,TFSME,adoptingaprudent

approachtorefinancinginanticipation

ofheightenedcompetitionforfundsas

market-widematuritiesdrawnearer.As

atDecember2023,Societyhasrepaid

82.5%ofthetotalamountdrawn

underthescheme.

Capital

Introduction to capital

TheSocietymaintainscapitalreserves

tosafeguardtheinterestsofits

membersthroughouttheeconomic

cycle.

TheSocietyissubjecttoregulatory

capitalrequirementsenforcedinthe

UnitedKingdom(UK)bythePrudential

RegulationAuthority(PRA).Regulatory

capitalresourcesincludegeneral

reserves,fairvaluethroughother

comprehensiveincomereserves,and

subordinatedliabilities;theseare

GrowthintheSociety’sCET1

resourcesof£0.3bnhasbeenoffset

byrisk-weightedasset(RWA)growth

of£1.9bn.TheRWAgrowthwas

aresultofnetmortgagelending,

diversificationoftheSociety’streasury

investments(whichattractahigher

risk-weight),andanincreaseinthe

operationalriskcomponentgiven

theinclusionofhigherprofitlevels

inthecalculationwhichisbasedon

athree-yearaverage.TheCET1ratio

remainscomfortablyaboveregulatory

requirementsandriskappetite.

MREL (Minimum requirement

for own funds and eligible

liabilities)

TheSociety’sMRELRWAratioat

year-endstoodat24.2%,compared

totheprioryear’spositionof21.9%.

ThisincreaserecognisesSeniorNon-

Preferred(‘SNP’)issuanceactivity

undertakenduring2023tostrengthen

theSociety’sMRELresources.

subjecttoregulatoryadjustmentsand

IFRS9transitionalarrangements.MREL

resourcessuchasSecondaryNon-

PreferentialLiabilities(‘SNP’)arenot

includedaspartofregulatorycapital,

buthavebeendisclosedtoshowthe

impactonresources.

The Society has complied with

the PRA’s regulatory capital

requirements during the year,

further details of the Society’s

capital position can be found in

the 2023 Pillar 3 Disclosures.

Theratios,deductions,anddefinitions

belowareinaccordancewithCRDIV

regulations.

Management of capital

CapitalriskismanagedviaBoard-

approvedCapitalPolicyandrisk

appetite.TheSociety’smanagement

ofcapitalencompassesadhering

toregulatoryrequirementsandrisk

appetitelevelswhilstsupportingthe

Society’sstrategicobjectivesthrough

sustainablegrowth.

TheAsset&LiabilityCommittee

(‘ALCO’)istheSociety’sgovernance

committeewithresponsibilityfor

capitalmanagement.Underits

delegatedBoardauthority,itretains

responsibilityformonitoringthe

Society’scapitaladequacyand

recommending/approvingactions,as

appropriate.

Currentandprojectedcapitalpositions

areregularlymonitoredandforma

pivotalpartoftheSociety’sapproach

tocapitalmanagement.

TheSocietyundertakesanInternal

CapitalAdequacyAssessmentProcess

(ICAAP)annually.UnderPillar2A,the

Societyconsidersextremestresses

onindividualrisksinisolation.Under

Pillar2BtheSocietyapplieseconomic

stressscenariosovertheplanning

horizon.Thisprocessallowsthe

Societytoassesstheimpactonits

capitalheadroomwerethesestresses

tomaterialise.

Capital outlook

WhilsttheSocietycurrentlymonitors

andreportsitsLeverage-basedcapital

position,Leveragerequirementswill

becomebindingwhentheSociety

surpasses£50bnofretaildeposits

andisclassifiedasLREQ.TheSociety

iswellcapitalisedtomeetthese

requirementsonbothaUKandMREL

Leveragebasis.

TheSocietycontinuestoprogress

towardsInternalRatingsBased(IRB)

accreditation,andpreparationsare

alsounderwaytoimplementBasel

3.1perthePRA’snear-finalpolicy

statement(PS17/23)on1July2025.

Our Financial Review (continued)

Financial performance(continued)

50 | Strategic report 51

£m 2023 2022

Common Equity Tier 1 ('CET1')

Generalreserve

3,702.9 3,379.2

Fairvaluethroughothercomprehensiveincomereserve (10.2) 1.9

Cashflowhedgereserve 0.4 9.9

Common Equity Tier 1 prior to regulatory adjustments 3,693.1 3,391.0

CommonEquityTier1regulatoryadjustments - -

IFRS9transitionalarrangements - -

Pensionfundadjustments (27.8) (23.3)

Intangiblefixedassets (18.4) (20.2)

Prudentvaluationadjustment (7.7) (7.3)

Cashflowhedgereserve (0.4) (9.9)

Total Common Equity Tier 1 capital 3,638.8 3,330.3

Tier 2

Subordinatedliabilities 267.9 278.7

Collectiveprovisionsforimpairment - -

Total Tier 2 Capital 267.9 278.7

Total capital (audited) 3,906.7 3,609.0

MREL Resources

SecondaryNon-PreferentialLiabilities 1,313.0 739.4

Tier2MRELEligible 37.1 16.9

Total MREL Resources (unaudited) 5,256.8 4,365.3

Riskweightedassets(unaudited) 21,756.1 19,846.6

CommonEquityTier1capitalratio 16.7% 16.8%

Tier1ratio 16.7% 16.8%

Totalcapitalratio 18.0% 18.2%

TotalMRELResourcesratio 24.2% 22.0%

CRRLeverageratio 5.8% 5.6%

UKLeverageratio(excludingclaimsoncentralbanks) 6.2% 6.2%

30 IncludesallentitiesintheYBSGroup,asdisclosedinNote8tothesefinancialstatements,withtheexceptionofthesubsidiaryYorkshireKeyServicesLimited(YKS).

YKSisanon-tradingsubsidiaryand,asitsoperationswerenon-financialinnature,itisoutsidethescopeofCRDIVforcapitalpurposes.

Risk overview

Theenvironmentinwhichweoperate,

andthenatureoftherisksthatweface,

arecontinuallyevolving.Effectiverisk

managementisfundamentaltoensure

thatwemaintainthetrustofourmembers,

customers,andregulators.

How we manage risk

Wecategorisetheemergingandevolvingrisksthatwe

faceintonineprincipalrisks,definedinourEnterpriseRisk

ManagementFramework(seetheRiskManagementreport).

Thisensuresthatweidentify,assess,andmanagetheserisks

carefullyandconsistently.

Themostsignificantemergingandevolvingrisksare

reviewedregularlythroughourseniorriskcommitteesand

areconsideredduringourbusinessplanningprocesses.

Wecontinuetomonitortheeffectivenessof,andinvest

in,ourriskmanagementcapabilitiestoensuretimelyand

appropriateactionistakentoprotecttheinterestsofthe

Groupanditsmembersandcustomers.

Ourrobustriskmanagementframework,strongcapital

position,diversefundingsources,andhighliquidity

levelsleadustobeconfidentintheGroup’sfinancialand

operationalresilience.

Our top emerging and evolving risks

Emerging or

evolving risk

Principal risk(s) Commentary

The political

and economic

environment

Retail and commercial

credit risk

Market risk

Funding and liquidity

risk

AtaUKlevel,persistentlyhighinflation,higherinterestratesandan

uncertaineconomicoutlookcontinuetoaddpressuretohousehold

incomes.

Thishasreducedaffordabilityforbothmortgageborrowersandtenants

ofbuy-to-letlandlords,contributingtoaslowdownintheUKresidential

market.

Weassessaffordabilityfornewlendingusingasophisticatedmodelwhich

usesastressedinterestrate,andisreviewedatleasteverysixmonths.Our

lendingcriteriaaimtobalancethelevelofpurposefulriskwetakewith

lendingresponsiblytodelivergoodcustomeroutcomes,minimisearrears,

andcomplywiththeConsumerDutyregulations.

Weensurethatourproductsarecarefullypriced,andwearedisciplined

inourapproachtohedging,sothatwedonotexceedtheBoard-approved

riskappetite.

Westresstestourliquiditypositionregularlyandourliquidityratios

continuetoremainsignificantlywithintheBoard-approvedriskappetite.

Theinternationalpoliticalandeconomicenvironmentaffectsustoo;we

haveseennervousnessinsomewholesalefundingmarketsarisingfrom

thefailuresofbanksintheUSandEurope.

Our Financial Review (continued)

Financial performance(continued)

52 | Strategic report 53

Emerging or

evolving risk

Principal risk(s) Commentary

Attracting and

retaining the right

people

Operational risk Employercompetitioncontinuesforin-demandskills,suchasthose

relatingtochange,cybersecurity,digital,andanalytics.Coupledwithlow

levelsofunemploymentandhigherwageinflation,attracting,andretaining

therightpeopletodeliverourstrategyisvitalandchallenging.

Effectiveresourceplanning,forecasting,andsuccessionplanningremain

priorities.Wehavealsostrengthenedourriskmanagementcapabilitiesfor

peopleriskandhaveimprovedourpeoplepolicies,particularlyforworking

families.

The use of

sophisticated

models

Model risk Weusesophisticatedmodelstohelpmanageourfinancialrisks.These

usehistoricaldataandassumptionsbasedonthepast,toprovidefuture

estimatestoassistwithrunningthebusinessandinunderstandingour

risks.Anyapproachthatseekstopredictthefuturecarriesinherentrisk.

OurModelRiskCommitteereviewsthespecificrisksassociatedwiththe

modelsregularly.Wealsoensurethatourmodelriskframeworkmeets

regulatoryrequirements.

The regulatory

environment

Compliance and

conduct risk

TheregulatoryenvironmentfortheUKfinancialservicessectorcontinues

toevolve,withtheFCA’sConsumerDutyrulesandtheGovernment’s

MortgageCharterbothstartingin2023.

Wecontinuetohaveopenandconstructivedialoguewithourregulators,

andworkwiththemandindustrybodiestocontributetotheregulatory

agenda.Monitoringandmaintainingouractualregulatorycompliance

positionsisofthehighestpriorityacrossmanagement.

Climate change Credit risk

Operational risk

ThemainrisksfromclimatechangefortheSocietyariseinthephysical

riskstoourcustomers’properties,suchasfromflooding,subsidence,

andcoastalerosion,andthoseposedbythetransitiontoalower-carbon

economy,suchaschangesinenergyefficiencyregulation.

Wecontinuetodevelopourenvironmentalandclimatechangerisk

managementcapabilities,toensurethatwealignwithindustrygood

practiceandmeetreportinganddisclosurerequirements.

Financial crime

threats

Compliance and

conduct risk

Financialcrimethreatsarisebothfromcustomersfallingvictimtofraud

attempts,particularlythroughdigitalchannels,aswellasfromindividuals

attemptingtousetheSocietyforunlawfulreasonssuchastolaunder

moneyorevadesanctions.Thesethreatsareheightenedintheuncertain

economicandgeopoliticalenvironment.

Ourcontinuedfocusonourfinancialcrimecapabilityremainsparamount,

andwecontinuetoinvesttodeliverproportionateandeffective

monitoring,andpreventioncontrols.

Cyber security

threats

Operational risk TheincreasinguseoftechnologyanddigitalservicesmeanstheUK

financialservicessectorisexposedtoincreasingcybersecurityrisks.

Theseareheightenedfurtherbecauseofgeopoliticaltensions,suchasthe

warinUkraine.

Resiliencetosuchthreats,andanabilitytorespondeffectivelyintheevent

ofanattack,remainsessentialtoprotecttheSocietyandourcustomers,

andtomaintaintheconfidenceofregulators.

Wehavesignificantlyenhancedourcyberthreatmonitoringandresponse

capabilityandwillcontinuetodoso.

IT resilience Operational risk AsITcomponentsage,theirhealthandvaluecandeteriorate.Thisposesa

risktoourcustomerswhoincreasinglyrelyonourdigitalchannels,andour

colleagueswhouseoursystemstodeliverservicestoourcustomers.

WearecontinuallymodernisingandsimplifyingourITestatetoimproveits

resiliencesowecandelivertheservicesourcustomersexpect.

DetailsofourBoardandExecutiveTeam

aresetoutinthefollowingsection.

For information regarding our Board and

any changes during 2023 see the Corporate

Governance report.

Our Board and

Executive Team

AuditCommittee

GroupRiskCommittee

BGNC

GRC

BoardGovernanceand

NominationsCommittee

RemunerationCommittee

Risk Overview (continued)

Our top emerging and evolving risks(continued)

5554 | Strategic report

Chair of the Board

Joined our Board in

2014 as Chairman

Designate, becoming

Chair of the Board

in 2015.

Chair of the Board Designate

Background and career

Guyworkedintheauditprofessionfor36yearswithKPMG,

including24yearsasapartner.Hewasalsoamemberof

KPMG’sUKBoardforsevenyearsanditsEuropeanBoardfor

fiveyears.HewastheLeadAuditPartnerforanumberof

bankingclientsincludingBarclays,INGandHSBC.

Skills and experience

Guyisabankingexpertandbringsrecentandrelevant

experienceoftheUKbankingsector.Hehascomprehensive

knowledgeoftheregulatoryenvironmentinwhichwe

operate.

Other roles

Non-ExecutiveDirectorandChairoftheAuditCommittee

atICEClearEuropeLtdandaNon-ExecutiveDirector,Chair

oftheAuditCommitteeandamemberoftheCorporate

Governance&NominatingCommitteeatManulifeFinancial

Corporation.

Background and career

AnnemarieDurbinhas35years'internationalbusiness

andbankingexperience,includingretail,commercial,

corporateandinstitutionalbanking.Shespentthemajority

ofherexecutivecareerwithStandardChartered,aFTSE

100internationalbank,culminatinginmembershipofthe

GroupExecutiveCommittee.Sheheldavarietyofglobaland

businessroles,includingbeingCEOandExecutiveDirector

ofStandardChartered’spubliclylistedentityinThailandand

CEOinthePhilippines.Annemariehasalsoheldarangeof

non-executivepositions,includingWHSmithPlc,Santander

UKplcandwasChairofCaterAllenLimited.Annemarieis

alsoanexecutivecoachandmentor.

Skills and experience

Annemarieisahighlyexperiencedexecutivewitha

strongbackgroundinbanking,leadershipandtalent,

transformation,andcorporategovernance.Shealsohas

significantexperienceinrelationtoremuneration,including

asaRemunerationCommitteeChair,andextensive

experienceinrespectofaudit,riskandresponsiblebanking

fromhermembershipoftherelevantCommitteesat

SantanderUKplc.

Other roles

Non-ExecutiveDirector,ChairofRemunerationCommittee

andmemberofNominationCommitteeatPersimmonPlc.

Non-ExecutiveDirector,ChairofRemunerationCommittee

andmemberofManagementEngagement,AuditandRisk

andNominationsCommitteesatPetershillPartnersLLC.

Annemarie Durbin

BComm LLB MSc

Chair of the Board

Designate

Background and career

AlisonstartedhercareeratIBM,progressingtotherole

ofGlobalDirectorofOnlineFinancialServices.She

joinedBarclaysBankin2000holdinganumberofsenior

managementpositions.Alisonmovedtospecialistmortgage

providerKensingtonGroupplcin2004asManagingDirector

andthenGroupChiefExecutive,leadingthesuccessfulsale

ofthebusinesstoInvestecin2008.SheleftInvestecin

2008andlaunchedThePenniesFoundation,aregistered

charitywhichsupportsdigitaldonationstogoodcauses.

ShehasbeentheChiefExecutiveofthePenniesFoundation

since2009.

Skills and experience

Alisonhasastrongbackgroundintechnology,retailand

charitysectorsaswellasextensiveexperienceinthe

retailfinancialservicessector.Shehasmorethan35years

ofmanagementandBoardlevelexperience.Alisonwas

awardedaCBEin2016forservicestotheeconomyand

charities.

Other roles

ChiefExecutiveofThePenniesFoundation,Senior

IndependentDirectorofDFSFurnitureplcandSenior

IndependentDirectorofForesightGroupHoldingsLtd.

Background and career

Aqualifiedlawyer,Johnworkedinthelegalprofessionfor40

yearsandjoinedtheseniormanagementteamofcorporate

lawfirmEvershedsin1999.HewasappointedChairmanof

Evershedsin2010forafour-yeartermandretiredin2015.

Skills and experience

Johnhasextensivecommercialandlegalexperienceinhis

leadershiproleinshapingEversheds’long-termstrategyasit

grewintoamajorinternationallawfirm.Inthelastfewyears

hehascontributedtothedevelopmentandsuccessofboth

theSociety,includingdrivingBoardsuccession,aswellas

thevariousfinancialbodiesofwhichhehadbeenamember.

Other roles

MemberoftheAuditandRiskCommitteeandConstitutional

andGovernanceCommitteeoftheInternationalBar

Association.MemberoftheAdvisoryBoardofthe

InternationalBusinessandDiplomaticExchange.

John will retire from his role as Chair of the Board in

April 2024.

Joined our Board

in 2023 as Chair

of the Board

Designate.

John Heaps

LLB

Chair of the Board

Chair

BGNC

Non-Executive Director

Joined our Board in

2015 and became

Vice Chair and Senior

Independent Director

in October 2020.

Alison Hutchinson

BSc, CBE

Senior Independent

Non-Executive Director

and Vice Chair

Non-executive Director for

Workforce Engagement

(to 31 December 2023)

Non-Executive Director

Joined our Board

in 2019.

Guy Bainbridge

MA (Cantab), ACA

Independent

Non-Executive Director

Whistleblowing

Champion

BGNC GRC RC

56 | Governance 57

Our Board and Executive Team (continued)

AC GRC

Chair

BGNC

Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director

Joined our Board

in 2022.

Joined our Board

in 2023.

Joined our Board

in 2021.

Joined our Board

in 2020.

Background and career

Debrahasover25yearsofexperienceinfinancialservices.

AfterstartinginMarketResearch,shespenttheremainder

ofherexecutivecareerwithAmericanExpress,inavariety

ofseniorrolesincludingleadingtheUKConsumerBusiness,

leadingProductMarketinggloballyandrollingoutthe

AmericanExpressbusinessacross55Countries.She

representedtheCompany’sinterestsinmajorJointVentures

intheMiddleEast,BelgiumandSwitzerlandwhereshe

wastheChairofSwisscard.Shehasheldarangeofnon-

executiveandcommitteeChairroleswithAXAUKplcand

CreditSuisseinternational.

Skills and experience

Debrahasastrongbackgroundinprofitandlossleadership,

customerservice,marketing,technologytransformationand

digitalinnovation,aswellasPartnershipdevelopmentand

management.Herexperiencespansbusinesstoconsumer

andbusinesstobusinessacrossmanycountriesand

cultures.

Other roles

Non-ExecutiveDirectoratAXAUKplc,Chairofthe

RemunerationCommitteeandmemberoftheAuditandRisk

Committees.Non-ExecutiveDirectorofIntrumAB,member

oftheTransformationCommittee.

Background and career

Angelaspent20yearsworkingforAvivaPLCinavarietyof

seniorroles–culminatinginherservingasChiefExecutive

Officer(CEO)ofUKLifefollowingaperiodasInterimCEOof

UKInsurance,whereshewasresponsibleforleadingtheUK

InsurancebusinessandamemberoftheAvivaLeadership

Team.PriortoherCEOroles,AngelawastheGroupChief

RiskOfficerforAvivaPLCforfouryears,responsiblefor

leadingtheRiskFunctionatGrouplevel.

Skills and experience

Angelahassignificantexperienceofthefinancialservices

sectorwithadeeptechnicalexpertiseinrelationtoriskas

wellastheabilitytocontributetoawiderstrategicagenda.

Other roles

IndependentNon-ExecutiveDirectorofRothesayLifeand

MemberofCouncilfortheLondonSchoolofHygieneand

TropicalMedicine.

Our Board and Executive Team (continued)

Background and career

MarkwasChiefExecutiveofCoventryBuildingSocietyfrom

2014untilhisretirementinApril2020.Markhassignificant

experienceworkingwithinretailfinancialservicesincluding

rolesatBarclaysandAbbeyNational,aswellastimeat

PricewaterhouseCoopers.AtBarclayshewastheChief

FinancialOfficerforRetailandBusinessBankingandalso

servedastheDeputyChiefExecutiveofBarclaysUKRetail

Bank.

Skills and experience

Markhasover35years’experienceinfinancialservicesand

hasarangeofexecutiveexperienceacrossfinance,human

resources,product,retailmanagement,riskmanagementand

investorrelations.

Other roles

Non-ExecutiveDirectorofFairstoneCapitalGroupLtd.

Background and career

Dinabeganhercareerinstrategyandtechnology

consultingpriortojoiningHSBC/MidlandBankinLondon.

ShesubsequentlyworkedwithUBS,BritishTelecomand

INGBankinatransformationcapacitywithintheirretail,

corporateandwholesalebusinessdivisions.Morerecently,

DinajoinedtheEuropeanBankforReconstructionand

DevelopmentinOctober2021astheVicePresidentand

ChiefTransformationOfficeroverseeingtheBank’sdigital

transformationwithdirectresponsibilityfortheBank’s

datamanagement,technologyandadministrativeservice

departmentsaswellasthebankwidetransformationoffice.

Skills and experience

Dinaisanengineerandeconomistandhasover30years’

experienceintransformation,operationsandtechnological

innovationworkingacrossindustriesbothinEuropeand

theUS.

Other roles

VicePresidentandChiefTransformationOfficerforthe

EuropeanBankforReconstructionandDevelopment.

Angela Darlington

BSc, FIA

Independent

Non-Executive Director

Chair

ACGRC

Debra Davies

BA (Hons)

Independent

Non-Executive Director

Chair

GRCRC

Dina Matta

BSc, BA (Hons)

Independent

Non-Executive Director

Mark Parsons

BA, FCMA

Independent

Non-Executive Director

Board Consumer Duty /

Member Champion

58 | Governance 59

GRC

Executive Director

Joined the Society

in 2018 and our

Board in 2022.

Executive Director

Joined the Society

and our Board in

2017.

Non-Executive Director

Executive Director

Joined our Board

in 2021.

Joined the Society

and our Board in

2023.

Background and career

SusanwasmostrecentlyHeadofCustomerTransformation

atBarclayswhereshewasresponsibleforleadingand

supportingallcolleaguesinfrontlineteamstodelivera

differentiatedcustomerexperience.PriortothatSusanwas

responsibleforallofSantander'sUKRetailandBusiness

bankingbusinesses,supporting15millioncustomers

andwithanationwidenetworkofbranchesandcustomer

contactcentres,followingherroleasChiefTransformation

Officer.SusanisaformerBoardmemberofUKFinance.

Skills and experience

Susanhasmorethan25yearsofexperienceinfinancial

serviceshavingheldseniorexecutivepositionsatanumber

oflargeretailbanksintheUK.Susanhasbeenaproud

championofdiversityandinclusivitythroughouthercareer.

SheisalsoamemberoftheBuildingSocietiesAssociation

Council.

Other roles

MemberoftheBoardofTrusteesfortheAlzheimer’sSociety.

Background and career

Jennellespentover17yearsworkingforYum!Restaurants

Internationalinavarietyofseniormarketingroles–

culminatinginherservingastheGlobalChiefMarketing

OfficerforKFC,responsibleforthecompany’smarketing,

communications,innovation,digitalpresenceandreputation

inover125countries.JennelleistheFounderandChief

BrandStrategistatLondon-basedbrandconsultancy

MarketingwithInsight.

Skills and experience

Jennellehasover25years’consumermarketing,digitaland

innovationexperiencewithleadingglobalFMCGandfood

retailbrands.

Other roles

Non-ExecutiveDirectorofShaftesburyCapitalPlc,Senior

IndependentDirectorofCamelotUKLotteriesLtdand

TrusteeforTheGuideDogsfortheBlindAssociation.

Susan Allen

BA Hons (Econ), ACIB, ACT, OBE

Chief Executive

Officer

Our Board and Executive Team (continued)

Background and career

DavidbeganhiscareeratCitigroupandhassubsequently

workedatvariousFinancialServicesinstitutionsacross

theUKandinternationally.PriortojoiningYBSDavid

wastheHeadofProductsatCoventryBuildingSociety.

Heisresponsiblefortheinnovation,developmentand

on-goingmanagementoftheSociety’smortgagesand

savingsproducts,YBS’smarketinganditsdigitalchannels,

mortgagedistributionandtheSociety’sbranchnetwork.

DavidisalsoresponsibleforourCommercialLendingand

isChairofAccordMortgagesLimited.

Skills and experience

Davidhasover15yearsofexperienceinretailbanking

andhasastrongtrackrecordofdrivingcommercial

performanceinfinancialservicesorganisations,including

themutualsector.

Background and career

Alasdairbeganhiscareeronthemanagementtraining

programmeatMarsInc.wherehespentanumberofyears

workinginsales,beforemovingintofinance.Sincethen,

he’sgainedsignificantexperienceinthefinancialservices

sector,includingasFinanceDirectorofRetailProductsfor

LloydsBankingGroupandGroupChiefFinanceOfficerfor

BGLGroup.

Skills and experience

Over20yearsofexperienceinFinanceworkinginavariety

ofBoardlevelroles,bothnon-executiveandexecutive.

TheseincludeCFOandInterimCEOofYBS,AuditCommittee

ChairforbothSainsbury’sBankandCoventryBuilding

SocietyandanumberofrolesatLloydsBankingGroup.

Alasdair will retire from his role with the Society

in 2024.

Jennelle Tilling

B.Bus, BA

Independent

Non-Executive Director

Alasdair Lenman

MA, ACMA

Chief Finance

Officer

David Morris

BA, MA

Chief Commercial

Officer

60 | Governance 61

Chief Officer

Joined the Society

in 2010.

Chief Officer

Joined the Society

in 2022.

Chief OfficerChief Officer

Joined the Society

in 2023.

Joined the Society

in 2019.

Background and career

FraserwasmostrecentlyChiefDigitalandInnovation

OfficeratVirginMoney.Priortothisheheldarangeofroles

includingGroupChiefOperatingOfficer,ChiefInformation

OfficerandInnovationandChangeDirector.Beforejoining

VirginMoneyhismostrecentrolesincludedChiefOperating

OfficeratKleinwortBensonandCIOofCitizensBankinthe

USA.

Skills and experience

Fraserhasawiderangeofexperienceacrossbusinesses,

functionsandgeographies–includingbusiness

transformation,ITandchangemanagement.

Background and career

Orlaghisanexperiencedhumanresourcesprofessional

whohasheldseniorrolesacrossarangeofindustries

includingfast-movingconsumergoodsandretail,aswellas

havingsignificantexperienceinfinancialservices.Orlagh

isresponsibleforthePeopleDivisionincludingreward,

recognition,traininganddevelopment,diversityand

inclusion,internalcommunicationsandsocialpurposeand

sustainability.

Skills and experience

OrlaghwaspreviouslyHeadofHumanResourcesfor

AXASunlife,GroupHumanResourcesDirectorforFTSE-

100insurerRoyalSunAllianceaswellasGroupHuman

ResourcesDirectorforAIBinDublin.

Our Board and Executive Team (continued)

Background and career

Richardhasheldanumberofseniorriskmanagementroles

atseveraloftheUK’smajorbanksandbuildingsocieties.

Heisresponsibleforensuringthatthereareappropriate

proceduresandcapabilityforthemanagementofallrisks

whetherplannedorunplanned.InadditiontoRisk,heis

alsoresponsiblefortheLegal,ComplianceandSecretariat

functionsaswellasregulatoryrelationships.

Skills and experience

Richardhasextensiveexperienceofriskmanagementwithin

thefinancialservicesindustryacrossawideenterpriseof

risksincluding,Prudential,OperationalandConductRisks.

HeisalsoadirectorofAccordMortgagesLimited.

Richard will retire from his role with the Society in

2024.

Background and career

KatewasmostrecentlyHeadofEuropeanGovernanceat

Vanguard,leadingacrossfunctionalprogrammeofworkto

improvetheirgovernance,riskandregulatoryframeworks.

PriortothisshewastheEuropeanHeadofAudit(SMF5)

fortheirUK,IrishandGermanRegulatedentitieshaving

previouslybeenaSeniorManageratErnstandYoung.

Skills and experience

Katehasabroadrangeofaudit,riskandfinancialexperience

withinthefinancialservicesindustry.Sheisresponsiblefor

our'thirdlineofdefence'intheSociety'sriskmanagement

model,includingevaluatinghowwemanageourcapital,

liquidity,credit,operationalandregulatoryrisks.

Kate will be leaving the Society in 2024 to take up a

new opportunity.

*Also known as Katherine Remington

Fraser Ingram

MBA FCB

Chief Operating

Officer

Orlagh Hunt

BA, FCIPD

Chief People

Officer

Kate Ireland*

BSc, FCA

Chief Internal

Audit Officer

Richard Wells

FCIB

Chief Risk

Officer

62 | Governance 63

A word from the

Chair of our Board

IampleasedtopresentourCorporate

Governancereportfor2023,whichsets

outtheroleoftheBoardanditskey

activitiesduringtheyear.

AsaBoardweremaincommittedto

maintainingarobustandeffective

governanceframeworkwhichsupportsthe

deliveryofourstrategyandpurposewhilst

remainingadaptabletothechallenges

broughtbyexternaleventsarisingintheUK

andaroundtheworld.

Our approach to Corporate

Governance

Weapproachcorporategovernanceasa

frameworkofrules,practicesandprocesses

weusetomanagetheSocietyandour

approachisbasedontheprinciplesand

provisionsoftheUKCorporateGovernance

Code(theCode)publishedbytheFinancial

ReportingCouncil('FRC').

Ourcommitmenttooperatetothisstandard

helpstoensurethelong-termsuccessand

asustainablefuturefortheSocietyand

forthebenefitofourcurrentandfuture

members,customers,colleaguesandall

otherstakeholders.

Changes to the Board

AsreportedintheAnnualReportand

Accounts2022,wewerepleasedto

announceinAugust2022thattheSociety

hadappointedSusanAllenOBEasournew

ChiefExecutive.SusanjoinedusinMarch

2023andbroughtmorethan25yearsof

experienceinfinancialservices.Herskills

andexpertisearealreadyprovingtobe

asignificantbenefittotheSocietyaswe

deliverourstrategy.

WeannouncedinJanuary2024thatAlasdair

Lenman,ourChiefFinanceOfficer,willbe

retiringfromhisrolewiththeSocietyand

fromtheBoardinJune2024.Iwouldlike

totaketheopportunitytothankhimforhis

outstandingcontributiontotheSocietynot

leastforhisroleasInterimChiefExecutive.

Therehascontinuedtobeasignificant

focusonNon-ExecutiveDirectorsuccession

planningforourBoardduring2023to

ensureitremainseffectivenowandin

thefuture,includingmanagingasmooth

transitionofkeyrolesontheBoard.

InJuly2023weannouncedthat,after

nineyearsasChairoftheBoard,Iwillbe

succeededbyAnnemarieDurbinwhojoined

ourBoardasChairoftheBoardDesignate

on18December2023.Annemariehasover

35years’experienceinretail,commercial,

corporateandinstitutionalbanking,she

isaqualifiedlawyerwithexpertiseacross

generalmanagement,operations,HR,

legalandcompliance,aswellasbeingan

executivecoachandmentor.Iwasdelighted

thatAnnemarieagreedtojointheSociety

andtobeabletowelcomeheronthe

Board.Movinginto2024wewillbeworking

togethertocompleteadetailedhandover

processtoensuretheongoingsmooth

runningandeffectivenessofourBoard.

WewerepleasedtowelcomeDebra

DaviestoourBoardinJuly2023who’s

experienceandknowledgeofthefinancial

servicessector,togetherwithherfocuson

remunerationandrisk,isaconsiderable

valueaswecontinuetogrowanddevelop.

DebrabecameChairofourRemuneration

CommitteeinSeptember2023.

Iwouldliketotakethisopportunitytothank

AlisonHutchinsonforundertakingtheChair

ofRemunerationCommitteeroleduringthe

interimperiod,ensuringongoingstability

duringaperiodoftransitionthroughher

significantexperiencebothwiththeSociety

andasaRemunerationCommitteeChair.

Further details can be found in the

Board Governance and Nominations

Committee report.

Strategy

During2024theBoardandExecutive

Teamhavebeenworkingtorefresh

andfinalisethenextstageofour

strategywhichwilltaketheSociety

into2024andbeyond.Thiswill

provideuswithacleardirectionand

ensurewebuildonourachievements

todateandcontinuetoimproveon

whatwedelivertoourmembersand

customers.

Engaging with our

stakeholders

TheBoardrecognisesthevalueof

insightgainedfromourstakeholders

andtheimportanceoftakinginto

accounttheirviewsaspartofdecision

making.

OurAnnualGeneralMeetingisalways

oneofthekeyeventsintheyearfor

ustomeetandobtaintheviewsof

ourmembersonhowtheSocietyis

run.ForourAnnualGeneralMeeting

in2023wewerepleasedtooffereven

morechoiceonhowtotakepart,as

wellasbeingabletovoteaheadof

themeetingorattendthemeeting

inperson,forthefirsttimethose

membersparticipatingonlinewere

alsoabletovoteandaskquestions.

Consumer Duty

TheConsumerDutyhasbeenakey

areaoffocusfortheBoardin2023and

thiswillcontinueinto2024aswehave

thesecondphaseofrequirements

tomeetforourclosedproductsand

services.Thiswillleadustothefirst

BoardattestationinJuly2024.

TosupporttheBoard’soversight

wehavecontinuedtohaveregular

updatesandtrainingduring2023

andwehaveourownConsumerDuty

ChampioninMarkParsonsoneofour

Non-ExecutiveDirectors.

Board evaluation

Thelastexternalevaluationofthe

Boardwascompletedin2020and,as

such,basedontherequirementsof

theCodeanexternalvaluationwas

duein2023.

TheBoardiscommittedtocomplying

withtheCoderequirementsforan

externalevaluationwhichprovides

theopportunityforanindependent

viewofprogress,effectivenessand

providesinsightsintopotentialnew

areasoffocus.Assuch,Linstockwere

appointedtosupportanexternal

reviewprocessin2023.

For2023andinto2024thereview

processalsoprovidesuswiththe

opportunitytosupportthetransition

oftheChairoftheBoardrole.

Further details on the external

review process can be found

in the Corporate Governance

report and Board Governance and

Nominations Committee report.

Board priorities in 2024

ThecompositionoftheBoardand

ongoingsuccessionplanningforkey

roleswillremainafocusin2024.The

BoardGovernanceandNominations

Committeewillcontinuetosupport

theBoardtoensurerobustplans

areinplacetomaintaintheongoing

effectivenessandstabilityofthe

Board.

IwillberetiringasChairoftheBoard

attheendofourAnnualGeneral

MeetinginApril2024andIlook

forwardtoworkingwithAnnemarie

untilshesucceedsmeastheChairof

theYBSBoard.Ithasbeenaprivilege

toservesucharesilientorganisation

withastrongsenseofpurposeover

thelastnineyears.

John Heaps

ChairoftheBoard

64 | Governance 65

Corporate Governance report

Corporate Governance report (continued)

UK Corporate Governance Code Compliance 2023

Forthe2023financialyearwehaveappliedtheprinciplesandcompliedwiththeprovisions

oftheCodepublishedinJuly2018(availableontheFinancialReportingCouncil’swebsite

frc.org.uk)asfarastheyapplytobuildingsocieties(assetoutintheBuildingSocieties

Association(BSA)Guidanceavailableatbsa.org.uk)subjecttothefollowing:

•

Asamutualorganisationwedo

nothavesharesorshareholders

thereforereferencestolong-

termshareholdingsinrelationto

remuneration(Provision36)do

notapply.Wedo,however,seekto

applytheprovisionsoftheCode

thatreferenceshareholdersas

appropriatetoourmembersandin

accordancewiththeBSA’sguidance.

•

Provision19oftheCodeexpectsthattheChairshouldnotremaininpost

beyondnineyearsfromthedateoftheirfirstappointmenttotheBoard.

However,tofacilitateeffectivesuccessionplanningtheperiodcanbeextended

foralimitedtime,particularlyinthosecaseswherethechairwasanexisting

Non-ExecutiveDirectoronappointment.JohnHeaps,ourcurrentChairofthe

BoardreachednineyearsofserviceinNovember2023havingjoinedtheBoard

asChairoftheBoardDesignateinNovember2014beforeformallybecoming

theChairoftheBoardattheAnnualGeneralMeetinginApril2015.Following

carefulconsideration,andontherecommendationoftheBoardGovernanceand

NominationsCommittee,theBoardagreedtoextendMrHeapstermofofficeto

theendoftheAnnualGeneralMeetingin2024.MrHeapsdidnottakepartin

thedecisionsinrelationtohistermofoffice.

ThedecisiontoextendMrHeaps’termofofficebeyondnineyears,forashort,

time-limitedperiod,wasspecificallytosupportthesuccessionoftheChairof

theBoardroleandallowforanappropriatehandoverperiodwithAnnemarie

DurbinaftershejoinedtheBoardasChairoftheBoardDesignateinDecember

2023.Thisapproachwillensuretheongoingcontinuityandstabilityofthe

Boardduringthisperiodandsupportitsongoingeffectiveness.

Board leadership and the Society’s purpose

Our Board and Committee structure

The Terms of Reference for the Board, Remuneration, Audit, Group Risk and Board Governance and Nominations

Committees are on our website.

InOctober2022theBoardestablishedanadditionalCommittee,calledtheChairoftheBoardSuccessionCommittee,to

leadtherecruitmentprocessforthesuccessionoftheChairoftheBoardonbehalfofitandtheBoardGovernanceand

NominationsCommittee.TheChairoftheBoardSuccessionCommitteewasformallydissolvedfromthegovernancestructure

in2023followingtheconclusionoftherecruitmentprocessandapprovaloftheappointmentoftheChairoftheBoard

Designate.

Details of the membership and role of the Committee are set out in the Board Governance and Nominations

Committee report.

Chair’s

Committee

Remuneration

Committee

Audit

Committee

Group Risk

Committee

Board Governance

and Nominations

Committee

Chair -

John Heaps

Considersadhoc

mattersspecifically

delegatedtoitbythe

Board.

Membersarethe

ChairoftheBoard,

ViceChairand

ChiefExecutiveor

anyotherDirector

appointedbythe

Board.

Chair -

Debra Davies

Overseesthe

developmentand

implementationof

theRemuneration

Policyforall

colleagues.

Chair -

Guy Bainbridge

ReportstotheBoard

onfinancialreporting,

internalcontrolsand

riskmanagement

systems,environment

socialandgovernance

reporting,Internal

AuditandExternal

Audit.

Chair -

Angela Darlington

OverseesPrudential

Risk,Operational

RiskandConduct

Risk,RiskStrategy,

Appetiteand

Oversight.

Chair -

John Heaps

OverseesBoard

governance,including

composition,

successionand

appointment

processesforthe

Board.

Chair – John Heaps

Collectivelyresponsibleforthelong-termsuccessoftheSociety.

TheBoarddelegatescertainmatterstoBoardCommitteessothattheycanbeconsideredinmoredetailbythosedirectors

whohavethemostrelevantskillsandexperiencetodoso.

Board

Board Committees

Executive Committee ('ExCo') Executive Risk Committee ('ERC')

Chair - Susan Allen, Chief Executive

Overseesanddirectsthemanagementofallaspectsof

theSocietywithdelegatedauthorityfromtheBoard.

AllChiefOfficersaremembers.

Chair - Richard Wells, Chief Risk Officer

Overseesdaytodayriskmanagementactivitywith

delegatedauthorityfromtheGroupRiskCommittee.

66 | Governance 67

Climate and environmental

governance

InlinewiththePrudentialRegulation

Authority('PRA')expectations(SS3/19)

andourcommitmenttoaligningour

operationstoTaskForceonClimate

RelatedFinancialDisclosures('TCFD')

principles,theSocietyhascreateda

robustgovernanceprocessfortherisks

associatedwithenvironmentaland

climatechange.

You can read more about our

climate governance in the

Strategic report.

Board’s responsibilities

TheBoardisaccountabletoour

membersforactingintheirbest

interests.Itsroleandresponsibilities

aresetoutinitsTermsofReference

andinclude:

•

Collectiveresponsibilityforthe

success,includinglong-termsuccess,

oftheSociety.

•

OverallmanagementofSociety

withinaframeworkofrisk

management(includingapprovalof

riskappetite).

•

Establishingthepurpose,valuesand

strategyoftheSociety.

•

Establishingasustainablebusiness

model.

•

Developingthedesiredcultureand

settingthe‘tonefromthetop’.

•

OversightoftheSociety’s

operations.

•

Reviewofperformanceinlightof

theStrategyandCorporatePlan.

TheBoardretainscertainkeymatters

foritsownapprovalwhichitdoesnot

delegatetoanyofitscommitteesor

anyindividual.

These are set out in a Schedule

of Matters Reserved which can

be found on our website at ybs.

co.uk/board.

Setting our purpose and generating long-term success

TheBoardiscommittedtodeliveringourpurposeofprovidingRealHelpwithReal

Lifeaswellascreatinglong-termvalueforourmembersandotherstakeholders

throughgoodgovernanceandkeepstheSociety’spurposeandlong-termsuccess

underreview.

SomeofthekeyelementsthatsupporttheBoardinitsroleinclude:

Further information on our priorities, purpose and behaviours can be found

in the Strategic report.

Strong and robust

corporate governance

framework

TheBoardandCommitteegovernancestructure

supportseffectivedecisionmakingensuringit

alignswiththeSociety’spurposeandstrategy.

Board composition EnsuringtheBoardanditsCommitteesremainfit

forpurpose,withtherightskillsandexperience,

enablesittocontinuetobeeffectiveandableto

workforthelong-termsuccessoftheSocietyfor

ourmembers.

Strategy EnsuringtheSocietyhasacleardirection

whichenablesittoaddresscurrentandfuture

opportunitiesandchallenges.

Risk management Ensuringcontinuousidentificationandreview

ofprincipalbusinessrisksandhowtherisks

couldaffecttheSociety’spurposeandlong-term

success,takingintoaccounttheagreedrisk

appetite.

Compliance Goodcorporategovernanceensuresthatwemeet

legalandregulatoryrequirementsandavoidany

consequencesofnotdoingso.

Culture Strongbehaviourswhichsupportthedeliveryof

ourpurposeandstrategy.

Stakeholder

engagement

Engagementwithandparticipationfromkey

stakeholderssuchasourmembersandcolleagues

supportsdecisionmakingandthelong-term

successoftheSocietyforourmembers.

Brand and reputation Aclearandeffectiveframeworkofcorporate

governanceprovidesconfidencetoour

stakeholders,supportingapositivebrand

reputation.

Environment Social

Governance (ESG)

strategy

OurESGcommitmentsandgoalssupportthe

deliveryofourpurpose.

Finance Ensuringstrongcapitalandliquiditymanagement.

People Ensuringpoliciesandproceduresareconsistent

withtheSociety’spurposeandbehaviours.

Board activities in 2023

OurBoard’sactivitiesduringtheyeararebasedaroundanannualcyclewhichisplannedonarolling12-monthbasisto

makesureitmeetsitsresponsibilitiesandoverseesoverallmanagementofouroperations.

TheBoardagendaalsoincludesadditionalitemsasrequiredduringtheyeartogetherwiththefollowingstandingitems

presentedtoeachmeeting:

•

ReportoftheChairoftheBoard

•

Member,MarketandCompetitorUpdate

•

ChiefExecutiveOfficerReport

•

BusinessReview

•

BoardandCommitteeupdatesandminutes

ExamplesofsomeofthetopicsdiscussedandprincipaldecisionsmadebytheBoardduringtheyeararesetoutbelow

togetherwithanykeystakeholderimplications:

Principal Decision Examples Key stakeholder implications

Approval of Annual Report

and Accounts and Interim

Financial Statements

M&C

G&R

Approval of 2023

Internal Capital Adequacy

Assessment Process (ICAAP)

M&C

G&R

Approval of Internal

Liquidity Adequacy

Assessment Process (ILAAP)

M&C

G&R

Approval of key policies,

such as Whistleblowing

Policy

M&C

G&R

Approval of Operational

Resilience Self-Assessment

M&C

G&R

Approval of the Society’s

Modern Slavery

Transparency Statement

M&C

G&R

Approval of appointment of

Non-Executive Directors

M&C

G&R

Key Topic Examples Key stakeholder implications

Strategic Context Review

M&C

G&R

Consumer Duty Updates

M&C

G&R

Colleague Engagement

Updates

Cyber Security Updates

M&C

G&R

Change Portfolio Updates

M&C

G&R

Environment Social

Governance Updates

M&C

Balance Sheet Management

Strategy

M&C

G&R

Strategy sessions in 2023

TheBoardalsoholdsseparatestrategysessionseachyearandin2023twosessionswereheldtoreviewthestrategic

directionoftheSociety.Thesessionsconsideredthefuturestrategytoensureitcontinuedtobuildshort-termresilience

whilstdevelopinganapproachtobuildinglong-termprofitabilityandgrowthinlinewithourMemberValuepriorityandour

dutytoourmemberstooperatearesponsibleandresilientbusiness.

EachstrategysessionwasattendedbyallBoardmemberswithmembersoftheseniorleadershipteaminvitedtoattendto

presentrelevantitems,supportedbyexternaladvisorswhereappropriate.

During2023theBoardhasbeenfocusedontheevolutionanddeliveryoftheSociety’sStrategy,engagingwiththeExecutive

CommitteeandSeniorLeadershipTeam.

Keytopicsconsideredduring2023coveredmeetingcustomerneedsandconnectingwithourmembers,supportedby

discussionsonbrand,mortgageandsavingsmarketparticipation,futureoftheretailnetwork,futureofretailfinancial

services,inspiringandempoweringourpeople,changeandourCorporatePlan.

Colleagues

M&C

Members&Customers

G&R

GovernmentandRegulators

Investors

Partners

Communities

Key

Corporate Governance report (continued)

Board leadership and the Society’s purpose (continued)

68 | Governance 69

Our Board’s engagement

with stakeholders

TheBoardrecognisestheimportanceof

maintainingastrongrelationshipwithits

stakeholdersincludingthecontributionit

makestoachievingtheSociety’spurpose

anddeliveringitsstrategy.Thisincludes

understandingtheviews,areasofinterest

and/orconcernsofourkeystakeholders

whenitcomestodecisionmaking.

EachreporttotheBoardincludes,whereappropriate,details

ofanyconsultationundertakenwithkeystakeholders

togetherwithanyimpact,orpotentialimpact,adecisionmay

haveonrelevantstakeholders.Theperformanceinformation

providedtotheBoardalsocoverskeyareasrelevanttothe

Society’sstakeholders.

DetailsofhowourBoardengageswithourmembersandour

colleaguesaresetoutinthesectionsbelow.

OurBoardalsoengageswithotherstakeholderssuchas

investors,regulators,partners(suchasbrokers,agency

proprietors,tradeunions),industrybodiesandcommunities

asrequired.

Examplesinclude:

•

Updatesinrelationtoregulatorymatters.

•

Responsetoconsultations.

•

Membershipofindustrybodiesandinvolvementin

industryconferencesandforums.

•

Regularupdatesinrelationtokeystakeholderactivities,

suchasinrelationtoourcommunityintereststrategyand

resilienceofkeysuppliers.

•

Feedbackfromtradeunions(throughtheRemuneration

Committee).

•

Visitstobrokers.

For more details on how the wider Society engages

with its key stakeholders see the stakeholder section

in the Strategic report.

Our members and customers

Asabuildingsocietywedonothaveexternalshareholdersandinsteadweareownedby,andarethereforthebenefitof,our

members.WearecommittedtoensuringtheSocietyisruneffectivelyontheirbehalfandthisincludesusingfeedbackonour

activitiestoinformtheBoard’sdecisions.

Examplesofhowwegetthisfeedbackfromourmembersandcustomersinclude:

Annual General

Meeting

OurAnnualGeneralMeeting('AGM')providestheBoardwiththeopportunitytopresentto

ourmembersdetailsofhowweperformedduringthepreviousyear,ourplansforthefuture

and,wherecircumstancesallow,togivethemanopportunitytoaskquestionsandprovide

feedback.

In2023forthefirsttimeourmembersjoiningusonlinewerealsoabletovoteandask

questions.ItisimportantthatourmembersareabletohavetheirsayatourAGMsoeven

iftheyareunabletoattendinpersonorjoinusonlinewestronglyencouragealleligible

memberstoexercisetheirrightstovote.Memberswerealsoabletocall,emailorwritewith

theirquestionsandresponseswereissuedinatimelymanner.

VotingattheAGMisoneoftheimportantwaysinwhichourmemberscangetinvolvedand

voteonimportantmatters,includingthedirectorswhorepresentthemontheBoard.TheUK

CorporateGovernanceCodeexpectsthatifthereisavoteof20percentormoreagainstany

resolutionputforwardbyourBoardattheAGM,weshouldgivedetailsofhowwewillconsult

ourmemberstounderstandthereasonwhy.TheSocietyhasaprocessinplaceifthishappens.

Therewere,however,novotesof20percentormoreagainstanyoftheresolutionsourBoard

putforwardatthe2023AGM.

Member Champion

/ Consumer Duty

Champion

TheBoardhasaNon-ExecutiveDirectorMemberChampionroletoensurethecontinued

prominenceofourmembersvoiceindiscussionsandsupportalldirectorsintheirdutytoact

inthebestinterestsofourmembersandcustomers.

OurcurrentMemberChampionisNon-ExecutiveDirectorMarkParsonswhoisalsotheBoard’s

ConsumerDutyChampion.

My Voice

(Online community)

OurMyVoicepanelisouronlinecommunitywherememberscaninteractwiththeSocietythrough

arangeofchannelsandcommentonabroadrangeofservicesandcustomerjourneyssowecan

continuetoimproveandmakesurewearegettingthingsright.ResearchthroughMyVoiceisdone

inavarietyofways,suchasquickpolls,surveysanddiscussionswithothermembers.

Aswellasaquarterly‘moodtracker’,topicscoveredin2023haveincludedtheuseofChatbots,

savingsratenotifications,attitudestowardISAsandfinancialplanningforlaterlife.

Your Time to Talk

(In branch events)

WeholdYourTimetoTalkEventstoenablememberstohearfirst-handhowwearelooking

aftertheirinterests.Eventsareheldacrossthecountryandprovidelocalmemberswiththe

opportunitytomeetourseniorteam,askquestionsandmeetourcolleagues.

InJune2023aneventwasheldattheRoyalArmouriesMuseuminLeedswheremembers

wereabletolistentoapresentationonMakingtheMostofYourSavings.

ThiswasfollowedbyaQuestionandAnswersessionwithsomeofourseniorteam;Susan

Allen,ChiefExecutive;DavidMorris,ChiefCommercialOfficer;andJennelleTilling,Non-

ExecutiveDirector.Thequestionscoveredtopicssuchasthefutureofbranches,housing

marketandthechallengesfortheyoungergeneration,artificialintelligenceandthepotential

foracashlesssociety.

Your Time to Talk

(Online events)

OurfirstonlineYourTimetoTalkeventwasheldon23November2023providingsomeofour

memberswiththeopportunitytojoinourpanelofexpertsforinsightintowhatishappening

inthemarketandwhatthismeansforthem.

Membersalsohadtheopportunitytoaskquestionsandgivetheirthoughtsthroughpollsand

wordclouds,sowecouldseeexactlywhatmatterstothem.

Operational visits OurBoardrecognisesthecontributionoperationalvisitstoareassuchasbranchesand

customerfacingteamsmaketothecontinuedunderstandingofwhatismostimportanttoour

membersandcustomers.

Other Otherareasoffeedbackinclude:

•

NetPromoterScore('NPS')tracking.

•

BrandTracker.

•

Membercasestudies.

•

AnalysisofprofileandbehaviourofYBScustomersegments.

•

Adhocresearchwithmembersthroughonlinesurveysorfocusgroups.

•

Adhocinsightsuchascommissionedresearch.

Corporate Governance report (continued)

70 | Governance 71

Our colleagues

OurBoardremainscommittedtoensuringthereiseffective

engagementwithourcolleagues.Animportantpartofour

engagementframeworkisthequarterlyColleagueForum,

thathascolleaguerepresentationfromacrosstheSociety

andtheNon-ExecutiveDirectorforWorkforceEngagement

attends.AlisonHutchinsonhasheldtheroleofNon-

ExecutiveDirectorforWorkforceEngagementsince2019,

withAngelaDarlingtontakingoverthispositioninJanuary

2024.

OneofthekeyrolesoftheColleagueForumistohelp

informbetterBoarddiscussionsanddecisions,ensuring

colleagues’viewsareheardandconsidered.TheColleague

Forumisdesignedtoexplorefeedbackfromcolleagueson

specificBoardtopicsandtoenableunstructureddiscussion

tocaptureanyotherconcernstoo.

FollowingamovetovirtualmeetingsduringtheCovid-19

pandemic,theColleagueForumhascontinuedtomature

andevolvewithtwoofthefoursessionsnowtakingplace

inpersontoallowcolleaguestonetworkmoreeasily.The

Forumcontinuestobewellattendedbycolleagueswhoare

thoroughlyprepared,passionateandbringqualityfeedback

toparticipatefullyindiscussions.

Colleaguecommunicationshavefocusedonbuildingwider

awarenessoftheForum’spurpose,tobuildbeliefandto

reinforcethatdiverseperspectivesareactivelywelcomedat

YBS.TheadditionofColleagueNetworkChairsasattendees

hasalsoensuredwehaveastrong,diverserepresentation.

IntermsofwhatisdiscussedatColleagueForum,wetook

adifferentapproachin2023toensurethetopicswere

timelierandmorealignedtotheExecutiveCommitteeand

Boardstrategicrunway.Thisledtousexploringthefollowing

areas:BusinessTransformation,CustomerCentricity,Career

ProgressionandUnderlyingSkillsandourEnvironmental,

SocialandGovernancepriorities.

Followingeachquarterlyforum,theNon-ExecutiveDirector

forWorkforceEngagementprovidesasummaryofcolleague

viewstoBoard.TheForumChair,TinaHugheswhoisDirector

ofMarketing&DigitalChannels,alsosharesoutputswith

theExecutiveCommitteeandanyactionsarefedbackatthe

nextColleagueForum.Theeffectivenessofthisfeedback

loopisanareathatcontinuestostrengthen,particularlyas

membersoftheSeniorLeadershipTeamarerotatingtheir

attendanceateachForumtodirectlyhearcolleagues’views.

AlongsidetheColleagueForumwealsohaveseveralother

channelsforcolleaguestoprovidefeedbackandsharetheir

viewsinconfidence:

•

Wehaveaflowofregularengagementtemperaturecheck

surveystosupplementafullengagementsurveyatthe

yearend.

•

Allcolleaguesarealsoencouragedtocompleteour

Diversity,EquityandInclusionsurveyannually.

•

Boardlisteningsessionscontinuebiannuallyfor

colleaguestoraiseanyquestionstheyhavedirectlywith

ourNon-ExecutiveDirectors.

•

ColleaguescanattendworkingluncheswithourExecutive

Committeeand‘AskMeAnything’sessionswithourChief

Executiveonaregularbasis.

•

WehaveadirectlinktoourChiefExecutiveviaour

‘StraighttoSusan’mailboxwitheachmessagereceivinga

personalresponse.

AllBoardandCommitteepapersarestructuredtoensure

thateachoneincludesdetailsofhowcolleagueviewshave

beentakenintoaccounttoinformanyrecommendations

togetherwithanypotentialimplicationsforcolleagues.The

Boardalsoreceivesanannualassessmentandupdateonthe

frameworkforcolleagueengagement.

Therearemanytangibleexamplesthatdemonstrate

theinfluenceofcolleagueviews,continuingtoshow

thatfeedbackisbeingheard.Theprogress,impactand

outcomesofourengagementframeworkshowsupthrougha

combinationofchangestopolicyorpracticeandthosemore

intangiblebenefitsthateffectiveengagementcanbring.

ExamplesofhowcolleaguefeedbackhasbeenkeytosupportingcolleaguesacrossYBSinclude:

Connecting colleagues to

their role in transforming

the business

DuringtheMarch2023Forum,

whichcoveredthetopicofBusiness

Transformation,werecognisedsome

colleagueswerenotclearonwhat

thismeansforthemandtheirpart

inhelpingtomakethishappen

toimprovetheexperienceofour

membersandcustomers.OurSenior

ManagerofBusinessTransformation

attendedthefeedbacksession

whichresultedinherwriting

anarticle“Thepathtoreal

transformationstartswithyou.”This

clearlylaidoutwhattransformation

reallymeans,whyitmatters,and

therolecolleaguesneedtoplayin

helpingourtransformationhappen.

Thiswaswellreceivedbycolleagues

andgeneratedpositivefeedback

fromacrossthebusiness.

Climate check-ins

ThesediscussionstakeplaceattheendofeachColleagueForumand

remainanessentialpartoftheagendatoprovideasafespacetoraise

itemsoutsideofthemaindiscussiontopic.Oneexampleofthiswas

ConsumerDutywherecolleaguesfelttheyneededmoreinformation.

Asaresult,weprovidedadditionalcommunicationstocolleagueswhich

includedadedicatedConsumerDutypageontheIntranet,aQuestionand

Answervideoandregularblogsandfeaturestokeepcolleaguesupdated

withprogress.

Improving our intranet

OurIntranethasbeenahottopicofconversationacrossall

forumsinthepast12monthsandtheirtenacityhasproved

invaluable.WiththehelpoftheForumChair,progressto

movetheIntranettotheCloudwasacceleratedwhichnow

allowsfornewfeatures,andthereisateaminplacelooking

atwhatourIntranetprovisionwilllooklikegoingforwards.

TheimprovementstoourIntranetwillassistourcolleaguesin

supportingourmembers.

Providing better cost

of living support

Followingadiscussionon

thetopicofcostoflivingin

December2022,acost-of-

livinghubwascreatedonour

Intranettoenablecolleagues

tofindinformationabout

helpandsupportquicklyand

easilybothforthemselves,

ourcustomersandour

communities.

Corporate Governance

report (continued)

Our Board’s engagement

with stakeholders

(continued)

72 | Governance 73

Our culture

TheBoardrecognisesthat‘how’we

workasanorganisationiscritical

andourbehavioursdrivetrue

differentiationsettingouttheculture

wewishtofoster.

Ourcultureandbehavioursare

promotedthroughouttheorganisation

byourBoardandSeniorLeadership

Team,throughlearningand

developmentaswellasthrougha

rangeofactivitiessuchasworkforce

engagement,performancereviews,

remunerationpolicies,recruitment,

successionplanningandinclusionand

diversity.

TheBoardiskeyinoverseeingand

monitoringcultureandhowour

behavioursareembeddedaspartof

theSociety’swiderstrategytakinginto

account:

•

ColleagueEngagementincluding

ColleagueListeningGroupsandour

ColleagueForum.

•

FeedbackfromtheNon-Executive

DirectorforWorkforceEngagement.

•

EmployeeSurveyResults.

•

PeopleUpdates.

•

HealthandSafetyUpdates.

•

WhistleblowingUpdates.

•

OperationalSiteVisits.

Whistleblowing

Wearecommittedtomakingsure

thatanyone,includingourcolleagues,

canbeconfidentthatanyconcerns

raisedwithuswillbetakenseriously

andtreatedasconfidential.Nobody

willbethesubjectofvictimisation,

subsequentdiscriminationor

disadvantageforreportingtheir

concerns,whatevertheoutcome.

Weadvocateacultureofopenness,

accountabilityandintegritywhereby

individualsfeelconfidenttoreportand

raisegenuineconcerns,withoutthe

riskofexperiencinganyretributionas

aresult,eveniftheconcernturnsout

tobemistaken.

TheSocietyhasaWhistleblowing

Policywhichsetsoutourapproachto

whistleblowing.Ourwhistleblowing

processesareintendedtoensurethat

theSocietyinvestigatesanddeals

withdisclosuresfairly,promptlyand

properly.ThisenablestheSocietyto

beinformedatanearlystageabout

fraudulent,immoralormalicious

activitiesormisconduct,inorder

toenableappropriateactionstobe

initiated.

OurBoardapprovesthe

WhistleblowingPolicyonanannual

basisandoverseesitsimplementation.

TheSocietyalsohasaWhistleblowing

Championwhoisakeypointof

contactforindividualswhowishto

reportconcerns.Asreportedinour

AnnualReportandAccountsfor2022,

GuyBainbridgewasappointedtothe

rolewitheffectfrom1January2023.

AllcolleaguesandourNon-Executive

Directorsalsocompleteanannual

whistleblowinge-learningcourse.

Directors’ duties

Section172oftheCompaniesAct

2006describesthedutiesofcompany

directorsinrespecttopromoting

thebusinessandconsideringother

stakeholders.Thisdoesnotapplyto

theSociety’sDirectorsaswearea

mutualbuildingsocietynotacompany,

buttheUKCorporateGovernance

Codeexpectsboardstoreportonhow

theyhaveconsideredthemattersset

outinSection172indecisionmaking.

Our Section 172 Statement is set

out in the Directors report.

Conflicts of interest

OurBoardhasaConflictsofInterest

PolicyforDirectorsandChiefOfficers

whichsetsouthowwewillreview

and,whereappropriate,approve

anyconflictsorpotentialconflictsof

interest.ThePolicyisreviewedonan

annualbasisbytheBoardGovernance

andNominationsCommitteeand

recommendedtotheBoardfor

approval.

Anyinterestsandassociatedconflicts

arerecordedinaRegisterofInterests

whichisreviewedandapprovedbyour

BoardGovernanceandNominations

Committeeateachquarterlymeeting.

Ifanydirectorwantstotakeona

newexternalpositionitmustfirstbe

approvedbyourBoard,whichwill

considerwhethertherecouldbeany

conflictsofinterestand/oranimpact

onthetimetheycommittotheirrole

withtheSociety.

Division of responsibilities

Board roles and division of responsibilities

Independence

AlltheNon-ExecutiveDirectorscontinuetobeconsideredindependentbasedontheguidancesetoutintheCode.TheChair

oftheBoardandtheChairoftheBoardDesignatewereconsideredtobeindependentonappointment.

Chair of

the Board

Chief Executive

Vice Chair / Senior

Independent Director

Non-Executive Directors

Executive Directors

Group Secretary

Non-Executive

Director

Executive Director

•

LeadershipoftheBoard.

•

EnsurestheBoardacts

effectively,promotinghigh

standardsofcorporate

governance.

•

Leadsannualreviewofthe

performanceoftheBoard,its

committeesanddirectors.

•

Identifiesongoingdevelopment

needsoftheBoard.

•

LeadstheBoardinthe

developmentoftheSociety’s

culture.

•

OverallresponsibilityformanagingtheSociety.

•

Implementsthestrategiesandpoliciesagreed

bytheBoard,supportedbytheExecutiveTeam,

throughanumberofmanagementandrisk

committees.

•

ResponsibleforadvisingtheChairoftheBoardandtheBoardasawholeonallcorporategovernancematters.

•

Responsiblefortheday-to-daymanagementof

specificareasofthebusinessincludingmaintaining

theSociety’sfinancialstrengthandsustainability.

•

Bringsassociatedskillsandknowledgetotheboard.

•

Deputisesforandprovides

supportandguidancetothe

ChairoftheBoard.

•

Actsasanintermediaryfor

otherdirectors.

•

Leadstheperformance

evaluationoftheChairofthe

Board.

•

Actsasthemainpointof

contactfortheSociety’s

membersshouldthenormal

channelsofcommunicationfail.

•

Responsibleforbringing

independentjudgementto

Boarddecisionsanddebate.

•

Usestheirownexperience

andskillstoconstructively

challengetheExecutiveTeam.

Corporate Governance report (continued)

Our Board’s engagement with stakeholders (continued)

74 | Governance 75

Attendance at Board and Committee meetings

ThetablebelowshowsourdirectorsandthescheduledBoardandCommitteemeetingstheyattendedduring2023(where

theywereamemberduringtheyear)followedbythenumberofmeetingsthedirectorwaseligibletoattend.

In2023thefollowingadhocmeetingswereheldat

shortnotice:

•

OnemeetingoftheBoardtodiscusstheoutcomesofthe

Governance,RiskandControlsReview.

•

TwomeetingsoftheBoardGovernanceandNominations

CommitteeinrelationtotherecruitmentofNon-Executive

DirectorsandBoardcompositionandsuccessionplanning.

•

ThreemeetingsoftheRemunerationCommitteeinrelation

totheappointmentoftheChiefOperatingOfficerandthe

reviewoftheRewardPolicy.

Ifadirectorcannotattendameetingtheywillreceivethe

papersandprovideanycommentstheyhavetotheChairof

themeetingbeforehand.

AnnemarieDurbinjoinedtheBoardon18December2023andassuchdidnotattendanyBoardmeetingsin2023.

TheChairoftheBoardandChiefExecutiveareinvitedto

attendallCommitteemeetingsandtheChiefRiskOfficeris

invitedtoattendallBoardmeetings.

IfanurgentdecisionisneededwhenthereisnotaBoard

meetingadecisioncanbetakeninwriting(knownasa

writtenresolution)ifthereisapprovalfromalldirectors(or

membersinthecaseofacommittee).OurRulessetoutthe

procedureforwrittenresolutionsandthiswasusedduring

theyear:

•

ThreetimesbytheBoard.

•

OnetimebytheBoardGovernanceandNominations

Committee.

•

OnetimebytheAuditCommittee.

•

OnetimebytheRemunerationCommittee.

Director Board

Board

Strategy

Board Committees

Chair's Audit

Board Governance

and Nominations Remuneration Group Risk

Non-Executive Directors

John Heaps 9/9 2/2 Nomeetings

requiredin2023

– 4/4 – –

Alison Hutchinson 9/9 2/2 Nomeetings

requiredin2023

– 4/4 5/5 4/4

Guy Bainbridge 9/9 2/2 – 4/4 4/4 – 4/4

Angela Darlington 9/9 2/2 – 4/4 – – 4/4

Debra Davies

4/4 1/1 – – – 2/2 –

Dina Matta 9/9 2/2 – – – 5/5 –

Mark Parsons 9/9 2/2 – 4/4 – – 4/4

Jennelle Tilling 9/9 2/2 – – – 4/5 –

Executive Directors

Susan Allen

iii

7/7 2/2 Nomeetings

requiredin2023

– – – –

Alasdair Lenman 9/9 2/2 – – – – –

David Morris 9/9 2/2 – – – – –

i. MeetingsonlyheldwhenrequiredtoconsideradhocmattersspecificallydelegatedtoitbytheBoard.

ii. DebraDaviesjoinedtheBoardandtheRemunerationCommitteeon26July2023andtheGroupRiskCommitteeon18October2023(pendingapprovalof

theappointmenttoGroupRiskCommittee,DebraDavieswasanattendeeatthemeetingon16October2023priortobecomingaformalmember).

iii SusanAllenjoinedtheBoardon2March2023.

Directors’ time commitment and

other directorships

AllNon-ExecutiveDirectorshavetomakesurethat

theyhaveenoughtimefortheresponsibilitiesof

theirroleandtosupportthis:

•

Availabilityandothercommitmentsarereviewed

andtakenintoaccountwhenrecruitingnewNon-

ExecutiveDirectors.

•

EachNon-ExecutiveDirectorhasaletterof

appointmentwhichsetsouttheexpectedtime

commitmentfortherole.

•

IfaDirectorisintendingtotakeonanadditional

externalappointmentthisisreviewedand,if

appropriate,approvedbeforeitistakenup.Our

Boardwillconsidertheimpactanyadditionalrole

wouldhaveonthetimetheycouldcommitto

theirrolewiththeSociety.

•

Areviewoftimecommitmentisalsoincludedas

partoftheone-to-onesessionsheldeachyear

withindividualdirectors.

Priortoappointmentthesignificantcommitments,

includingthetimeinvolved,forNon-Executive

Directorsisdisclosedandreviewed.

For2023thisincluded:

•

DebraDavies,Non-ExecutiveDirector–joinedthe

SocietyinJuly2023

•

AnnemarieDurbin,ChairoftheBoardDesignate–

joinedtheSocietyinDecember2023.

Therewerenosignificantappointmentswhich

requiredapprovalforexistingNon-Executive

Directors,however,theBoardGovernanceand

NominationsCommitteecontinuedtomonitorall

commitmentsthroughouttheyearthroughthe

NoneoftheExecutiveDirectorshaveheldany

non-executivedirectorshipsinaFTSE100company

during2023.

Composition, succession and

evaluation

Election and re-election of directors

Allofourdirectorsaresubjecttoelectionon

appointmentandannualre-electionbyour

membersattheAGMbasedonthebestpracticeset

outintheCode(ourRulesrequirethere-electionof

ourdirectorstotakeplaceatleastonceeverythree

years).

Detailsofeachindividualdirector’scontribution

aresetoutinthebookletaccompanyingtheNotice

ofAGMsenttoallqualifyingmembers.Theprofiles

inthe

OurBoardandExecutiveTeamSection

,and

availableonourwebsite,alsosetouttheskillsand

experienceofindividualdirectors.

Further information in relation to Inclusion and

Diversity can be found in the Board Governance and

Nominations Committee report.

Board gender balance

(asat31December2023)

58%

female membership

Women

58%

Men

42%

Board ethnicity

(asat31December2023)

1 director

from an ethnic

minority

background

Board tenure

(asat31December2023)

3.2 years

average tenure

50%

25%

17%

0-2Years 3-4Years 5-7Years 8-9Years

Board composition

Rolling four year female representation

2023

58%

2022

44%

2021

40%

2022

20%

White(including

anyotherwhite

background)

Minority

Ethnic

Background

Corporate Governance report (continued)

Division of responsibilities (continued)

76 | Governance 77

Tenure

AsummaryofthetenureofthecurrentBoardissetoutintheBoardCompositionsection.

TheChairoftheBoard,JohnHeaps,wasappointedasaNon-ExecutiveDirectorandChairDesignatein2014andbecame

ChairoftheBoardin2015.Assuch,hereachednineyearsofserviceinNovember2023,however,followingcareful

considerationontherecommendationoftheBoardGovernanceandNominationsCommittee,theBoardagreedtoextendhis

termofofficetotheendoftheAnnualGeneralMeetingin2024.Fulldetailsinrelationtotherationalefortheextensionin

termaresetoutintheUKCorporateGovernanceCodeCompliance2023sectionofthisreport.

For further details on Non-Executive Director tenure see the Terms of Office section of the Board Governance and

Nominations Committee report.

Annual review of Board performance 2022

AsreportedintheAnnualReportandAccountsfor2022,aninternalperformancereviewwascompletedfortheBoardandits

Committeesin2022.TheoutcomeswerediscussedbytheBoardatitsmeetinginJanuary2023andwereusedtoinformthe

BoardEffectivenessActionPlanfor2023.

Keythemesforthe2023ActionPlanincluded:

Theme Background Update

Board

composition

and succession

Maintainingthesuccession

planningprogrammeand

managingthetransitionto

anewChiefExecutiveand

ChairoftheBoard.

SuccessionplansaremanagedonanongoingbasisbytheBoard

GovernanceandNominationsCommittee.

Clearinductionplansandcomprehensivehandoverswereputin

placeforthetransitionforboththeChiefExecutiveandChairof

theBoardrole.

Further details can be found in the Board Governance and

Nomination Committee report.

Board

meetings

Reviewingtheapproachto

Boardagendastoensure

theyremainalignedto

theSociety’spurposeand

strategy.

AdetailedreviewoftheMattersReservedtotheBoardwas

completedin2023toensurethatBoardagendasremainfitfor

purposeandensuretheBoardcanfocusonappropriateareasof

oversight.

Oversight Continuetooversee

keytopicsarisingfrom

aregulatoryorexternal

perspective.

During2023theBoardhasmaintainedoversightofkeyareas,

includingConsumerDuty,ResolvabilityAssessmentFramework,

developmentsinrelationtotheGovernmentconsultationon

RestoringTrustinAuditandCorporateGovernance,costofliving

issuesandthedevelopmentofcryptoanddigitalcurrencies.

For further details on the process followed for the Board and Committee evaluations please see the Board Governance

and Nominations Committee report.

Appointment of external facilitator Evaluation approach

2023 Board and Committee evaluation process

Recommendations and Actions

Afteracomprehensiveprocurementprocess,Lintstock

wereappointedtoundertaketheexternalevaluation.

TheSocietyhasnootherconnectionwithLintstockat

thistime.

Areviewprocesswasundertakenincorporatinga

survey,interviewsandmeetingobservations.

Particularareasoffocusforthe2023reviewincluded

thetransitionoftheChairoftheBoardroleand

prioritiesforthenewChair;theBoard’srelationship

withthenewChiefExecutive;externaldevelopments

suchasthecompetitivelandscape;andsuccession

planningandtalentmanagement.

Basedontheoutcomesoftheevaluationprocess,LintstockproducedareportfortheBoardandCommittees.The

reportwasdiscussedattheBoardmeetinginJanuary2024.

Therewerenourgentorsignificantactionsarisingfromtheinitialdiscussions,however,theBoardhasidentifiedthe

followingthemesforfocusin2024:

•

Overseeingasuccessfultransitioninkeyroles

•

Reviewingthemanagementofmeetings

•

Increasingcohesionfollowingaperiodofchange

•

ContinuingthejourneytothepossibledesignationasacategoryonefirmbythePRA

•

Supportingmanagementindeliveringonthestrategy

TheoveralloutcomesandrecommendationswillbeusedtoinformanyBoardactionsrequiredin2024andanupdate

onprogresswillbeprovidedintheAnnualReportandAccountsfor2024.

Annual evaluation of Board performance 2023

ThelastexternalevaluationoftheBoardwascompletedin2020withinternalevaluationscompletedin2021and2022.In

accordancewiththeCoderequirementsforanexternalevaluationtobecompletedeverythreeyears,itwasagreedthatan

externalevaluationwouldbeundertakenin2023facilitatedbyLintstockinaccordancewiththeprocesssetoutbelow.

Corporate Governance report (continued)

Composition, succession and evaluation (continued)

78 | Governance 79

Board training and

development

TheBoardhasaformalTrainingPlan

toensurethatthereisanoverarching

planinplacefortheBoardasa

whole,settingoutthetrainingand

developmentrequirementsforthe

year.TheTrainingPlanisagreedand

overseenbytheBoardGovernance

andNominationsCommitteeonbehalf

oftheBoardandtakesaccountof

futurestrategy,keytopicswhichwould

benefitfromanexternalperspective,

annualBoardEffectivenessReview,

BoardSkillsMatrix,successionplans

andregulatoryandgovernance

expectations.

TheTrainingPlancoversthose

developmentareaswhicharerequired

fortheBoardasawhole,with

individualtraininganddevelopment

incorporatedintopersonal

developmentplans.

AspartoftheBoardTrainingPlan,

arangeoftopicsareidentifiedfor

externalspeakers/facilitatorsto

providetheBoardwithanexternal

perspectivetosupportstrategy

discussionsandBoarddecision

making.

During2023keyBoardtrainingand

developmenttopicsincluded:

•

CryptoandDigitalCurrency.

•

ExternalMarkets.

•

HedgeRiskManagementand

Accounting(AuditandGroupRisk

Committeetrainingavailabletoall

Boardmembers).

•

ResolvabilityAssessmentFramework.

•

Onlinelearningincluding

ConductRules,overviewof

SeniorManagementFunctionand

ConsumerDuty.

Non-Executive Director induction

AllNon-ExecutiveDirectorshaveafull,formalandtailored

inductionprogrammeonjoiningtheBoard,basedontheir

skillsandexperience,includingwhereappropriateaspecific

inductiontoanyCommitteestheywillbejoining.Role

specificinductionsarealsoarrangedwhereadirectortakes

onanewroleorcommitteemembership.

DebraDaviesjoinedtheBoardasaNon-ExecutiveDirector

inJuly2023andatailoredinductionprogrammewasput

inplacebasedonherexistingexperience,keyareasof

theSocietyandthoserelatingtoherareasofexpertise.A

comprehensivehandoverwasalsoputinplaceinrelation

totheRemunerationCommitteeandhersuccessiontothe

Chairrolefollowingregulatoryapproval.

MoreinformationonourBoardisavailableinothersections

ofthisdocument:

Acomprehensiveinductionprocesshasbeendeveloped

forourChairofBoardDesignate,AnnemarieDurbin,who

joinedtheSocietyon18December2023.Theinductionwill

assistinfacilitatingthehandoveroftheChairoftheBoard

roleandwillbemonitoredbytheBoardGovernanceand

NominationsCommittee.

TheBoardGovernanceandNominationsCommittee

monitorsthecompletionofallNon-ExecutiveDirector

inductions.

Chief Executive induction

AllExecutiveDirectorshaveafull,formalandtailored

inductionprogrammeonjoiningtheSociety,basedontheir

skillsandexperienceandtakingintoaccounttheirroleon

theBoard.SusanAllenjoinedtheSocietyasChiefExecutive

inMarch2023andatailoredinductionprogrammewasput

inplacebasedonherexperienceandtakingintoaccount

allkeyareasoftheSociety.Theinductionprogrammewas

monitoredbytheBoardGovernanceandNominations

CommitteeinaccordancewithitsTermsofReferenceand

wasfullycompletedin2023.

“Realhelpwithreallifeissucha

powerfulmantraandthispurpose

wasamajorpartofwhatattractedme

totheSociety.SincejoiningIhaven’t

beendisappointed.Inthecourseof

myinductionIhavemetteamsfullof

passionate,dedicatedandenergetic

peoplehelpingcustomerseveryday.

I’mlookingforwardtoplayingmy

partindeliveringvalueformembers

alongsidethem.”

Non-Executive Director induction – Debra Davies

Succession

planning for the

Board

See the Board Governance and

Nominations Committee report.

Skills and

experience of

our Board and

Committees

See Our Board and Executive

Team profiles.

Recruitment and

appointment of

Directors

See our Board Governance and

Nominations Committee report.

Board diversity

and inclusion

See our Board Governance and

Nominations Committee report.

Ensuring that

both internal

and external

audit are

effective

More information can be found in

the Audit Committee report.

Setting our risk

appetite

More information can be found in

the Risk Management report.

Our systems of

internal controls

More information on the internal

controls framework can be found

in the Audit Committee report.

Audit, risk and internal control

OurBoardhasoverallresponsibilityforaudit,riskand

internalcontrol,anddelegatesoversighttoitscommittees:

TheBoardreceivesquarterlyreportsfromtheChiefRisk

Officertoenableittomonitortheeffectivenessoftherisk

managementframeworkandinternalcontrolssystems.

TheAuditCommitteereviewstheeffectivenessofinternal

controlsatleastannuallywiththeoutcomesreportedtothe

BoardbytheAuditCommitteeChair.

Remuneration

OurBoardhasaRemunerationCommitteewhichhas

delegatedresponsibilityforsettingthepolicyonthe

remunerationofExecutiveDirectorsaswellassettingthe

remunerationfortheChairoftheBoard,andothermembers

oftheLeadershipTeam.

For further details please see the Directors’

Remuneration report.

TheremunerationofNon-ExecutiveDirectorsisadecision

reservedforourBoard’sapprovalandisreviewedbythe

ExecutiveDirectorsandtheChairoftheBoardonly.

John Heaps

ChairoftheBoard

28February2024

Corporate Governance report (continued)

Composition, succession and evaluation (continued)

80 | Governance 81

Board Governance

and Nominations

Committee Report

AwordfromtheChairofthe

BoardGovernanceand

NominationsCommittee.

Iampleasedtointroducetheannual

reportoftheBoardGovernance

andNominationsCommitteewhich

providesasummaryofthework

undertakenbytheCommitteeduring

2023.

Followingthesuccessfulcompletionofthe

recruitmentprocessforourChiefExecutivein2022,

wewerepleasedtowelcomeSusanAllentothe

BoardinMarch2023.During2023theCommittee

hasprovidedoversightfortheChiefExecutive’s

inductionprocesstoensureasmoothtransitionto

therole.

Thesuccessionplanningandrecruitmentprocess

forkeyNon-ExecutiveDirectorroleshasbeen

apriorityfortheCommitteeduring2023.This

includedtheappointmentprocessforanewChair

oftheBoard,supportedbytheChairoftheBoard

SuccessionCommitteeestablishedforthepurpose

(andchairedbytheViceChair),andournewChair

ofRemunerationCommittee.

TheCommitteehascontinuedtomonitorall

governancedevelopmentsincludingtheposition

inrelationtotheoutcomesoftheGovernment’s

consultationinrelationtoRestoringTrustinAudit

andCorporateGovernance.Theconsultationon

changestotheUKCorporateGovernanceCode

(Code)wasconsideredbytheCommitteein2023

and,followingthepublicationoftherevisedCode

inJanuary2024,itwillreviewtherequirementsas

itappliestoabuildingsociety.

Aswemoveinto2024,theCommitteewill

continuetokeepthemixofskillsandexperience

onourBoardunderreviewtoensuretheyremain

appropriateforthedeliveryofourStrategy,with

strongsuccessionplansinplacetosupportongoing

Boardeffectiveness.

John Heaps

ChairoftheBoardGovernanceand

NominationsCommittee

Board Governance and Nominations

Committee members and meetings

ThemembersoftheCommitteeare:

OnlymembersoftheBoardGovernanceand

NominationsCommitteeareentitledtoattendits

meetings,althoughothersmaybeaskedtoattend

allorpartofameeting.TheChiefExecutive,Chief

PeopleOfficerandGroupSecretaryareusually

invitedtoattendeachmeeting.

TheCommitteemetfourtimesin2023andheldtwo

additionalmeetingsinrelationtoNon-Executive

Directorrecruitmentandfuturesuccessionplanning.

Details of the number of scheduled Committee

meetings attended by each member is

available in the Corporate Governance report.

John Heaps

Chair of the Board and

Committee Chair

Alison Hutchinson

Senior Independent

Non-Executive Director /

Vice Chair

Guy Bainbridge

Independent

Non-Executive Director

Board Governance and Nominations Committee

responsibilities

TheresponsibilitiesoftheBoardGovernanceandNominations

Committeeinclude:

•

Reviewingthestructure,sizeandcompositionoftheBoardtakinginto

accountsuccessionplansandtheBoard’sDiversityStatement.

•

Overseeingsuccessionplanningfordirectorsandothersenior

executivesandthedevelopmentofdiversepipelines.

•

ReviewingtheapproachtotheannualevaluationprocessfortheBoard

anditsCommittees.

•

OverseeingtheappointmentprocessforNon-ExecutiveDirectorsand

ExecutiveDirectors.

•

ReviewingthetrainingplanfortheBoardonatleastanannualbasis.

•

Reviewinggovernancearrangementsandmonitoringcorporate

governancedevelopments,makingrecommendationstotheBoard

whereappropriate.

•

ReviewingandrecommendingtotheBoardtheDirectorsandChief

OfficersConflictsofInterestPolicyforapprovalandmonitoring

potentialconflicts.

•

ReviewingandrecommendingtotheBoardtheBoardDiversity

Statementforapproval.

Further detail on the role and responsibilities of the Committee can

be found in the terms of reference which are available on the Your

Society section of our website, at ybs.co.uk.

Corporate governance

TheCommitteeisresponsiblefortheoversightofBoardgovernanceand

ensuringweworkwithinastrongcorporategovernanceframework.During

2023thishasincluded:

•

AnnualreviewoftheSociety’scompliancewiththeUKCorporate

GovernanceCode(asitappliestoabuildingsociety).

•

ReviewoftheCorporateGovernancereportandtheBoardGovernance

andNominationsCommittee’sreportandrecommendationtotheAudit

CommitteeandtheBoardthattheybeincludedintheAnnualReport

andAccounts.

•

Oversightofcorporategovernancedevelopmentswithanychanges

requiredasaresultrecommendedtotheBoardtoensurethe

governanceframeworkisbasedonbestpractice.

Succession planning

TheBoardiscommittedtoensuringithastherightcompositionbothnow

andinthefuture,tosupportthedeliveryofourstrategyandensurethe

long-termsuccessoftheSociety.TheBoardGovernanceandNominations

CommitteesupportstheBoardbyensuringthatitkeepsunderreview

thestructure,sizeandcompositionoftheBoardanditsCommitteesand

ensuresthateffectivesuccessionplansaremaintainedtomanageperiods

oftransitionontheBoard.

TheCommitteecarriesoutadetailedreviewofsuccessionplanningfor

DirectorsatitsannualstrategysessioninMarcheachyearandkeepsthe

planunderreviewateachsubsequentmeetingduringtheyear.Italso

plansaheadforfuturerecruitmentofNon-ExecutiveDirectorstomake

surethattheBoardcontinuestohavetheskillsandexperienceitneeds

tooverseethedeliveryofthestrategyforthelong-termsuccessofthe

Society.

82 | Governance 83

TheBoardGovernanceandNominationsCommitteehas

accesstoarangeofinformationtosupportsuccession

planningincluding:

TheCommitteecontinuedtooverseesuccessionplanning

forNon-ExecutiveDirectorsin2023,takingintoaccount

tenure,currentandfutureskillsrequirementswhilst

balancingtheneedforcontinuityduringaperiodof

transitionforkeyroles.

TheCommittee’sroleiskeyinsupportingtheongoing

stabilityandeffectivenessoftheBoardnowandin

thefuture.

InadditiontoNon-ExecutiveDirectorsuccession,the

BoardGovernanceandNominationsCommitteealso

reviewsthesuccessionandtalentpipelineforsenior

rolesacrosstheSocietytounderstandtheskillsrequired

tomanagethebusinessandassessanyrisksorpotential

gaps.During2023thishasbeenkeyinsupportingthe

onboardingofanewChiefExecutiveandensuringrobust

successionplansareinplaceasaresultofchangesinthe

seniorleadershipteam.

Board Skills

Matrix and

Skills Map

Basedonanannualself-evaluation

byourdirectorsoftheirskillsand

experience.In2023theCommittee

undertookadetailedreviewofthe

approachtotheSkillsMatrixto

ensureitremainedfitforpurpose

andsupportedtheCommitteein

itssuccessionplanningandfuture

recruitmentexercises.Takinginto

accounttheBoard’scurrentand

futurerequirementstodeliverthe

Society’sstrategy,togetherwith

externalfeedback,arevisedSkills

Matrixapproachwasagreedby

theCommitteeandcompletedby

allNon-ExecutiveandExecutive

DirectorsinQuarter42023.

Non-

Executive

Director

Succession

Timeline

Settingoutappointmentdates,

termsofofficeandexpected

retirementdatesincludingkey

rolessuchastheBoardand

CommitteeChairs.

Board

Committee

Membership

and Key Non-

Executive

Director

Roles

SettingoutcurrentBoard

Committeemembership,

compositionandanyfuture

requirements,togetherwithother

keyrolesheldbyNon-Executive

Directors,suchastheNon-

ExecutiveDirectorforWorkforce

Engagement.

Board

Diversity

Statement

and

Information

SettingoutourBoard’s

commitmentstoinclusionand

diversityandunderstandingthe

compositionofourBoard.

Recruiting Non-Executive and

Executive Directors

TheCommitteeleadstherecruitmentofnewNon-

ExecutiveandExecutiveDirectorsonbehalfofthe

Board,basedonathoroughandinclusiveprocess:

Succession planning

TheCommitteemaintainsoversightoftheBoard’s

successionplansincludingplanningforfuture

recruitmentexercises(takingintoaccountexpected

termsofofficeforNon-ExecutiveDirectors).

Role requirements

Arolespecification,includingthekeyskillsand

experiencerequired,isagreedtakingintoaccount

successionplansandtheBoardSkillsMatrixas

appropriate.

External search agency

Anexternalsearchagencyisappointedtosupportthe

processusingourPreferredRecruitmentSupplierList.

OurPreferredRecruitmentSupplierListensuresthat

thereisclarityintermsofthestandardofserviceto

beprovidedbythesupplierandtherequirementsand

expectationsoftheSociety.Thepurposeofthelistis

toensurethattheCommitteehasaccesstoarange

ofsearchfirmstoprovidethewidestpossiblepoolof

diversepotentialcandidates.Allthesearchfirmsare

expectedtoadheretotheBoard’sDiversityStatement

andensureitispartoftheirsearchprocess.

Short listing

Ashortlistisdevelopedandagreedbasedon

objectivecriteria,withdueregardtothebenefitsof

diversityontheBoard,andtheskillsandexperience

candidatescouldbringtotherole.

Interviewing

Astructuredinterviewprocessisundertakenincluding

PanelinterviewswithmembersoftheCommittee(or

anyotherCommitteeestablishedbytheBoardforthe

purposeofrecruitment)andsubsequentinterview

sessionswithotherkeyBoardstakeholders.

Appointment

Followingarobustprocess,apreferredcandidateis

identifiedandtheBoardGovernanceandNominations

CommitteewillmakearecommendationtotheBoard

toappoint(subjecttoregulatoryapprovalinrelation

torolesundertheSeniorManagersandCertification

Regime).

Chair of Remuneration Committee succession

and recruitment

Succession planning

AsreportedintheAnnualReportandAccounts2022,theCommittee

agreedtocommencearecruitmentprocesstoidentifyapermanent

successorfortheChairofRemunerationCommitteerole.This

followedtheretirementofGuyParsonsinApril2022withthe

interimroleundertakenbyAlisonHutchinsontoensureconsistency

andcontinuity.

Role requirements

AcandidatespecificationwasapprovedbytheCommitteesetting

outthekeyrequirementsfortheroletakingintoaccountsuccession

plansandexistingBoardcomposition,includingskillsand

experience.

External search agency

RussellReynoldsAssociateswereengagedastheexternalsearch

agencytosupporttherecruitmentprocess.Theyhavepreviously

assistedtheSocietyintherecruitmentofGuyBainbridge,Chairof

AuditCommitteein2018.

Shortlisting and interview process

Theshortlistingprocessandpanelinterviewswereundertakenbyall

membersoftheCommitteeandinaddition,theChiefExecutiveand

ChairofGroupRiskCommittee.Thepreferredcandidatealsomet

withallotherNon-ExecutiveDirectors,ExecutiveDirectorsandthe

ChiefPeopleOfficer.

Appointment

DebraDavieswasidentifiedasthepreferredcandidatefortheroletakingintoaccountherexperienceand

knowledgeofthefinancialservicessectorandfocusonremunerationandrisk,togetherwithastronginterestin

socialpurposeandsustainability.

TheBoardapprovedMsDaviesappointmentontherecommendationoftheCommitteeandsheofficiallyjoinedthe

Boardon26July2023.FollowingregulatoryapprovaloftheSeniorManagementFunctionrole,MsDaviesbecame

ChairofRemunerationCommitteeinSeptember2023.

For more information about Ms Davies skills and experience see the Non-Executive Director profiles in the

Our Board and Executive Team section.

Recruitment and Succession in 2023

Non-Executive Directors

Aspartofongoingsuccessionplanning,theCommitteehasbeeninvolvedintherobustrecruitmentandappointment

processesforthefollowingkeyNon-ExecutiveDirectorRoles:

Board Governance and Nominations Committee report (continued)

Succession planning (continued)

84 | Governance 85

Chair of the Board succession and recruitment

Succession planning

AsreportedintheAnnualReportandAccounts2022the

Committeeagreedtocommencearecruitmentprocessfor

successiontotheChairoftheBoardrole.

Chair of the board succession committee

ToensurerobustgovernancetheBoardagreedtoestablish

aChairoftheBoardSuccessionCommitteeasaCommittee

oftheBoardtomanagetheprocessonbehalfofitandthe

BoardGovernanceandNominationsCommittee.Themembers

oftheCommitteewereAlisonHutchinson(ViceChairand

SeniorIndependentDirector)whochairedtheCommittee,Guy

Bainbridge(IndependentNon-ExecutiveDirector)andMark

Parsons(IndependentNon-ExecutiveDirector).

Role requirements

AcandidatespecificationwasapprovedbytheCommittee

settingoutthekeyrequirementsfortheroletakingintoaccount

successionplansandexistingBoardcomposition,includingskills

andexperience.

External search agency

RussellReynoldsAssociateswereengagedastheexternal

searchagencytosupporttherecruitmentprocess.Assetout

above,theypreviouslyassistedintherecruitmentofGuy

Bainbridge,ChairofAuditCommitteeandDebraDavies,Chairof

RemunerationCommittee.

Shortlisting and interview process

Theshortlistingprocessandpanelinterviewswerecompleted

byallmembersoftheChairoftheBoardSuccessionCommittee

andinaddition,interviewswereheldwiththeChiefExecutive,

ChairofGroupRiskCommitteeandChiefFinanceOfficer.The

preferredcandidatealsometwiththeChairoftheBoard,all

otherBoardmembersandtheChiefRiskOfficer.

Appointment

AnnemarieDurbinwasidentifiedasthepreferredcandidatefortheroletakingintoaccountherextensiveretail

bankingandbroaderretailfinancialservicesexperience,togetherwithherexperienceinotherNon-Executive

Directorroles.

TheChairoftheBoardSuccessionCommitteerecommendedthepreferredcandidatetotheBoardGovernanceand

NominationsCommitteeforapprovalandtheBoardapprovedMsDurbin'sappointmentontherecommendationof

theCommittee.ShejoinedtheBoardasChairoftheBoardDesignateon18December2023.

For more information about Ms Durbin's skills and experience see the Non-Executive Director profiles in the

Our Board and Executive Team section.

Executive Directors

TheCommitteeisresponsibleforsupportingtherecruitmentofanynewExecutiveDirector.AsreportedintheAnnualReport

andAccounts2022,asuccessfulrecruitmentprocesswasledbytheCommitteefortheChiefExecutiveroleandresultedin

theappointedofSusanAllen.SusanjoinedtheSocietyinMarch2023anddetailsofherinductionprocessaresetoutinthe

CorporateGovernancereport

Board diversity

WeplacegreatimportanceonhavinganinclusiveanddiverseBoardandworkforcegenerally.OurBoardhasagreeda

DiversityStatementtosupportthisambition,whichisreviewedbytheBoardGovernanceandNominationsCommitteeand

approvedbytheBoardeachyear.

AsummaryofprogressagainstthekeyaspectsoftheStatementissetoutbelow:

Use of specialist recruitment agencies that

have signed up to the Standard Voluntary

Code of Conduct of Executive Search firms

for the appointment of Directors, with

a preference for those signed up to the

Enhanced Code

RussellReynoldsAssociateswereappointedtosupportthesearchfor

apermanentChairofRemunerationCommitteeandanewChairofthe

BoardandaresigneduptotheEnhancedVoluntaryCodeofConductfor

ExecutiveSearchFirms.

At least 40% of Board Directors will be

women

ThepercentageofwomenontheBoardasat31December2023was

58%andexceededthetarget.

For prior years see the Board Composition section of the Corporate

Governance report.

Further increase Board diversity in order

to enhance effectiveness and embrace the

talents of people from all backgrounds

OurBoardplacesgreatemphasisonensuringitsmembershipreflects

diversityinitsbroadestsense.Considerationisgiventodemographics,

skills,experience,race,age,gender,disability,educationaland

professionalbackground,andotherrelevantpersonalattributes.In

ensuringanappropriatebalanceofallthesefactorstheBoardcan

providetherangeofperspectives,insightsandchallengeneededto

supportgooddecisionmaking.

TheCommitteeregularlyreviewsthecompositionoftheBoardto

ensurethatithasthebalanceofskills,experience,independenceand

knowledgethroughitsdiversecompositiontoremaineffective.

i. TheVoluntaryCodeofConductforExecutiveSearchfirmslaysoutstepsforsearchfirmstofollowacrossthesearchprocess,fromacceptingabriefthroughto

induction.TheEnhancedVoluntaryCodeofConductwascreatedbyexecutivesearchfirmsthemselveswiththeaimofraisingthestandardsofprofessionalism

andconductintherecruitmentofwomentotheboardsofFTSE350companies(thelargest350companieslistedontheLondonStockExchange).

Board Governance and Nominations Committee report (continued)

Succession planning (continued)

86 | Governance 87

Evaluation of the Board and its committees

TheBoardGovernanceandNominationsCommittee

agreesandrecommendstotheBoardtheprocessforthe

annualreviewoftheBoard’sperformanceandthatof

itsCommitteesinaccordancewiththeCode.TheCode

recommendstheevaluationoftheBoardbeexternally

facilitatedeverythreeyears.

Asanexternalreviewwaslastcompletedin2020,itwas

agreedthatanexternalreviewwouldbecompletedin2023.

Further details on the appointment of an external

facilitator and the approach to the review can be found

in the Corporate Governance report.

Chair of the Board

OurSeniorIndependentDirector,AlisonHutchinson,meets

withourChairtwiceayearonbehalfofourBoardtoreview

theChair’sperformanceincludingtheannualreviewwhich

tookplaceinJanuary2024,takingintoaccountfeedback

fromkeystakeholders.Theoutcomesofthereviewwere

discussedattheBoardmeetinginJanuary2024without

theChairpresent.AsChairhehascontinuedtoshowstrong

commitmentandloyaltyandthequalityofhisleadership

wasnotedtogetherwiththeexpertiseandinsighthehad

broughttoYBSoverthelastnineyears.

Non-Executive Directors

OurChairhastwiceyearlymeetingswitheachNon-

ExecutiveDirectortoreviewtheirperformance,discuss

anyareasfordevelopmentandreviewongoingtime

commitment.

Executive Directors

ExecutiveDirectorevaluationsarecarriedoutbyourChief

Executive,(ortheChairoftheBoardinthecaseoftheChief

Executive),againstagreedobjectives.

TheChairoftheBoardmeetswiththeNon-Executive

Directorsatleastannuallytoconsidertheperformanceof

managementandtheExecutiveDirectors.

Evaluation of the Board Governance and

Nominations Committee

TheBoardCommitteeevaluationswereincorporatedinthe

externalevaluationprocessfor2023.TheBoarddiscussed

thefindingsofthereviewinJanuary2024andmore

detailscanbefoundintheCorporateGovernancereport.

Therewerenourgentorsignificantactionsarisingforthe

Committee,however,itwillconsidertheoutcomesofthe

reviewwhichwerespecifictoitsroleatitsmeetingin

March2024.

John Heaps

ChairoftheBoardGovernance

andNominationsCommittee

28February2024

Diverse talent pipelines

AspartofitsroletheCommitteeoverseesseniorleadershipsuccessionplansandthediversityofthetalentpoolfor

futurevacancies.

WehavesignedtheHMTreasury’sWomeninFinanceCharterandarecommittedtoimprovinggenderbalance,

particularlyatseniorlevelsinourorganisation.Bywayoffurtherinformation,wehadthefollowingpercentagesof

womencolleaguesat31December2023(andforcomparison2022):

For more details on our colleagues and inclusion and diversity please see the Strategic report.

31 December 2023

31 December 2022

Executive Committee

TheLeadershipTeamimmediatelybelowourBoard(assetoutinthe

UKCorporateGovernanceCode)

43 33

Senior Managers

OurcolleaguesinrolesGradeEorabove(inaccordancewithour

commitmentsundertheWomeninFinanceCharter)

49 50

All Colleagues 61 63

Audit Committee Report

AwordfromtheChairoftheAuditCommittee

Iampleasedtopresentour2023

AuditCommitteereportwhich

setsouttheAuditCommittee’s

roleanditskeyactivitiesduring

theyear,includingitsreview

offinancialreportingmatters,

oversightoftheGroup’sinternal

controls,anditsinternaland

externalauditors.Iammost

gratefultomyfellowCommittee

membersforthediligence

withwhichtheycontributeto

theCommittee'swork,andto

managementforthetimeand

efforttheyputintoensurethe

Committeeremainseffective.

Duringtheyearwehavespentconsiderable

timeassessinganyimpactsupontheGroup's

controlenvironmentfromtheCovidandpost-

Covidreturntoofficeperiod,andthechanges

inseniormanagementoftheGroupoverthe

lasttwoyears.Wehavealsoconsideredthe

continuingdevelopmentsinourinternalaudit

function,includingthefiveyearlyexternal

qualityassessmentofthefunctioncompleted

inthelastquarterof2023.Wehaveremained

focusedontheimpactsoftheeconomic

environment,notablyincreasedinterestrates

andinflation,andregulatoryandlegislative

developmentsuponourcurrentandfuture

business.TheBoardhasrecentlydelegated

responsibilityfortheoversightoftheGroup's

annualEnvironmental,SocialandGovernance

(ESG)reporttotheCommitteeandwehave

beenpreparingforactivityonthe2023

reportinthefirsthalfof2024,includingthe

introductionofafifthregularCommittee

meetingtomeettheESGreporttimetable,

whichwillalsogiveustheopportunityto

rebalancemeetingworkloadsandaccelerate

certainreportstotheCommittee.

In2024,theAuditCommitteewillcontinue

itsworktoprotecttheinterestsofallofthe

Group'sstakeholders.

Guy Bainbridge

ChairoftheAuditCommittee

Audit Committee membership

ThemembersoftheAuditCommitteeare:

OnlymembersoftheAuditCommitteeareentitledtoattend

itsmeetings,althoughothersmaybeaskedtoattendallorpart

ofameeting.OurChairoftheBoard,ChiefExecutive,Chief

FinanceOfficer,ChiefInternalAuditOfficerandtheexternal

auditorwereinvitedtoattendallmeetingsin2023,alongwith

othermembersofourLeadershipTeamandSeniorManagers

wheretheAuditCommitteefeltitwasbeneficial.

WehadfourAuditCommitteemeetingsin2023.Themeetings

beganwithaprivatesessionbetweentheinvitedmembersof

theLeadershipTeamandtheAuditCommitteemembersand

generallyfinishedwithaprivatesessionbetweentheAudit

Committeemembersandourinternalandexternalauditors.

TheseprivatesessionsallowtheAuditCommitteetodiscuss

confidentialmatters,whichmaynotbeappropriatetodiscuss

inthemainAuditCommitteeitself.

Details on the number of meetings attended by each of

the Audit Committee members during 2023 are shown in

the Corporate Governance report.

Angela Darlington

Independent Non-Executive Director

Mark Parsons

Independent Non-Executive Director

Guy Bainbridge

Committee Chair

Independent Non-Executive Director

Board Governance and Nominations Committee report (continued)

Succession planning (continued)

88 | Governance 89

OurBoardappointsmembersto

theAuditCommitteeandtakesinto

accounttherequirementsoftheUK

CorporateGovernanceCode('the

Code'),asfarastheyapplytobuilding

societies,whenconsideringwho

shouldbeamember.Inlinewith

theCode,allmembershavetobe

independentNon-ExecutiveDirectors,

atleastonemembermusthave‘recent

andrelevantfinancialexperience’

andtheAuditCommitteeasawhole

shouldhaveexperienceinthefinancial

servicessector.

You can find out more about

the Code, and how it applies

to building societies, in the

Corporate Governance report.

In2023,allthemembersofthe

AuditCommitteewereindependent

Non-ExecutiveDirectors,andall

haverecentandrelevantfinancial

experiencegainedthroughthe

qualificationstheyholdandtheroles

theyhaveheldorcurrentlyhold

withotherorganisations.Therehave

beennochangestotheCommittee

membersduring2023.

TheAuditCommitteebenefitsfrom

adiverserangeofexpertiseinthe

areasofauditing,financeandrisk,

withparticularemphasisonthe

financialservicessector.Altogether,

thisensuresthattheAuditCommittee

hastherequiredcompetenceinthe

financialservicessector.

You can find out more about

the skills, qualifications

and experience of the Audit

Committee members in the

directors' biographies in the Our

Leadership Team section.

Therolesandresponsibilitiesofthe

AuditCommitteeareexplainedin

itsTermsofReference,whichset

outtheareasonwhichitprovides

oversightorguidancetotheBoard.

TheAuditCommitteereviewsits

TermsofReferenceeveryyearto

ensureitcontinuestomeetregulatory

requirementsandgoodpracticeand

boththeAuditCommitteeandBoard

approvetheTermsofReferenceeach

year.

You can find them on our

website ybs.co.uk/your-society/

inside-your-society/corporate-

governance/committees.

Key financial reporting

matters

Providingourstakeholderswith

complete,accurateandrelevant

financialinformationiscriticalto

ensuringthattheSocietymaintains

theirtrust.TheAuditCommitteeis

responsibleforensuringthatthekey

accountingpolicies,estimatesand

judgementsusedinourfinancial

statementsareappropriate.Tohelp

theAuditCommitteeachievethis,it

receivesreportsfrommanagement

andourexternalauditor,PwC.

Audit Committee report (continued)

Matters

Considered

Key Activities 2023

Expected credit

losses

Thecalculationofimpairmentforaportfolioofmortgageloansisinherentlyuncertain.Expected

creditlosses('ECL')arecalculatedusinghistoricaldefaultandlossexperiencebutrequire

judgementtobeappliedinpredictingfutureeconomicconditions(e.g.interestratesandhouse

prices)andcustomerbehaviour(e.g.defaultrates).UnderstandingtheGroup’sexposuretocredit

riskandensuringthattheassumptionsfeedingintoourECLmodelsareappropriate,arekey

prioritiesfortheAuditCommittee,allofwhosemembersserveontheGroupRiskCommittee.

TheAuditCommitteecontinuedtochallengemanagementontheselectionofeconomic

assumptions,andtherelativeweightingoftherangeofeconomicscenarios,giventheyhavea

materialimpactonECL,todemonstratethatthesedecisionsappropriatelyreflectedeconomic

conditionsandtheoutlookforunemployment,bankrateandhouseprices.Inflationaryrisks

remainedanincreasedfocusareawithhouseholdspendingbecomingthegreatestheadwind

in2023ashigherpricescontinuedtodragonrealincomesaswellasthepersistentincrease

ininterestratesreducingdisposableincomeandraisingtheriskofborrowersfailingtomeet

theircontractualrepayments.Managementevaluatedtheseuncertainties,withtheeconomic

assumptionsappliedtotheECLmodeladjustedtoreflectanymaterialchangesinviewofthe

macro-economicenvironment.Probabilityweightingswerereviewedduring2023andupdated

toreflecteconomicconditions.Thecorescenarioweightingdecreasedandthedownturnand

severedownturnscenarioweightingsincreasedtoreflecttherisksassociatedwithinflation

remaininghigherforlonger,mortgageaffordabilitypressureduetotheincreasesinBankRate

todateandtheongoinggeopoliticalandUKeconomicsituation.SMEjudgmentisapplied

inthefinalassessmentofweights,informedbothbyanassessmentofexternaldataand

statisticalmodelresults.Followingdetailedreviewanddiscussion,assumptionsforbasecase,

upsideanddownsidescenarios,aswellasforasevereeconomicdownturn,wereagreed.The

Committeeconcurredwithmanagementthatthescenariosusedreflectedanappropriaterange

ofassumptionsandtheupdatetoscenarioweightingswereappropriatetoreflectthechanging

economicoutlook.

Postmodeladjustments('PMA')areappliedwhenachangeincreditriskisidentifiedthatisnot

effectivelycapturedinthecoreECLmodels.PMAsarereviewedthroughouttheyeartodetermine

whethertheidentifiedrisksarestillapplicable.

TheSocietywillcontinuetorelyonPMAsgiventheenvironmentofincreaseduncertaintyto

offerasolutiontoECLcalculations,whilstmodelenhancementoptionsarecontinuallybeing

developed.Sincetheyareinherentlyjudgemental,PMAsrequirerobustprocessandgovernance,

supportedbytransparentandhigh-qualitydocumentation.

APMAworkinggroupwasestablishedinH22023withthepurposeofmonitoring,analysing

andenhancingthedocumentationofPMAs.ThisgroupretainsacentralroleintheECLcontrol

frameworkwiththeresponsibilityofactivelymanagingtheportfolioofPMAs,keepingthescope,

durationandconditionsforunwindingmanagementoverlaysunderregularreview.Furtherto

this,theywillcontinuetoinvestigatethescopeofplanstoreducerelianceonPMAsinfuture

wherepossible.TheultimateapprovalofourECLprovision,includingPMAswillcontinueto

followinternalscrutinypriortobeingsubmittedtoAuditCommitteeeachhalfyearandyearend.

Thecontinueduncertaintyintheeconomicoutlookandtheimpactsofincreasedinflationand

raisedinterestratesonaffordabilitycontinuedtobeafocusareafortheCommittee,withthe

Group'scost-of-livingandinflationPMAschallengedtoensuretheapproachremainedfitfor

purpose,particularlywhenconsideringthemodelperformancePMAsandthepotentialforthese

tooverlap.TheaffordabilityPMAmethodologywasrevisedtoreflectalowerstressbeingapplied

toaccountsidentifiedasmostvulnerabletoaffordabilitystresses,howeveritwasconsidered

appropriatetomaintainamoreprudentassessmentforaccountsclosetoproducttermexpiry.

Thesechangesresultedinalowerproportionofaccountsbeingidentifiedashigherriskand

decreasedthelevelofPMAinplace.TheBTLbookwasconsideredseparatelyandcontinuesto

berelativelyinsensitivetothestressesmentionedabove.Thecommitteedeemeditappropriate

tocontinuetoholdanadditionalprovisiontocoverthisunderestimation,althoughthePMA

hasreducedinmagnitudefrom2022.ECLcoveragehasnotexceeded0.04%ontheBTLbook

despitethechallengingeconomicclimateoverrecentyears.

Significant financial reporting matters considered by the Audit Committee since the

last Annual Report and Accounts

90 | Governance 91

Matters

Considered

Key Activities 2023

Expected

credit losses

(continued)

FourthgenerationIFRS9modelsandimpactswerepresentedtotheSociety’sModelRisk

Committeein2023andapprovedforuse.ThesehavebeenusedasthebasisforgeneratingCore

modelECLsforthisreportingperiod.BoththeMethodologyChangesandModelRecalibration

PMAshavebeenreleasedastheyarenolongerrequiredandthereductioninECLassociated

withthestage2movementoutweighedotheraspectsofthemigrationtothefourth-generation

modelsthatwouldhaveincreasedECLs,leadingtoanoverallreleaseoninitialimplementation.

However,twoadditionalPMAshavebeenraisedinrelationtothefourthgenerationPDmodel,

onereflectsthelimitedsensitivitytothedifferenteconomicscenariosovertheavailablehistory.

ThenarrowrangeinaveragePDestimatesacrossscenariosofdifferingseverityhighlightedthe

modelweakness.TheotherrelatestoPDunderpredictionwhich,wasalsoachallengewithin

thethird-generationmodelsbuiltonsimilardataperiods,andthetrendhascontinuedtobe

observedthroughmodelmonitoringsincethefourthgenerationmodelwasputintouseinMay.

AsthesearematerialtotheECLbalance,theAuditCommitteereviewedandchallengedthe

rationale,calculationmethodologyandgovernanceforeachofthesePMAs.

TheCommitteecontinuetoconsiderbothphysicalandtransitionrisksinrelationtotheGroup’s

mortgageportfolioandnotedthechallengeswithunderlyingdataandlong-termnatureof

expectedimpactsofclimateriskaspartoftheARAreviewandapprovalprocess.

Beingkeytotheaccurateprovisioning,theECLmodelperformanceisconstantlymonitoredand

theresultsofthismonitoringarecommunicatedtotheCommittee.

TheCommitteewassatisfiedthattheimpairmentprovisionandthedisclosuresprovidedinthe

financialstatementswereappropriate.

Matters

Considered

Key Activities 2023

Hedge

accounting

TheAuditCommitteecontinuedtoreviewthemethodologyandkeyassumptionsappliedto

thehedgeaccountingmodelsovertheperiod,includingconsiderationofnewhedgestrategies.

TheCommitteereviewedtheSociety’sapproachtohedgeaccountinginthecontextofthe

marketvolatilityseenintheyearandrequestedadditionaldisclosuresaroundfairvalue

volatilityinthehalfyearreportgiventhemagnitudeofthevolatilityexperiencedduetorate

volatilityinthewidereconomicenvironment.TheCommitteerequestedanalysisofthekey

driversofthevolatilitybetweentheprioryearend,halfyearandcurrentyearendgiventhe

magnitudecomparedtorecentyears,allofwhichwassharedwiththeCommitteeinboth

formalandinformalmeetings.Themostsignificantsourceoffairvaluegainsandlossesinthe

incomestatementcontinuestorelatetointerestrateswapsnotplacedintoahedgeaccounting

relationship.Payfixedinterestrateswapsaretransactionstohedgethemortgagepipelineand

cannotbeplacedintoahedgeaccountingrelationshipforashortamountoftimeaftertheyhave

beentransacted.Thesearepartiallyoffsetbytheswapsthathedgefixedratesavingswhichare

neverplacedintoahedgeaccountingrelationship.

TheCommitteetookpartinahedgeriskmanagementandhedgeaccountinginformationsession

inH2withtheFinanceleadershipteamwhichincludeddetailonhedgingandhedgeaccounting

activitiesandfuturechangesordevelopmentsthatarebeingexplored.TheCommitteeissatisfied

thattheamountsrecognisedinthefinancialstatementsareappropriatelystated.

Matters

Considered

Key Activities 2023

Retirement

benefit

obligations

TheGroupoperatesoneemployeebenefitscheme(theScheme)withbothdefinedbenefitand

definedcontributionsections.ThedefinedbenefitschemeisaccountedforbytheGroupunder

IAS19,withthekeyassumptionspresentedto,andapprovedby,theAuditCommittee.During

theperiodtheAuditCommitteereviewedtheassumptionsproposedbymanagementandthe

schemeadministrators(WillisTowersWatson),withchallengeonhowthepensionsurpluswillbe

impactedgiventhecontinuedvolatilityinthemarketthisyearandreviewedhowtheybenchmark

againsttherestoftheindustry.

Effective

interest rate

('EIR')

TheAuditCommitteeconsideredtheresultsofmanagement’sdetailedreviewsofthemethods

andassumptionsusedinthecalculationofinterestincomeundertheEffectiveInterestRate(EIR)

methodology,asrequiredunderIFRS,andconcludedthattheamountsrecognisedwerefairly

stated.

Acquisition

fair value

adjustment

run-off

TheAuditCommitteereviewedtherun-offprofileofthefairvalueadjustmentsmadeonthe

acquisitionoftheChelsea,Norwich&PeterboroughandEggportfoliosandapprovedchanges

wheretheactualrun-offexperienceiseitherquickerorslowerthanthatanticipatedoninitial

recognition.TheAuditCommitteeiscomfortablethatthecarryingamountsreflecttheremaining

expectedlifeoftheacquiredloansandsavingsbalances.

Tax Paperssettingoutthejudgementsappliedintherecognitionofdeferredtaxbalancesandthe

leveloftransferpricingadjustmentsappliedbetweenGroupentitieswerepresentedtothe

AuditCommitteeovertheperiod.TheAuditCommitteeissatisfiedthattherecognisedamounts

ofdeferredtaxarereasonablegiventhesubstantiveenactmentofscheduledchangesinUK

corporationtaxratesandthetransferpricingassumptionsarereasonable.

Provisions for

liabilities and

charges

TheAuditCommitteereviewedandconsideredtheprovisionsanddisclosuresforliabilitiesand

charges,beingthoserelatingtorestructuring,customerredressandpropertyrelatedcosts,and

agreedwiththeoverallamountheld.Moreinformationontheseprovisionscanbefoundinnote

23tothefinancialstatements.

Viability and

going concern

TheAuditCommitteereviewedpaperspreparedbymanagementandrecommendedtotheBoard

thatthefinancialstatementsshouldbepreparedonagoingconcernbasisi.e.12monthsfromthe

endofthereportingperiod.TheAuditCommitteeconfirmedthatthreeyearswasasuitableperiod

ofreviewfortheviabilitystatement,andthattheviabilitystatementcouldbeprovided.Whilst

thereisnoguarantee,thereisareasonableexpectationthattheSocietywillbeabletocontinueto

beviable,i.e.operateandmeetitsliabilitiesastheybecomedue,to31December2026.

More information can be found in our Directors’ report.

Disclosures TheAuditCommitteereviewedpaperspreparedbymanagementandagreedthatthedisclosures

includedwithinthisAnnualReportandAccountsmetallstatutoryrequirementsunderthe

BuildingSocietiesAct1986,thedisclosureandtransparencyrulesoftheFCAandapplicable

internationalfinancialreportingstandards.

TheAuditCommitteeconfirmedthatdisclosuresintheHalf-YearlyFinancialReportmetthe

requirementsofthedisclosureandtransparencyrulesoftheFCAandinternationalfinancial

reportingstandards.

TheAuditCommitteealsoreviewedtheGroup’sregulatoryPillar3quarterlydisclosuresincluded

infullontheSociety’swebsite.TheCommitteeapprovedthequarterone,twoandthreePillar

3disclosuresforpublicationandrecommendedthequarterfourdisclosurestotheBoardforits

approval.

ToenabletheBoardtoapprovetheLetterofRepresentationtotheexternalauditoratbothyearendandhalfyear,the

AuditCommitteereviewedthespecificrepresentationsandthebasisonwhichmembersoftheLeadershipteamhave

evidencedthem.

Audit Committee report (continued)

Key financial reporting matters (continued)

92 | Governance 93

Oversight of the external

auditor and external audit

process

TheAuditCommitteeoverseesthe

auditprocessandtherelationship

withourexternalauditor.TheAudit

Committeebeginseachannualaudit

cyclebyreviewingandapprovingthe

proposedauditplanpresentedbyour

externalauditor,PwC.Thisprocess

includesadiscussionbetweenthe

AuditCommitteeandourexternal

auditoraroundkeyriskareastoensure

thatthereisagreementonthefocus

oftheexternalauditor’sworkand

theirassessmentofmaterialityforthe

financialstatements.TheCommittee’s

discussionoftheexternalauditor’srisk

assessmentwasinformedthisyearby

theincreasesininterestratesaffecting

ECLsandhedging,andmanagement

changesinthehedgingandhedge

accountingteams.

For further information about

materiality and how it is

calculated, please refer to the

Independent Auditors’ report.

TheAuditCommitteehasassessed

PwC’sriskassessments,plannedwork,

resourcesandauditfeesthroughout

theyearandmonitoredtheprogressof

PwC’sauditworkthroughdiscussions

withPwCandmanagement.The

externalauditorprovidesregular

updatestotheAuditCommitteeon

theirworkontheHalf-YearlyFinancial

ReportandtheAnnualReportand

AccountsbeforetheAuditCommittee

approvesthem.

ThroughouttheyeartheAudit

Committeeassessestheeffectiveness

oftheexternalauditprocess,an

assessmentwhichisbasedon

guidancefromtheFinancialReporting

Council(FRC).TheAuditCommittee’s

assessmentincludesareview

undertakenbythefinancialreporting

managementteamwhichfocusedon

atargetedlistofbusinessareaswho

havesignificantinteraction,outside

ofthemainfinanceteams,withthe

auditprocesstoobtainfeedback.A

setofquestionswasconstructedasan

anchorfordiscussionsandtogenerate

someconsistencywhencollating

feedback,andwiderfeedbackwas

capturedalongsidethis.Inadditiona

surveywassentfollowingcompletion

oftheaudittomembersoftheAudit

Committeeandseniormanagersinthe

Society’sFinanceDivision.Adebrief

withtheauditfieldteamtookplace

toobtaintheirfeedbackandareas

forimprovementswereidentified.A

meetingtodiscussauditfeedback

washeldwiththeSeniorAuditteam

memberstosharetheconclusions

ofthereviewandobtaintheirviews

ontheeffectivenessoftheexternal

auditprocessandhowtheSociety

cancontributefurthertothis.The

outputfromallthesestepsisshared

withtheAuditCommitteeandhelps

itreviewthequalityoftheexternal

auditteamandprocess.TheAudit

Committeeconcludedthattheexternal

auditorwasperformingitsdutiesin

aneffectivemannerwithareasfor

improvementsharedwiththelead

auditpartnerforconsideration.

External auditor

independence

TheAuditCommitteemonitors

andannuallyassessestheexternal

auditor’sindependenceand

objectivity,takingintoaccount

relevantlaws,professionaland

regulatoryrequirementsandthe

relationshipwiththeexternalauditor

asawhole.Tofulfiltheresponsibilities

setoutinitsTermsofReference,

theAuditCommitteeconsiders,as

describedbelow,theexternalauditor’s

non-auditwork,thefeespaidin

respectofsuchnon-auditwork,the

employmentofformeremployeesof

theexternalauditor,andtheexternal

auditor’stenure.

TheGrouphasapolicyontheuse

oftheexternalauditorfornon-audit

work,andtheapplicationofthispolicy

isoverseenbytheAuditCommittee.

Thepolicyisdesignedtoensure

theexternalauditor’scontinued

independenceandobjectivity.

Feesforindividualassignmentsthat

exceedasetthresholdarereviewed

bytheAuditCommittee.Feesforthose

assignmentsunderthethresholdare

approvedbytheChiefFinanceOfficer

underdelegatedauthority.Allnon-

auditservicesareapprovedinadvance

oftheworkcommencing.Ourexternal

auditor’sfeeisreviewedregularly.The

AuditCommitteeissatisfiedthatthe

Grouphasoperatedinlinewiththe

policyduring2023.

Thetotalamountoffeespaidtoour

externalauditorforbothauditand

non-auditworkisdisclosedinnote6

tothefinancialstatements.

TheGroupalsohasapolicyon

theemploymentofemployeesof

theGroup’sexternalauditor,and

theAuditCommitteemonitorsthe

implementationofthispolicyannually.

InsummarythisrestrictstheSociety

fromofferingemploymenttonamed

individualsfromtheexternalauditfirm

forkeymanagementpositionswithin

atwo-yearperiodfromworkingon

theGroupstatutoryauditandensures

anysuchoffersofemploymentare

vettedbytheAuditCommitteeto

ensureon-goingindependenceofthe

externalauditor.TheAuditCommittee

alsoreviewedtheindependence

positionoftheCommitteemembers

andrelevantseniormembersof

theFinanceDivision,anditremains

satisfiedtherearenoconflictsor

independenceissues.

TheAuditCommitteetakesinto

accounttheperformanceofthe

externalauditorwhenconsidering

theirreappointmentaswellastheir

lengthoftenureandthedateof

rotationoftheauditpartner.PwC

wereappointedasexternalauditor

followingacompetitivetenderprocess

in2018andtheirappointmentwas

approvedbymembersatthe2019

AGM.HeatherVarley,theauditpartner

isrequiredtorotateofftheauditat

theendofthe2023audit,having

completedthemaximumtermof

fiveyears.Hersuccessorhasbeen

identifiedandhasmettheAudit

Committee.PwCwerereappointedas

theSociety’sexternalauditoratthe

2023AGMandtheAuditCommittee

hasrecommendedtotheBoardthat

theybeapprovedforreappointmentas

externalauditoratthe2024AGM.

Review of internal controls

OurBoardrecognisesthattomanage

riskseffectivelyweneedgoodinternal

controls.Thesehelpustoachieveour

purposeofprovidingRealHelpwith

RealLifebyprotectingourcustomers’

andotherstakeholders’interests

andlookingafterourGroup’sassets.

Theyalsoenableustobecomemore

efficientandeffectiveatwhatwe

do,producereliableinformationand

reports,andcomplywithlawsand

regulations.

Therisksthatwefacechangeovertime,sotheAuditCommitteeregularlyreviewshowourGroup’sinternalcontrolsare

workingandwhetherourGroupneedstostrengthenwhatitdoestomanagethenatureandextentofthoserisks,including

theriskoffraud(whatwecallourinternalcontrolframework).OurBoarddevelopsourpoliciesonriskandcontrol,butall

ofourSociety’scolleagueshavearesponsibilitytocarryoutthosepoliciesaspartofhelpingourorganisationachieveits

objectives.Sothattheycandothat,ourLeadershipTeamprovidestrainingandcoaching,andthenmonitorshowcolleagues

aremanagingrisks.

TosupporttheAuditCommittee’s

reviewofinternalcontrolsourInternal

Auditfunctionprovidesreportsto

everymeetingandourexternal

auditorprovidetheirownindependent

opinionstous.TheAuditCommittee

alsoreceivesreportsonsignificant

controlweaknessesfromthe

LeadershipTeam.TheAuditCommittee

workscloselywiththeGroupRisk

Committeetomakesurethattherisk

managementframeworkisoperating

effectivelyacrossourbusiness.

You can find further details of risk

management practices in the Risk

Management report.

Themaintypesofinformationthe

AuditCommitteeconsideredduring

2023were:

•

Internal Audit reports:TheAudit

Committeereviewedandapproved

theInternalAuditplanforthe

year,theproposedrevisionstothe

plan,andtheresourcesneededto

supportit.IndoingthistheAudit

Committeeconsideredtheongoing

appropriatenessofInternalAudit’s

coverageoftheGroup’srisks,

processes,systemsandcontrols

andthebalanceofassurance

betweentheGroup’stransformation

programmeandotherbusiness

activities.TheAuditCommitteealso

consideredreportsontheplan’s

progress,includingInternalAudit’s

findings,theirrootcausesandthe

LeadershipTeam’sresponses.Where

InternalAuditreportsareratedas

‘Unsatisfactory’theaccountable

membersoftheLeadershipTeamare

askedtoattendtheAuditCommittee

andexplainwhytheidentified

controlweaknesseshavearisen

andwhatactionsarebeingtakento

addressthem.In2023,InternalAudit

drewAuditCommittee’sattention

toarangeofareasthatrequired

improvement,includingcapital

reporting,responsiblelending,

peoplerisk,arrearsmanagement,

theSociety’schangeframeworkand

informationsecurity.

•

Updates on risk management

culture and ways of working:During

theyeartheCommitteediscussed

theSociety’sriskcultureandthe

impact,ifany,ofworkingfrom

homeoncontroleffectiveness,and

continuedtheirongoingmonitoring

ofprogressmadebymanagementin

improvingendtoendprocessand

controlsdocumentation.

•

External auditor reports:TheAudit

Committeereviewedreportsfrom

ourexternalauditors,PwC,about

recommendationsinrelationto

internalcontrolsforkeyfinancial

reportingprocessesandsystems.

Findingsthatwereraisedwere

prioritisedbymanagementaccording

toimpactandareasforimprovement

arebeingaddressed.TheAudit

Committeeconsideredregular

updatesonthestatusofcontrol

issuesidentifiedbybothInternal

AuditandPwC,andthevolumeand

ageprofileofthoseissuesremained

withintolerablelimits.Because

ourtotalassetsexceed£50bn,our

externalauditorprovidesthePRA

withaWrittenAuditorReporton

selectedaspectsoftheirauditand

this,too,wasconsideredbythe

AuditCommitteeduringtheyearin

relationtothe2022audit,together

withnon-firmspecificfeedbackfrom

thePRA.

•

Report on the adequacy of internal

controls in 2023:AuditCommittee

receivedareportfromallthree

linesofdefenceconcerningthe

effectivenessofinternalcontrols,

includingfocusonareasnotyetat

targetlevelsofmaturity.TheAudit

Committee’sattentionwasdrawn,in

particular,toimprovementsrequired

todataandregulatoryreporting

controls,controlssupporting

customeroutcomes,changeproject

controls,andcontrolstoprotectthe

securityofthefirm’ssystemsand

applications.

•

TheAuditCommitteeconsidered

whetheranyrecommendation

shouldbemadetotheRemuneration

Committeetoadjustthevariable

remunerationoftheLeadership

Team,inrespectofinternalcontrol

weaknesses.

Takentogether,theinformationthe

AuditCommitteereviewedprovided

assurancethat,whilstcontrol

improvementworkisongoing,the

Groupmaintainedanadequate

internalcontrolframeworkin2023

andtherewerenosignificantbreaches

ofcontrolorregulatorystandards.

Thissupportsouraimofcomplying

withtheprinciplesandprovisions

oftheCodewheretheyapplyto

buildingsocieties.TheLeadership

Teamproactivelytookactiontotackle

identifiedcontrolweaknesses,thereby

improvingthestrengthoftheinternal

controlenvironment,sothatourGroup

remainsfinanciallyandoperationally

resilient.

Audit Committee report (continued)

94 | Governance 95

OurInternalAuditfunctionis

governedbyacharter,whichtheAudit

Committeereviewsandapproves

annually.TheAuditCommittee

reapprovedthecharterinSeptember

2023andyoucanfindacopyofiton

ourwebsiteybs.co.uk/your-society/

inside-your-society/corporate-

governance/committees.

OurChiefInternalAuditOfficerreports

directlytotheChairoftheAudit

CommitteeandInternalAudithasfull

andunrestrictedaccesstoallofour

Group’sfunctions,systems,records

andcolleagues.TheChairoftheAudit

Committeemeetsregularlywiththe

ChiefInternalAuditOfficertoreview

theperformanceoftheInternalAudit

functionanddiscussanymatters

emergingfromInternalAuditactivities.

TheChairoftheAuditCommittee

alsoprovidesinputtotheappraisal

oftheChiefInternalAuditOfficer’s

performance.

Inadditiontoreceivingreportsonthe

outcomesofInternalAuditactivities,

asdescribedabove,theAudit

Committeereceivesregularreports

ontheperformanceofInternalAudit

againstanagreedsetofmeasures.

InternalAuditalsoreportstothe

AuditCommitteeannuallyonthe

strategyforthefunction,theskills

andresourcesithas,andwhatit

needstoeffectivelydischargeitsrole.

TheAuditCommitteereviewsand

approvesanyproposedchangestothe

strategyandresources.During2023,

thishasincludedconsiderationofthe

resourcestheInternalAuditfunction

mayneedoverthenextseveralyears,

andtheprogressmadeindeveloping

thefunction’sdataanalyticscapability.

TheAuditCommitteeissatisfiedthat

InternalAudithastheappropriate

resources,usingexternalthird-party

supportwherenecessary,tofulfilits

responsibilities.

InternalAuditcontinuestooperate

itsownqualityassuranceand

improvementprogramme.In2023,

thisprogrammeincludedanexternal

qualityassessmentofthefunction

againstrelevantprofessionalstandards

andcodesandindustrybestpractice.

Theassessmentwasperformedbyan

independentthird-party.TheAudit

Committeereceivedapresentation

fromthethirdpartyoftheresults,and

discussedtheassessmentandthe

recommendationsputforwardbythe

third-partytoenhancethefunction’s

approach,effectiveness,quality,skills

andexperiencewiththethirdparty

andtheChiefInternalAuditOfficer.

TheAuditCommitteewillcontinueto

overseeInternalAudit’sdevelopment,

includingthemonitoringofaction

plansresultingfromexternaland

internalassessments,tomakesurethe

functionremainsequippedfortherole

itplaysinhelpingourSocietyachieve

itspurpose.

Audit Committee

effectiveness

TheeffectivenessoftheAudit

Committeeisassessedannually.The

BoardCommitteeevaluationswere

incorporatedintheBoardexternal

evaluationprocessfor2023.The

Boarddiscussedthefindingsofthe

reviewinJanuary2024andfollowing

itsconsiderationofthefinalreport,

eachCommitteewillthenreview

anyoutcomesandrecommendations

relevanttoitsrole.Therewereno

urgentorsignificantactionsarising

fortheCommittee,however,further

informationonanyactionsidentified

asaresultofthereviewwillbe

presentedintheAnnualReportand

Accounts2024andwillbemonitored

bytheBoardandBoardCommittees

during2024.

Further details on the evaluation

process for 2023 can be found in

both the Board Governance and

Nominations Committee report

and the Corporate Governance

report.

TheAuditCommitteeundertakesa

detailedreviewannuallyofitsTerms

ofReferencetoensureitmeetsall

itsresponsibilitiesandconfirmed

thatin2023ithadmetallofits

responsibilities.TheCommittee’sTerm

ofReferencewereupdatedin2023to

reflecttheCommittee’soversightof

theGroup’sannualESGreport.

AuditCommitteemembersalsotake

partintrainingandreceivebriefings

onareasthatconcernnotonlytheir

rolesontheCommittee,butalsotheir

rolesontheBoard.In2023theAudit

Committeesetasideadditionaltime

tobebriefedonthedevelopmentsof

theCorporateSustainabilityReporting

Directive('CSRD')andhedgingand

hedgeaccounting,thelatteralongwith

membersoftheGroupRiskCommittee.

TheSocietyandtheAuditCommittee

willcontinuetomonitorthe

governancedevelopmentsarisingfrom

theGovernment’sconsultationon

RestoringTrustinAuditandCorporate

Governance,includingtherevisedUK

CorporateGovernanceCode,published

inJanuary2024,toensurethatany

requirementsorrelevantareasofgood

practiceidentifiedareimplemented

bytheSocietyasappropriatefora

buildingsociety.

TheFRC’s‘AuditCommitteesandthe

ExternalAudit:MinimumStandard’

('theStandard’),publishedinMay

2023,setstheminimumstandards

forauditcommitteesinrelationto

theiroversightresponsibilitiesforthe

externalauditandincludesguidance

onassessingtheeffectivenessofthe

auditprocessalongsidecoveringthe

auditcommittee’sresponsibilities

fortheexternalaudit,theexternal

audittender,oversightoftheexternal

auditorandauditandfinallythe

reportingofactivitiesundertakento

meettheStandard’srequirements.

TheStandardappliestoFTSE350

companiesandisvoluntary,subject

toanyfuturelegislationbeingpassed

toestablishtheAuditReporting

andGovernanceAuthority,however,

theStandardmaybeseenasgood

governanceandtheAuditCommittee

willconsideritinmoredetailin2024.

Our Chair of the Board oversees

the training and development

of the full Board and you can

find more information on this

in the Composition, Succession

and Evaluation section of the

Corporate Governance report.

Guy Bainbridge

ChairoftheAuditCommittee

28February2024

Risk

Management

Report

AwordfromtheChair

oftheGroupRisk

Committee.

IampleasedtopresentourRisk

Managementreportfor2023.This

reportexplainstheroleofthe

Boardriskcommittee,whichhere

iscalledtheGroupRiskCommittee

('theGRC'),describesthematters

thecommitteeconsideredduring

theyear,andgivesanoverview

ofhowtheGroupmanagesthe

risksitfaces.Ourattentionin

2023hasbeenbalancedbetween

prudentialrisk,operationalriskand

complianceandconductrisk.

Theyearhasonceagaindemonstratedthe

needforeffectiveriskmanagement.AsChairof

theGRC,IamsatisfiedtheGroup:

•

hasaclearriskappetitetoensureitcontains

theimpactofthoserisksithaschosento

take;

•

hasappropriatecontrolsinplacetoidentify

boththeriskofdeviationfromtherisk

appetiteandanyunplannedriskstheGroup

encounters;and

•

appropriatelybalancestherisksittakes

betweenbeingpurposefulforcurrent

andfuturecustomers,andprotectingthe

resilienceandsustainabilityoftheGroup.

MyGRCcolleaguesandIwillcontinueto

expectariskmanagementapproachthatis

purposeful,prudentandcustomer-focusedso

thatIcancontinuetoreportmysatisfaction

withtheGroup’sriskpositions.

Angela Darlington

ChairoftheGroupRiskCommittee

28February2024

About the Group Risk Committee

TheGRCcomprisesfivenon-executivedirectors:

Alison Hutchinson

Vice Chair and Senior Independent Non-

Executive Director

Debra Davies

Independent Non-Executive Director

Guy Bainbridge

Independent Non-Executive Director

Mark Parsons

Independent Non-Executive Director

Angela Darlington

GRC Chair and Independent Non-Executive

Director

Audit Committee report (continued)

Oversight of the Internal Audit function

96 | Governance 97

Matters considered

during 2023

TheGRCmetfourtimesin2023and

consideredallthemattersinrespect

ofitsresponsibilitiessummarisedin

itstermsofreference,coveringawide

rangeoftopics.

Ongeneralriskmanagementmatters,

theGRC:

•

ApprovedtheGroup’senterpriserisk

managementframework.

•

Reviewedandrecommendedthe

Boardapprovethe‘tier1’risk

appetiteexposurelimitsfor2024

andoversawcompliancewiththose

agreedpreviouslyfor2023.

•

ReceivedtheChiefRiskOfficer’s

quarterlyreportandviewofthe

Group’sprincipalrisks.

•

Approvedandmonitoredthe

progressofthesecondlineof

defence’soversightplanincluding

itskeyfindings.

Foritsoversightofprudentialrisk,the

GRC:

•

Reviewedandrecommendedthe

Boardapprovethescenariosand

resultsofthe2023internalliquidity

adequacyassessment('ILAAP')

andinternalcapitaladequacy

assessmentprocesses('ICAAP').

•

Reviewedthescenariosusedforthe

Group’sreversestresstests.

•

ReviewedandapprovedtheGroup’s

recoveryplan.

•

MonitoredtheGroup’scompliance

withtheresolvabilityassessment

framework.

•

Reviewedreportsfrom‘deepdives’

oftheGroup’smanagementofcredit

riskandcapitalrisk.

•

ReviewedandapprovedtheGroup’s

policyonregulatoryrisk,and

reviewedandrecommendedthe

BoardapprovetheGroup’spolicies

onfundingandliquidityrisk,capital

risk,marketrisk,treasuryriskand

retailandcommerciallending.

•

Reviewedthereportfroma‘deep

dive’oftheGroup’scommercial

lendingbusiness.

Andforitsoversightofoperationalrisk

andcomplianceandconductrisk,the

GRC:

•

Reviewedandrecommended

theBoardapprovetheGroup’s

annualoperationalresilienceself-

assessment,andmonitoredprogress

oftheworktocomplywiththe

operationalresiliencerules.

•

Reviewedtheannualreportfrom

theGroup’sMoneyLaundering

ReportingOfficer.

•

MonitoredprogressoftheGroup’s

worktostrengthenitscontrol

frameworkoverpeoplerisk,financial

crimeriskandclimaterisk.

•

Reviewedthereportfroma‘deep

dive’oftheeffectivenessofthe

Group’soperationalcontrols.

•

ReviewedandapprovedtheGroup’s

policiesoninformationandcyber

security,informationmanagement

andfinancialcrime,andreviewed

andrecommendedtheBoard

approvetheGroup’spolicyon

procurement,outsourcingandthird-

partyrisk.

Committee evaluation

TheeffectivenessoftheGRCis

assessedannually.TheBoard

Committeeevaluationswereincluded

intheBoardexternalevaluation

processfor2023.TheBoard

discussedthefindingsofthereview

inJanuary2024andfollowingits

considerationofthefinalreport,the

GRCwillthenreviewanyoutcomes

andrecommendationsrelevanttoits

role.Therewerenourgentactions

arisingfortheGRC,howeverfurther

informationonanyactionsidentified

inthereviewwillbepresentedinthe

AnnualReportandAccounts2024and

willbemonitoredbytheBoardandthe

GRCduring2024.Furtherdetailson

theevaluationprocessfor2023canbe

foundinboththeBoardGovernance

andNominationsCommitteereport

andtheCorporateGovernancereport.

Outlook

TheGRCwillcontinuein2024

toprovidebalancedoversightof

prudentialrisk,operationalriskand

complianceandconductrisk.Wewill

alsofocusontheGroup’sresponseto

anychangeinregulatoryapproachas

itgrowsitsbalancesheet.TheGroup

alwayswishestoproactivelyensure

thatriskmanagementcapabilityis

equaltooraheadofthatwhichis

necessarysofollowinganexternal

review,theGroupplanstostrengthen

itsgovernance,riskandcontrol

capabilitiesfurtherinanticipation

offuturegrowthandthepossibility

ofbeingdesignatedacategory

onefirmbythePRA.Theseplans

includeensuringtherightlevelof

subjectmatterexpertiseinkeyareas;

leveragingthelatesttechnology

anddatatodeliverautomationand

efficiencies;andfurtherencouraging

challengeandlearning.

TheGRCisalsoattendedbytheChairoftheBoardandmembersoftheexecutiveteamincludingtheChiefExecutive,the

ChiefFinanceOfficer,theChiefCommercialOfficer,theChiefOperatingOfficer,theChiefRiskOfficerandtheChiefInternal

AuditOfficer.

TheGRCisresponsibleforbringingtogetherandchallengingforsuitabilityallriskinformationonbehalfoftheBoard.This

coverstheapplicationofourenterpriseriskmanagementframeworkacrossallofourprincipalrisks.

The GRC’s terms of reference are available from our website at ybs.co.uk/your-society/inside-your-society/corporate-

governance/committees.

Our Enterprise Risk Management

Framework (‘ERMF’)

Werecognisethateffectiveriskmanagementis

essentialforourbusinesstogrowandachieve

itscommercialaspirations.OurERMFenables

robustyetefficientriskmanagement,whichhasan

importantandintegralrolein:

•

Deliveringourstrategywithinanappropriate

culture

•

Protectingagainstunplannedfinancialoutcomes

•

Beingresilienttooperationalrisks

•

Protectingcustomersfromunfairoutcomes

•

Demonstratingcredibilitytoexternal

stakeholders

TheERMFexplainshowseveralprocessesfit

togethertocreateaconsistentandeffectivewayof

managingriskacrosstheGroup.Thekeyelements

ofriskmanagementcovertheidentification,

assessment,control,monitoringandreportingof

risk.TheGRCreviewsandapprovesthisannually,

anditconsistsof:

•

The Governance, Risk and Control Strategy—

theSociety’sprioritiesforriskmanagementand

howtheyaligntotheSociety’sstrategy

•

Society culture—thevaluesandbehavioursthat

shapeourriskdecisions

•

Risk appetite—howmuchriskwecantaketo

deliverourstrategywhileensuringweprovide

faircustomeroutcomesandcontinuetooperate

asasafeandsecurebusiness

•

Policy and governance—howweorganise

ourselves,makedecisionsandtakeapproved

risks

•

Risk assessment and control—howweidentify,

assessandunderstandourrisksandlimit

undesirableoutcomes

•

Risk events —howwerespondwhenthingsgo

wrongandstopthesamethingshappeningagain

•

Monitoring and assurance—howwecheckthat

controlsareworkingandhighlightwhenrisks

requireattention

Three lines of defence

Weoperateathreelinesofdefenceapproachfor

managingrisk,whichseekstodifferentiatebetween

those:

•

Withdirectresponsibilityforthemanagementand

controlofrisk

•

WithresponsibilityfordefiningtheERMF,

communicatingrequirementsandindependently

monitoringadherencethroughoversightactivity,on

behalfoftheBoard

•

Providinganindependentandobjectiveopinionto

theBoardontheadequacyandfunctioningofthe

systemofinternalcontrol

Asummaryoftheseresponsibilitiesissetouton

page100.

Risk Management report (continued)

About the Group Risk Committee (continued)

98 | Governance 99

First line of defence

Thefirstlineofdefenceconsistsofallcolleagues,whoareresponsibleforensuringthatriskis

effectivelymanaged.Manycolleaguesalsohaveadditionalresponsibilitiesto:

•

Actasownersoftherisksrelevanttotheirbusinessfunction

•

Identifyandarticulatetheriskstheyareresponsibleforandputthemintoariskregister

•

Assessrisksandcontrolsanddetermineiffurtheractionsarerequired

•

Designandoperateapplicablekeycontrolsanddevelopandoperatesupplementarycontrolsas

necessary

•

Directpolicy,whichsetsoutwhatcolleaguescanandcannotdo

Third line of defence

ThethirdlineisfulfilledthroughtheInternalAuditfunction.Itindependentlyassesseswhether

risksareadequatelycontrolled,challengingtheexecutiveteamtoimprovetheeffectivenessof

governance,riskmanagementandinternalcontrols.InternalAuditreportsdirectlytotheAudit

Committee,whichisaseparateBoardcommittee.

Second line of defence

ThesecondlineisfulfilledbyourRiskdivisionwhichdefinesourapproachtowardriskmanagement

andsupports,coaches,facilitates,independentlymonitors,challenges,assessescompliance,reports,

andifnecessary,givesdirectinstructiontothefirstline.

Thisindependentsecondlineriskmanagementfunctionisresponsibleforensuringthatappropriate

riskmanagementandmeasurementtechniquesareusedthatarecommensuratewiththeGroup’s

strategicaims,itsappetiteforriskandtherisksitfacesatanytime.TheRiskdivisionensuresthatthe

GRCreceivesacomprehensiveprogrammeofdecisionpapersandreviewstoensureitisfullysighted

onsuchmatters.

TheChiefRiskOfficerprovidesaformalupdatetotheBoardandtotheGRC,viatheExecutiveRisk

Committee('ERC')onaquarterlybasis,coveringallareasofriskmanagement.Thisincludesroutine

reporting,emergingrisks,theresultsoftheRiskdivision’sindependentoversightandadditional

issuesthatmeritescalation.TheRiskdivisionisresponsibleformanagingourregulatoryrelationships

andforprovidingindependentbriefingsandinsightstotheBoard.

Governance

TheBoardisultimatelyresponsiblefor

theeffectivemanagementofrisk.The

approvalofriskappetiteandcertain

riskmanagementpoliciesareamongst

severalspecificareaswhichare

mattersreservedfortheBoard.

TheGRCisaBoardCommitteethat

oversees,onbehalfoftheBoard,the

keyrisksinherentinthebusiness

andthesystemofinternalcontrol

necessarytomanagesuchrisks,

presentingitsfindingstotheBoard.

TheERClookstoensurethatthe

Group’sbalancebetweenseeking

opportunityandmanagingriskis

appropriate.Itisresponsiblefor

themonitoringofday-to-dayrisk

managementactivityincluding,butnot

limitedto,reviewingtheeffectiveness

oftheGroup’sriskmanagement

frameworkandsystemofinternal

controls.Ithasauthoritytodirect

thebusinessinrelationtomitigating

actionsandtoapproveorendorserisk

acceptancewithindefinedlevels.

BelowtheBoardandsenior

managementcommitteestructureis

asetofdivisionalriskCommittees.

Thesemonitorriskmanagement

activityacrossthedivisions,acting

asapointofescalationformatters

ofGrouplevelsignificance.These

committeesalsohaveauthority

todirectmitigatingactionsandto

approveorendorseriskacceptancefor

riskswithinthedivision,inaccordance

withdefinedlevels.

TheGroup’sBoardandseniormanagementcommitteestructureisillustratedbelow,withthecommitteesmost

directlyinvolvedwithriskmanagementgovernancehighlightedinorange:

Board and related

Committees

Management and

Sub-committees

The Board

Chair's

Committee

Group Risk

Committee

Executive Risk

Committee

Audit

Committee

Remuneration

Committee

Executive

Committee

Board Governance

& Nominations

Committee

Model Risk

Committee

Commercial

Lending

Sanctioning

Committee

Retail &

Commercial

Credit Risk

Committee

Commercial

Division Risk

Committee

Customer

Services

Division Risk

Committee

Asset & Liability

Committee

Risk Management report (continued)

Three lines of defence (continued)

100 | Governance 101

Strategic risk

TherisktotheGroup’searningsorsustainabilityarisingfromchangesinthebusinessenvironmentorfromthe

effectivenessofdecisionsandactionsinourstrategicresponsetothosechanges.

Sources Approach Commentary

•

Thebusiness

environmentwe

operateincouldchange

unexpectedly.

•

Thedecisionswemake

andactionswetake

couldproveineffective.

•

Weperformregularhorizon

scanning,corporateplanning,

scenarioanalysis,competitor

analysisandbusiness

performancemonitoringto

mitigaterisksarisingfromthe

economicenvironmentandour

strategicchoices.

•

Wehavedefinedriskattitudes,

riskappetitesandriskmetrics

forallourotherprincipalrisks.

•

Ourbusinessmodelisrelatively

simple,butweoperateina

highlycompetitivemarket.Our

hedgingstrategytherefore

mitigatestherisksarisingfrom

ourfocusedrangeofproductsin

thismarket.

•

Wehavecontinuouslymonitoredtheexternal

environmentinwhichweoperate.

•

Thesizeoftheresidentialmortgagemarket

hasreduced,illustratingthepressuresthatnew

borrowersarefacingastheyeitherexercise

greatercaution,findthemselvesunabletosave,

orhavedifficultymeetinglendingcriteria.

•

Wehavealsoseenamoreacuteimpactinthe

buy-to-letmortgagemarket,asaffordability

considerationscandirectlylimittheability

landlordshavetoborrow.

•

Wehaveexperiencedmorecompetitionin

thesavingsmarket,withcustomersseeinga

premiuminpricingfortheabilitytolockmoney

awayforaperiodoftime.

•

Savingsprovidersalsocameundergreater

scrutinyfromboththemediaandregulatorsto

demonstratethatthebenefitsofhigherratesare

beingpassedonatanappropriatelevel.

Ourprincipalrisksanduncertaintiesandourriskprofileevolveaswemovethroughtheeconomiccycle.Wehaveanongoing

processforidentifying,evaluatingandmanagingtheprincipalrisksweface,andthisprocessisregularlyreviewedbytheGRC.

Capital risk

TheriskthattheGroupisnotabletomeetregulatorycapitalrequirementsordeliveronitsstrategicplansdueto

insufficientcapitalresources.

Sources Approach Commentary

•

Principalriskscould

crystallise,causinglosses

anddepletingcapital.

•

Regulatoryrequirements

forcapitalcould

increase.

•

Capitalriskisconstrainedbya

Board-approvedriskappetite

andtheBoard-approvedcapital

riskpolicy.

•

Currentandprojectedcapital

positionsareregularly

monitoredandconsidered

instressscenariosaspartof

theinternalcapitaladequacy

assessmentprocess.

•

Weconductinternaltests

toensuresufficientcapital

isavailablefortheGroupto

maintainitsminimumcapital

requirements,eveninastress

scenario.

•

Furtherinformationonour

capitalmanagementcanbe

foundintheGroup’spillar3

disclosuresonourwebsite.

•

Wemaintainedstrongcapitallevelsthroughout

2023,wellaboveregulatoryrequirementsand

internalriskappetite,andforecastthatthis

positionwillbemaintainedacrossourplanning

horizon.

•

Leveragerequirementswillbecomebinding

whenwesurpass£50bnofretaildepositsand

areclassifiedasLREQ.Wearewellcapitalisedto

meettheserequirements.

•

WecontinuetoprogresstowardsIRB

accreditation,andpreparationsarealso

underwaytoimplementBasel3.1perthePRA’s

near-finalpolicystatement(PS17/23)on1July

2025.

•

WearesubjecttoendstateMRELrequirements

(doublepillar1and2A)andcomfortablymet

theserequirementsthroughout2023.

Funding and liquidity risk

Theriskofhavinginadequatecashflowtomeetcurrentorfuturerequirementsandexpectations.

Sources Approach Commentary

•

Memberscanwithdraw

theirdepositsatshort-or

no-notice.

•

Wholesaleinvestorsmay

loseconfidenceinthe

Group.

•

Weareprimarilyfunded

throughretailsavingsbalances,

supportedbyastrongfranchise

inkeywholesalefunding

markets.

•

Fundingandliquidityrisk

isconstrainedbyaBoard-

approvedriskappetiteandthe

Board-approvedfundingand

liquidityriskpolicy.

•

TheBoardannuallyapproves

thekeyassumptionsand

controlsformanagingliquidity

riskaspartoftheinternal

liquidityadequacyassessment

process.

•

Weconductinternalteststo

ensuresufficientliquidityis

availabletomeetbusiness-

as-usualandstressed

requirements.

•

WemanagetotheLiquidity

CoverageRatio('LCR')and

theNetStableFundingRatio

('NSFR')externalregulatory

measures.

•

Ourliquiditylevelsremainedstrongand

materiallyaboveregulatoryrequirements

throughout2023.

•

WereportmonthlytothePRAthequantityof

high-qualityliquidassetsagainstnetliquidity

outflowsovera30-dayperiod,forboththe

Societyandonanunconsolidatedbasis.At

December2023,thelowerofthesetworeports

was156.36%.

•

Liquiditylevelsareforecasttoremainabove

regulatoryandinternallyderivedminimum

requirementsacross2024.

Risk Management report (continued)

Principal risks and uncertainties and how we mitigate them

102 | Governance 103

Market risk

TherisktotheGroup’searningsorthevalueofitsassetsandliabilitiesduetochangesinexternalmarketrates.

Sources Approach Commentary

•

Ourearningsorthe

valueofourassetsand

liabilitiesdeteriorate

becauseofadverse

changesinmarket

interestrates.

•

Marketriskisconstrainedbya

Board-approvedriskappetite

andthemarketriskpolicy.

•

Weadoptarisk-averseapproach

tointerestratemismatches,

althoughsomeposition-taking

isallowed,subjecttotherisk

appetite.

•

Weconductinternalteststo

ensuremarketriskiswithinan

acceptablerangeoveraseries

ofinterestratescenarios.

•

Ourlimitsforbasisrisk

includelimitsforsensitivities

aroundisolatedmovements

inunderlyingrates(SONIA),

foroverallmismatchratios,

andforensuringtheGroup

hassufficientlevelsofmargin

managementcapability.

•

Themarketriskinourbalancesheethas

reducedyear-on-year,drivenbycontinuous

activemanagementofourexposuretomarket

riskdrivers.In2023,additionaldriversofrisk

includetheprovisionsspecifiedintheMortgage

Charterandthesignificantincreaseininterest

rateenvironment.

•

Wecontinuetoproactivelymanageourinterest

rateriskexposurewithinapprovedriskappetite

limits.Allmarketriskappetitemetricswere

reviewedtoensuretheyremainedeffectivein

thecurrentinterestrateenvironmentandto

keeppacewiththeprojectedbalancesheet

growth.

•

Thereductioninmarketriskisevidencedby

areductioninourPresentValue(PV)metric.

PV100(marketvaluechangeontheSociety

balancesheetarisingfromaparallel100bps

increaseininterestrates)nowresultsinagain,

withayear-endvalueof£1.3min2023.This

positionstheSocietyfavourablyforarisein

rates,butunfavourablyshouldratesfall.

•

Our12-monthearningssensitivityhas

decreased(impacton1yearnetinterestincome

ofa2.5%parallelincrease/decreaseinrates).

ThelargestnegativesensitivityasatDecember

2023wasa£10.9mcostagainsttheparallel

downshock.

•

Astructuralhedgeisinplacetomitigatethe

interestrateriskonadministeredratesavings

balances.

Model risk

TheriskthattheSociety’smodelsthatareusedtomanagethebusinessareinaccurate,performinadequatelyorare

incorrectlyused.

Sources Approach Commentary

•

Modelsmaybe

incorrectlydesignedor

containcodingerrors.

•

Modelsmayuselogic

andassumptionsbased

onthepastwhichareno

longerrelevant.

•

Wemaintainaninventoryof

modelswhicharegovernedby

ourmodelriskpolicyandmodel

governanceframework.

•

Wehaveaprocesstoidentify

andmonitornewmodelsto

bringtheseintogovernance.

•

Compliancewiththepolicyis

monitoredbytheModelRisk

Committee('MRC'),whichis

chairedbytheChiefRiskOfficer.

•

Worktoassessourmodelriskmanagement

frameworkagainstthefinalregulatoryModel

RiskManagementPrincipleswillseeplansset

outtoclosegapsagreedbytheendofQ12024.

•

Giventhecurrentpoliticalandeconomic

climate,thereisanelevatedlevelofsystemic

modelperformanceriskinmodelswhichare

calibratedbasedonhistoricaleventsand/

orcustomerbehaviours,whichrequiresclose

monitoring.

•

Modelriskappetitetrackskeygovernance

andperformancemetrics.Measuresforthe

performanceofcriticalmodelsarepresentedto

theMRCtoensuremitigantsandremedialplans

areputinplacetomanageandaddressany

identifiedrisks.

Treasury risk

Theriskoflossesfollowingdefaultonexposuresarisingfrombalanceswithotherfinancialinstitutions,liquidasset

holdingsandtheuseofderivativeinstrumentstomanageinterestrateandforeignexchangerisk.

Sources Approach Commentary

•

Transactingwith

otherfinancialmarket

participantswhen

managingmarketrisk

whothenfailtofulfil

theirobligations.

•

Treasuryriskisconstrainedby

aBoard-approvedriskappetite

andthetreasuryriskpolicy.

•

Mostofourliquidassetbuffer

portfolioisinvestedinthe

highestqualityassets.

•

Mostofourderivativecontracts

aresubjecttocentralised

clearingtominimiserisk

exposureswithcounterparties.

Wherethisisnotpossible,

derivativeexposuresare

restrictedtohighquality

counterpartieswhichare

subjectedtoregularreview

bytheAssetandLiability

Committee('ALCO').

•

Werevieweachwholesalecounterpartylimitat

leastonanannualbasis,orsoonerifariskevent

occursintheinterim.

•

Thesizeofthecreditlimitweallocatetoeach

counterpartyisdrivenbytheircreditstatus

asdeterminedbyinternalanalysis,andis

calibratedtothesizeoftheGroup’scapital

positiontoensurethatthefinancialviabilityof

theSocietyisnotoverlyexposedtoanysingle

counterparty.

•

ExposuretoAA-orabovecounterparties

remainshigh,maintainingthelowriskprofilein

accordancewithBoardriskappetite.

•

Theriskhasnotmateriallychangedsince

lastyear;marketvolatilityisstillatrelatively

elevatedlevelsgenerallybutthecreditcontrols

wehaveinplaceremainappropriate.

Risk Management report (continued)

Principal risks and uncertainties and how we mitigate them (continued)

104 | Governance 105

Retail and commercial credit risk

Theriskofcreditlossesfromafailuretodesign,implementandmonitoranappropriatecreditriskappetite.

Sources Approach Commentary

•

Loanstoretailand

commercialcustomers

maynotbefullyrepaid.

•

Retailandcommercialcredit

riskisconstrainedbyaBoard-

approvedriskappetiteandthe

commerciallendingpolicy.

•

Ourrobustcreditriskframework

ensureslendingremains

withinlimitsandappropriate

remedialactionistakenifa

breachoccurs.Adherenceis

monitoredthroughgovernance

committees.

•

Weregularlyusestresstesting

toassesstheresilienceofour

portfolio.

•

Ourcreditriskmodelsare

overseenbythemodel

governanceframework(see

modelrisksection).

•

Wecontinuetoexhibitalow,albeitrisinglevelof

mortgagesinarrears.Attheyear-endour>=3m

arrearsrateforretailmortgageswas0.50%,an

increasefrom0.44%attheendof2022.This

comparesfavourablytothelatestUKfinance

marketaverageof0.87%.OurCommercial

Lending>=3marrearsrateis0.54%.

•

Inthecurrentenvironment,akeyriskfor

residentialcustomersmaturingfromlowfixed

rateproductsandeitherre-fixingatamuch

higherrateormovingtoavariablerate.Wehave

seenincreasedarrearsemergencefromthis

cohortcomparedtotherestofthestock,inline

withourinternalarrearsforecast.

•

Wehavepreparedforincreasedarrearsvolumes

andwillbemonitoringthiscloselyin2024.We

continuetoproactivelycontactthemostat-risk

customerstosupportthemthroughtheeconomic

environment.

•

TheYBSresidentialpossessionratewas0.01%at

theyear-end,comparedtothelatestUKfinance

marketvalueof0.02%.ForRetailBTLmortgages,

theYBSpossessionrateis0.07%,comparedto

theUKfinancemarketaverageof0.05%,whichis

drivenbyourlegacyretailbuy-to-letportfolios.

•

Ourretailmortgagebookhasremainedresilient

toHPImovementsin2023.4.11%oftheretail

portfoliohasanindexedLTV>85%,compared

to1.22%inDecember2022.Theincreaseis

drivenbydeclininghousepricemovementsin

2023offsetbyalowervolumeof>85%LTV

completionsthroughout2023(22%in2023

comparedto27%in2022).

•

Overall,theassetqualityofourportfoliosremains

strong.Alargeproportionoftheexpectedcredit

lossesheldagainstourmortgagesrelatestopre-

2009lendingandtheportfoliosacquiredthrough

theN&PandChelseamergers.Seenote31for

moredetails.

Operational risk

Theriskofdirectorindirectlossresultingfrominadequateorfailedinternalprocesses,peopleandsystems,orfrom

externalevents.

Sources Approach Commentary

•

Ourtechnologymayfail.

•

Oursuppliersmayfailto

meettheircontractual

obligations.

•

Wemaynotbeableto

recruitandretainthe

rightpeople.

•

Criminalsmayuse

theSocietyforillegal

activity.

•

Otherexternalevents.

•

Operationalriskisconstrained

byaBoard-approvedrisk

appetiteandanumberofrisk-

specificpolicies.

•

TheERMFdefineshow

colleaguesareexpected

toidentify,assess,monitor,

manageandreporttheir

operationalriskexposures.

•

Directorsmustregularlyattest

totheeffectivenessofthe

controlstheyareresponsible

forthroughtheriskandcontrol

self-assessmentprocess.

•

Therehasbeenanincreaseinthevalueof

operationallossesin2023to£2.6m(2022:

£1.0m)becauseofarangeofnon-systemic

incidents.

•

Oversightofourtransformationandsecurity

improvementprogrammeshasbeeninplace

throughout2023,withcontinuousmonitoring

activityandperiodicreportingtotheGroupRisk

Committee.

•

Wecontinuetodevelopthematurityofour

operationalriskcontrolenvironment,with

plansandsupportinginvestmentinplace

acrossourinformationtechnology,information

managementandinformationsecurityrisk

categoriesalongwithtargetedimprovements

andinvestmentinourfinancialcrimerisk

managementcapabilities.

•

Weengagedanexternalreviewofour

governance,riskandcontrolcapabilitiesand

plantostrengthentheminanticipationoffuture

growthandthepossibilityofbeingdesignateda

categoryonefirmbythePRA.

Compliance and conduct risk

Theriskofdirectorindirectlossfromafailuretocomplywithregulationortoensuregoodcustomeroutcomes.

Sources Approach Commentary

•

Developingnew

productsforour

customers.

•

Marketingourproducts.

•

Servingourcustomers.

•

Complianceandconductrisk

isconstrainedbyaBoard-

approvedriskappetiteanda

numberofrisk-specificpolicies.

•

Wemonitorconductriskmetrics

foranumberofareasincluding

sales,service,complaintsand

collections.

•

Thesecondlineofdefence

providescompliancesupport

onallregulatorymattersto

thefirstline,forbothday-to-

dayoperationsandchange

programmes.

•

TheFCA’snewConsumerDutyregulation

cameintoforceinJuly2023foropenproducts

andservices.Weundertookcomprehensive

programmeofworktomeetthoserequirements,

theoutcomesofwhichwereapprovedbyYBS’s

Board.WorkisunderwaytomeettheJuly2024

regulatorydeadlinesforclosedproductsand

servicesandtheannualBoardattestation.

•

Complaintsper1,000at2023H2were0.89for

savingsandshareplans,and5.68formortgages.

•

Acompliancemonitoringplan,approvedbythe

GRC,hasbeencompletedduring2023allowing

robustoversightofthekeyareasofconduct,

financialcrime,anddataprotectionrisk.All

oversightfindingsarethesubjectofaformal

actionplanoverseentoclosurebytheGRC.

Risk Management report (continued)

Principal risks and uncertainties and how we mitigate them (continued)

106 | Governance 107

Climate risk

Werecognisethephysicaland

transitionrisksarisingfromclimate

changecreateriskexposuresfor

theGroupinseveraloftheprincipal

riskcategoriesabove.Wetherefore

managetheserisksthroughtheERMF

toensuretheyareproperlyconsidered

alongsidetheotherrisksweface.

Further detail on how we manage

climate change risk can be found

in the ‘Building a greener society’

section.

Stress testing

Stresstestingisaproactiverisk

managementtoolusedthroughout

theGrouptobetterunderstand

thepotentialvulnerabilitiesin

ourbusinessmodelandtoderive

effectivemanagementactions.Stress

testingispresentedtoarangeof

forumsandCommitteesincludingthe

ALCO,theGRCandtheBoard.2023

demonstratedtheimportanceofstress

testingwithcontinuouseconomicand

marketvolatility.

Thekeyusesofstresstestingare:

•

Totesttherobustnessofour

financialplanandexposurelimitsto

adverseeconomicconditions

•

Scenarioanalysisofourrecovery

planandcontingencyfunding

options

•

Tosupporttheproductionof

theinternalcapitaladequacy

assessment('ICAAP')andinternal

liquidityadequacyassessment

('ILAAP')processes,whichinform

ourregulatorycapitalandliquidity

requirements

•

Keepinguptodatewithmarket

movementsthroughdailytesting

offundingandliquidityandmarket

risks

•

Toprovideperformance

managementinformationtosupport

mortgagetradingdecisions

•

Toassessnewproductsand

initiatives

•

Tounderstand,throughtheGroup’s

annualreversestresstests,howto

preventriskscrystallising.

Wehavealsomodelledtheimpact

oftheBankofEngland’sAnnual

ConcurrentStresstest('ACS').This

allowsustoevaluatehowtheGroup

performsunderthisscenarioand

relativetotheorganisationsthat

arepartofthisprocess.Thetest

showedthatwearewellpositionedto

withstandastresseventsuchasthat

definedintheACS.

Directors’

remuneration

report

Awordfrom

theChairofthe

Remuneration

Committee.

Iampleasedtosharethe

Directors’Remuneration

report,myfirstasChairofthe

RemunerationCommittee.Iwould

liketooffermysincerethanksto

AlisonHutchinsonforherservice

totheCommitteeandthesupport

shehasprovidedduringthe

handoverperiod.Alisonremainsa

valuedmemberoftheCommittee,

andIlookforwardtoworking

withallourCommitteemembers

throughout2024.

Alison Hutchinson

Senior Independent Non-Executive

Director and Vice Chair as well as

member of the Group Risk Committee

and Non-Executive Director for Workforce

Representative.

Jennelle Tilling

Independent Non-Executive Director

Dina Matta

Independent Non-Executive Director

About the Remuneration Committee

ThemembersoftheRemunerationCommitteeconsistof

Non-ExecutiveDirectorsandincludemembersoftheSociety’s

GroupRiskCommittee:

TheRemunerationCommitteeissupportedbytheChairofthe

Board,theChiefPeopleOfficerandtheDirectorofPeopleand

Culture.Whereitisfelttobeappropriate,theChiefExecutiveis

invitedtoattendtoprovidefurtherbackgroundandcontextto

assisttheCommitteeindischargingitsduties.

Debra Davies

Independent Non-Executive Director

and Committee Chair and member of the

Group Risk Committee.

Risk Management report (continued)

108 | Governance 109

Looking back at 2023

2023continuedtopresentgreat

challengesinrespectofthewider

politicalandeconomicenvironment

inwhichweoperate,fortheSociety,

ourmembers,andourcolleagues

alike.Despitethis,asoutlinedinthe

FinancialReview

section,theSociety

hasdeliveredanotherverystrong

setoffinancialresultsin2023.I’m

proudofthewayourcolleagues

havecontinuedtodeliverstrong

performanceagainstourCorporate

Plan,deliveringrealvalueand

improvingtheserviceweoffertoour

members.

Tosupportourcolleagueswiththe

continuedpressureseenonpersonal

financesweagreedtoawarda6%

corepayincreaseforalleligible

colleaguesaspartofthe2023annual

payreview,supplementedbyan

additional1%whichleaderswere

abletoallocateonadiscretionary

basiswherefurtheradjustmentswere

feltnecessary.TheCommitteealso

approvedtheintroductionofanew

minimum salary of £22,000 for all

colleagues,regardlessoftherole

theyperform(pro-ratedforparttime

colleagues).Thisfurthersupported

ourcommitmenttopayinlinewithor

abovetheRealLivingWage.

TheSocietyhasdeliveredstrong

financialperformancein2023with

CoreProfitBeforeTaxof£445.9m

againstatargetof£359.8m.In

addition,theSocietycontinuedto

provideexcellentservicetoour

membersasdemonstratedbya

NetPromoterScorefortheyear

of61againstatargetof55.This

combinedperformance,supported

byaneffectiveriskenvironmenthas

resultedinalleligiblecolleaguesbeing

awardedwitha10%bonuspayment,

themaximumavailableunderour

scheme.

InMarch2023wewelcomedour

ChiefExecutive,SusanAllen.Susan

hasmadearealimpactsincejoining

theorganisation,demonstratingher

tremendouspassionforprovidingthe

bestproductsandexcellentserviceto

ourmembers.Susanbringsawealth

ofbankingexperienceandsignificant

operationalandtechnicalknowledge

thatwillbeparamountastheSociety

deliversitspurposeofrealhelpwith

reallife,inachallengingexternal

environment.Theremuneration

packageforthenewCEOisinline

withourRemunerationPolicyand

wassettakingintoconsideration

marketlevelsofremuneration

aswellasherextensivefinancial

servicesexperience.Asnormalin

thesecircumstances,wehaveagreed

tocompensateSusanfortheloss

ofdeferredbonusforfeitedonher

resignationfromBarclays;these

replacementawardsarenomore

generousthantheoriginalawardsand

willbepaidinlinewithpriorvesting

schedule.Thefullremunerationdetails

forSusanareoutlinedinthisreport.

Directors' remuneration

outcomes for 2023

TheCommitteebelievestheExecutive

Directorshavecontinuedtodeliver

realbenefitsfortheSociety,including

improvementstocustomerjourneys

acrossmultiplechannelsandthe

streamliningofkeyprocesses

whichhavehelpedtoimprove

customerexperience.Thisisfurther

demonstratedbyensuringsignificant

investmentinmembervaluethrough

oursavingspropositions,thestrong

financialperformanceoftheSociety

andprogressagainstourcommunity

anddiversityobjectives.Itisonthis

basisthatwehavegrantedvariable

payawardstoourExecutiveDirectors

inrespectofthe2023performance

year.

TheSociety’sBuildingTogetherbonus

schemepaidoutatthemaximumlevel

of10%foralleligiblecolleagues,

includingExecutiveDirectors.

ExecutiveDirectorsareeligibleto

receiveanadditionalbonusawardas

partoftheSeniorLeadershipelement

oftheBuildingTogetherbonus

scheme.Thevalueofthisadditional

awardisdeterminedbytheirlevelof

performanceasmeasuredagainsttheir

individualscorecard.

ExecutiveDirectorsarealsoeligible

toparticipateintheLeadingfor

Valuebonusscheme.TheLeading

forValueschemeincludesinyear

performancetargetssetagainst

ourlonger-termobjectives,serving

toprotecttheSociety’sfinancial

strengthwhilstfocusingondelivering

longtermmembervalue.Allofthe

schemeunderpinsfor2023,which

includedupgradestoouroperational

riskcapabilityhavebeenmet,which

hasunlockedabonusawardonthis

scheme.Performanceagainstthe

scorecardareas-Transformation,

MemberValueandESGmetricshas

resultedinanoveralloutturnof

72%foreligibleparticipantsonthis

scheme.

ThismeanteligibleExecutiveDirectors

receivedanaveragetotalbonusof

88%oftheirsalarywhencombining

theawardsgrantedtothemas

partoftheBuildingTogetherand

LeadingforValuebonusschemes.

Wehaveincludedfulldetailsofhow

remunerationisawardedtoExecutive

Directorsandtheamountslaterin

thisreport.

In2023theCommitteecarriedouta

reviewofhowthemulti-yearLeading

forValueschemehadperformed

againstitsobjectivessinceits

introductionin2021.2023isthefinal

yearoftheLeadingforValuescheme

initscurrentconstruct.TheCommittee

lookedbackatperformanceoverthe

3-yearperiodandconcludedthatthe

schemehadmetitsintendedaimof

rewardingkeystrategicmilestones

anddeliveryoflong-termvalueto

members.Overthedurationofthe

scheme,membervaluehasbeen

createdthroughofferingrewarding

ratestothosesavingwithus.Thiswas

achievedthroughthedevelopment

ofmemberloyaltypropositions,

whichprovidedcompetitiverates,

andthroughpassingonincreasesto

ourvariable-ratecustomerswhen

theBankRateincreased.In2023the

ratesweprovidedwereonaverage

1.01percentagepointshigherthan

themarketaverage,whichequatesto

c.£441.1madditionalinterestpaidto

oursavers.

For more information, please see

the member value section of the

Strategic report.

AstheSocietyevolves,wecontinuetoreviewthewidermarket,

adjustingwhererequiredtoensuretheSocietyisabletoattractthe

talentandcapabilityrequiredatalllevelsintheorganisation.An

exampleofthisiswithintheCommercialLendingteam,whichsawthe

introductionofanewbonusschemein2023.ThisbringstheSociety

moreinlinewiththewidermarketremunerationofferingforthistype

ofbusinesswhichhashelpedtheSocietytoattractandretainthe

requiredcalibreofcolleaguetodeliverourambitiousplans.

2024 Remuneration Policy

TheRemunerationPolicyforourExecutiveDirectorswillbesubject

toanadvisorymembervoteatthe2024AGM,inlinewithour

commitmenttohaveaRemunerationPolicyvoteatleastevery

threeyears.

Asamutual,ourapproachtoremunerationreflectstheneedsofour

membersandisconsistentwithourpurposeandstrategy.During

2023theCommitteeundertookacomprehensivereviewofthe

RemunerationPolicy,applicabletoExecutiveDirectorsandthewider

colleaguepopulation,toensureitremainedalignedtotheSociety’s

purposeandstrategy.TheCommitteerefinedthepeergroupagainst

whichitconsidersmarketpaylevels,toensureremunerationis

positionedatalevelthatsupportstheattractionandretentionofthe

requiredtalentandcapability.

Followingthereview,anewvariablepayschemehasbeendeveloped

andtheallcolleagueschemehasbeenrefinedtosupportthe

Society’sobjectives.Theseincludedthecreationofanambitious

culture,andthefosteringofanenvironmentwherehighperformance

isrecognisedandrewarded.ForSeniorLeaders,theremuneration

approachhasbeensimplified,withvariablepaynowdelivered

throughasingleincentiveplan.WhilstSeniorLeaderswillnolonger

participateinBuildingTogether,keymeasuresofprofitandcustomer

satisfactionwillcontinuetobeassessedwithinthenewplan

alongsideothermeasuresfocusedonthedeliveryoftheSociety’s

purposeandstrategy.Thisapproachisintendedtoaidtransparency

formembersandparticipants,whilstalsorecognisingtheregulatory

expectationsofaProportionalityLevelOneFirm.Themaximum

opportunityforExecutiveDirectorswillremainunchangedwithinthe

newscheme.

Full details of the proposed changes can be found in the

Remuneration Policy section of this report.

Looking forward to the year ahead

TheCommitteehavereviewedtheSociety’splansforcontinued

transformationin2024andhaveproposedchangestothe

RemunerationPolicytoensurethatthestructureandperformance

measuresoftheremunerationcomponentscontinuetoprovidelong

termmembervalueandfinancialsustainabilityfortheSociety.

IftheproposedchangestotheRemunerationPolicyareapproved,

theCommitteewillcontinuetomonitorandreviewthesethroughout

2024toensuretheyareoperatingasintended(adjustingwhere

required).Wewillalsocontinuetoreviewourremunerationpolicies

toensuretheyarealignedtotheregulatoryexpectationsofa

ProportionalityLevelOnefirm.

OnbehalfoftheCommittee,Irecommendthatyouendorseandvote

infavouroftheproposedRemunerationPolicychangesandthe2023

DirectorsRemunerationreportattheforthcomingAGM.

Debra Davies

ChairoftheRemunerationCommittee

28February2024

Directors Remuneration report (continued)

A word from the Chair of the Remuneration Committee (continued)

110 | Governance 111

Basis of Preparation

Forthe2023financialyearwehaveappliedtheprinciplesandcompliedwiththeprovisionsoftheCodepublishedinJuly

2018(availableontheFinancialReportingCouncil’swebsitewww.frc.org.uk)asfarastheyapplytoBuildingSocieties(as

setoutintheBuildingSocietiesAssociation(BSA)Guidanceavailableatwww.bsa.org.uk)otherthanwherestatedinthe

CorporateGovernancereport.

Executive Directors remuneration for 2023

Allremunerationinthe2023performanceyearhasbeenawardedinlinewiththeSociety’sRemunerationPolicy.

Details of the full policy relevant for 2023 can be found at www.ybs.co.uk.

ThetablebelowshowsthesingletotalfiguretableofremunerationfortheExecutiveDirectorsoftheSocietyfortheyears

ended31December2023and31December2022.Thisinformationhasbeenauditedbyourindependentauditors,PwC.

Base salary

In2023AlasdairLenmanandDavidMorriswerebothawardedapayincreaseof5%,whichtookeffectfrom01May2023.

Theseupliftsarecommensuratewiththoseprovidedtoallcolleaguesandinlinewithouranalysisofthebroadermarket.

Uponhire,SusanAllenwasawardedanannualsalaryof£785,000andtherewasnofurtherbasesalaryincreaseduring2023.

Single total figure of remuneration for each Executive Director (audited)

* SusanAllenjoinedtheSocietyasChiefExecutiveon2March2023andwasawardedanannualbasesalaryof£785,000.Replacementawardsinclude£1,684,356

awardedtocompensatefordeferredawardsforfeitedonleavingherpreviousemployerandanawardof£832,000tocompensateforlostincentiveopportunityin

respectofthe2022PerformancePeriod.Inlinewithremunerationregulatoryexpectationsthesereplacementawardswillvestinlinewithpriorvestingschedule.

ThebonusawardedtoSusanforthe2023performanceperiodundertheBuildingTogetherandLeadingforValuebonusschemeshasbeencalculatedbasedonher

annualsalaryasat31December2023.

** AlasdairLenmantookontheroleofInterimChiefExecutivefrom17June2022,uponwhichhewasawardedanadditionalresponsibilityallowance.Followingthe

appointmentofSusanAllen,AlasdairsteppeddownasInterimChiefExecutiveon2March2023,afterwhichpaymentofhisadditionalresponsibilityallowance

ceased.Thevalueofthesepayments,£59,163.46in2022and£27,468.75in2023hasbeenincludedintheBaseSalarycolumn.

Fixed

Remuneration

Variable

Remuneration

Total

Remuneration

Excluding

Replacement

Awards

Total

Remuneration

Including

Replacement

Awards

2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022

Executive

Directors Role

Base

Salary

£000

Taxable

Benefits

£000

Pension

£000

Total

Fixed

£000

Bonus

£000

Replacement

Awards

£000

Total

Variable

£000 £000 £000

Susan

Allen*

Chief

Executive

Officer

655 N/A 26 N/A 72 N/A 753 N/A 777 N/A 2,516 N/A 3,293 N/A 1,530 N/A 4,046 N/A

Alasdair

Lenman**

Chief Finance

Officer /

Interim Chief

Executive

Officer

482 480 31 31 50 46 563 557 378 408 - - 378 408 941 965 941 965

David

Morris

Chief

Commercial

Officer

362 350 12 11 40 38 414 399 311 298 - - 311 298 725 697 725 697

Variable pay

ThissectionexplainstheunderpinsandmechanicsofthevariablepayschemesinoperationbytheSocietyin2023.The

underpinsusedfortheBuildingTogetherschemesarethesameforallcolleagues(includingExecutiveDirectors).

Financial performance

ThefirstperformancemeasureisProfitBeforeTax,whichisadjusted

forbonuspurposestoexcludeitems,bothpositiveandnegative,

wheretheydonotreflectunderlyingcommercialperformance–i.e.

timingdifferencesandoraccountingtreatment,thisisreferredtoas

theSociety’sCoreProfitBeforeTax(CorePBT).ForBuildingTogether

thisisusedtobothunlockanddeterminethevariablepaypool.For

LeadingforValueCorePBTisonlyusedtounlockthevariablepay

opportunity.

TheCommitteehasscopetoadjustthecalculationofprofitwithin

thevariablepayplan,forexampletoreflecttheneedtoincrease

ourcapital(intheeventofSocietygrowth)ortoreflectsignificant

deviationfromcostmanagementplans.

Thefollowingprinciplesareappliedwhenidentifyingpotential

adjustments:

•

Whereanunexpectedorunplanneditemarisesthatisnotpartof

thecore,businessasusual,runningoftheSociety.Forexample,

one-offinvestmentsorprojectsthatwerenotincludedintheplan

profitnumberagainstwhichactualperformanceisjudged.

•

Removalofbothpositiveandnegativeimpactsfromnon-core

actionsthatdonotreflectmanagementoftheSociety.Forexample,

anyunplannedprofits(orlosses)onthesaleofpropertywouldnot

beincludedintheCorePBTfigureusedtocalculatevariablepay

awardlevels.

Inlinewiththeprinciplesabove,theoverallCorePBTfigureachieved

in2023was£445.9magainstareportedstatutoryfigureof£450.3m.

Thisrepresentsaperformancelevelaboveboththetarget£359.8m

andstretch£414.6mmetricsfortheSociety’sbonusschemesand

setsthefinancialelementofthevariablepayearningpotential.The

Committeeweresatisfied,basedonanalysispresented,thatthe

businessoutperformedevenwhentheimpactoftheBankBaseRate

changesduringtheyearwereexcluded.

Customer experience

Thesecondperformancemeasureisthecustomer‘NetPromoter

Score’(‘NPS’)whichmeasureshowlikelyourmembersandcustomers

aretorecommendus.

NPSunlockstheBuildingTogethervariablepaypoolwhichisthen

moderatedupordownfromtargetbasedontheNPSoutcomes.

Our2023SocietyNPSconstructandtargetswere:

TheoverallNPSfigureachievedin2023was61,

whichrepresentsaperformancelevelaboveboth

thetargetof55andstretchmetricof60forthe

Society’s2023bonusschemes.

Financial sustainability review

Inadditiontotheabove,beforeanyvariable

payawardsaregranted,anumberofreviewsare

completedtoensurethelevelofcapitalheldby

theSocietyremainssustainableandcompliant

withregulationaswellasanassessmentwhich

determinesthattheSociety’scostmanagement

practicesarerobust.

Building Together

TheSociety’sperformanceagainsttheCorePBT

andNPStargetsdeterminesthecorevariable

payaward,whichisunderpinnedbyafinancial

sustainabilityreview.Allneedtobeachieved

beforeanyvariablepayawardwillbegranted.

ForExecutiveDirectors,aswellastheSenior

LeadershipTeam(‘SLT’),anadditionalpercentageof

variablepaymaybeawardedbasedonindividual

performance.Theassessmentofindividual

performanceismeasuredagainsttheachievement

oftheirindividualscorecard,whichcontainsboth

financialandnon-financialmeasures.

Leading for Value

2023isthefinalyearofthemulti-yearLeadingfor

Valuescheme.Theschemeoperatedinadditionto

theBuildingTogetherscheme,withperformance

assessedagainstthedeliveryofmeasurableand

targetedfinancialvalueformembers,achievement

ofkeystrategicmilestonesandESGperformance

againstcolleagueengagement,inclusionand

diversityandsocialimpacttargets.Targetsfor2023

weresetbyreferencetothelong-termstrategy,in

ordertosupportlong-termvaluecreationandto

alignwithremunerationregulatoryexpectations.

TheExecutiveCommitteeandtheChairofthe

Boardcarryoutapre-grantassessmentbefore

determiningindividualeligibilityforthisscheme

andconsiderbothpersonal(e.g.individual

performanceandcompensationlevelscompared

tothemarket)andtheSociety’sperformance(e.g.

Capital,Liquidityandriskplusfinancialmeasures).

Theoutcomeofthispre-grantassessment

determinesthemaximumopportunitythatwill

beavailabletotheindividual,subjecttothe

overallmaximumlevelsetwithinthescheme.The

RemunerationCommitteeoverseethisprocess

beforeagreeingtoanyproposals.

Weighting on

Society NPS 2023 target

Savings Customer 40% 46

Mortgage Customer 25% 51

Digital NPS 10% 41

Broker Residential 20% 82

Broker buy-to-let 5% 75

Society NPS Total 55

Directors Remuneration report (continued)

112 | Governance 113

PaymentisalsounderpinnedbygatewaymetricsincludingtheachievementofCoreOperatingProfitandNPSbeingata

levelinlinewiththresholdforBuildingTogether,andupgradestoouroperationalriskcapability.Followingtheyear-end,

theRemunerationCommitteeassessesperformanceagainsteachmetrictodeterminethevariablepayoutturn.Forthe

2023performanceyear,theRemunerationCommitteeagreeda72%outturnfortheplan,basedontheoverallachievement

oftargetoraboveagainsttheTransformation,MemberValueandESGmetrics.Allvariablepayawardsaresubjecttothe

operationofaBusinessControlsOverlay(BCO)Processasoutlinedinthe

RemunerationPolicy.

How variable pay is awarded for Executive Directors

Inlinewithrelevantremunerationregulations,variablepayawardsforExecutiveDirectorsaresubjecttodeferraloveramulti-

yearperiod.

Thistablebelowshowstheyearsinwhichthe2023performanceyearpaymentstoExecutiveDirectorsvest,with50%

deliveredincashand50%viaShareEquivalentInstrument(‘SEI’).PaymentsmadeviaSEIaresubjecttoaholdingperiod.

ForfurtherdetailsondeferralpleaserefertotheDeferralandShareEquivalentInstrument(‘SEI’)section.

How Leading for Value was calculated for Executive Directors

Measures Levels of achievement

Transformation

40%

•

Aligningaccountopeningtimesandavailabilityofdigital

serviceswithcustomerneeds

•

Improvedpaymentsserviceforsavingscustomers

•

Improvingaccesstomortgagelending

•

Improvedmortgagedecisions

•

SimplificationofservicesforSavingsaccounts

24%

Member value

30%

•

Improvingsavingsreturnsformembers

30%

ESG

30%

•

Financialeducationandincreaseawarenessinlocal

communities

•

Creatingamorediverseandinclusiveorganisation

•

Maintainhighlevelsofcolleagueengagement

18%

Total Award Deferral schedule

Executive

Director Role

% of

salary

2024 2025 2026 2027 2028 2029 2030 2031

Cash SEI Cash SEI Cash SEI Cash SEI Cash SEI Cash SEI Cash SEI Cash SEI Cash SEI

£000 £000 £000 £000 £000 £000 £000 £000 £000

Susan

Allen*

CEO 99.00 388.5 388.5 155.4

155.4

-

46.6

Alasdair

Lenman

Interim

CEO/

CFO

78.42 189.0 189.0 75.5

75.5

-

22.7

David

Morris

CCO 86.00 155.6 155.6 62.2

62.2

-

18.7

*ThebonusawardedtoSusanAllenforthe2023performanceperiodundertheBuildingTogetherandLeadingforValuebonusschemeshasbeencalculatedbasedonher

annualsalaryasat31December2023.

Payments for loss of office

TherewerenopaymentstoDirectorsforlossofofficein2023.

Payments to past Directors

TherewerenopaymentsmadetopastDirectorsin2023thathavenotalreadybeendisclosedinpreviousreports.

Colleague considerations in relation to remuneration

OuraimistobuildaworkingenvironmentwherecolleaguesfeelengagedandcommittedtotheSociety’sjourney,ensuring

theyfeelvaluedandrespectedtogivetheirbest.Ourrewardofferingisintegraltothat,withanapproachfoundedinour

mutualityandvalues.OurRemunerationPolicyisinplacetosupportourcolleaguesinworkingtogetherforthebenefitofthe

Societyandourmembersandcustomers.Thishasbeenreviewedfor2024,withchangesmadetosupporttheSociety’snew

strategy,includingthecreationofanambitiousculture,andtofosteranenvironmentwherehighperformanceisrecognised

andrewarded.

Colleague listening

TheSocietyactivelyseeksviewsofcolleaguesthrough

avarietyofsources,includingthroughourrecognised

tradeunion,Aegis.OurColleagueForumandPerformance

andRewardCommitteeareotherexamplesofwherewe

gaindirectcolleagueinputintothedesignandongoing

developmentoftheSociety’sremunerationframework.

AlisonHutchinson,amemberoftheRemuneration

Committee,andtheCommitteeChairuntilSeptember2023

hasheldtheroleofNon-ExecutiveDirectorforWorkforce

Engagementsince2019,withAngelaDarlingtontaking

overthispositioninJanuary2024.Theviewsofcolleagues

havebeentakenintoconsiderationaspartoftheSociety's

RemunerationPolicy,howeverconsultationonspecific

policyamendmentshasnotbeenundertaken.

Supporting colleagues in 2023

Itisimportanttousthatourcolleaguesfeelrecognised,

valuedandfairlyrewardedforthecontributionstheymake

toprovidingessentialservicestoourcustomersandthe

effectiverunningofouroperations.

In2023wemadeasignificantinvestmentinbasepay,

providingeligiblecolleagueswitha6%salaryincrease

whichwasaccompaniedbyanadditional1%discretionary

allocationforleaderstoallocatewherefurtheradjustments

wereneededtoaddressareassuchascolleagueswho

hadsignificantlydevelopedintheirroleortosupport

marketalignment.Wealsorecognisedthecostofliving

andinflationarypressuresfeltbysomeofourlowestpaid

colleaguesandintroducedaSociety-wideminimumfull-

timeequivalentsalaryof£22,000.Wealsomaintainedour

commitmenttopayallcolleaguesandcontingentworkersat

orabovetheRealLivingWage.

CEO pay ratio reporting

WecontinuetopublishtheratiooftheChiefExecutive’spaytothewidercolleaguepopulation.Thisratiocomparesthetotal

remunerationoftheCEOagainstthetotalremunerationofthemediancolleagueandthosewhositatthe25thand75th

percentiles(lowerandupperquartiles).

ThisratioreflectsthenatureoftheSociety,inparticulartherangeofdifferentrolesandskillsetsrequiredtooperatewithin

financialservices;fromanumberofcustomer-facingcolleaguesinthebranchnetworkandcallcentres,throughto,for

example,heavilytechnicalspecialistrolesinourTreasurydepartment.

Thisyear’scalculationisbasedonacombinationofearningsfromAlasdairLenmanandSusanAllen,whohavebothheldthe

positionofChiefExecutive(orInterimChiefExecutive)in2023.ForAlasdairLenman,thisincludeshisfixedearningsupto

andincludingthe01March2023,aswellasaproportionofhisvariableearningsfor2023(pro-ratedtotheperiodinwhich

hewasperformingtheroleofInterimCEO).ForSusanAllenthisincludesherfixedandvariableearningsfrom02March2023

paidinrespectofthe2023performanceperiod,aswellasthevalueofthereplacementawardsgranteduponhire.

72%

Directors Remuneration report (continued)

Leading for Value (continued)

114 | Governance 115

RecentresignationsfromtheCEOandInterimCEOpositionoverthelastfewyearshavecontributedtoarelativereduction

betweenthelevelofpayawardedtotheCEOandthatofthewidercolleaguepopulation.Theappointmentofanew

permanentCEOnowprovidesamorerepresentativeviewofCEOpaycomparedtothewidercolleaguepopulation.

Thetotalremunerationvaluesandbasesalaryvaluesforthe25th,50thand75thpercentileemployeesfor2023are:

Wehaveusedthereportingmethodof‘OptionB’,whichinvolvesutilisingourexistinggenderpaygapreportingdataasthe

basisforidentifyingthecolleaguesateachoftherequiredquartiles.ThetotalRemunerationcalculationforthecolleagues

identifiedateachquartilewastakenasat31December2023.

Year 25th percentile 50th percentile 75th percentile

Total £28,461.93 £38,489.83 £61,687,04

Salary £23,444.30 £32,860.53 £50,571.34

* Thefollowingelementshavebeenutilisedtocalculatethetotalremunerationofeachcolleague;basesalary,pension(includingpensioncashallowance),car

allowance,privatemedicalinsuranceandvariablepay.

Non-Executive Directors

Chair of the Board and Non-Executive Directors

TheChairoftheBoardandNon-ExecutiveDirector(‘NED’)feesarereviewedannually.Followinganalysisofthemarketdata

available,andinlinewiththeawardprovidedtoallcolleagues,theNEDfeeswereincreasedin2023asoutlinedbelow.

Single total figure of remuneration for each Non-Executive Director

TheNon-ExecutiveDirectorsbasicandcommitteefeesearnedin2023areoutlinedbelow.Non-ExecutiveDirectorsdonot

receiveanybenefits,butarereimbursedforanyexpensesincurred,suchastravelandsubsistence.Thisinformationhasbeen

auditedbyourindependentauditors,PwC.

Non-Executive Director fees (annual equivalents) Annual fees as at 1 July 2023 Annual fees as at 1 July 2022

£000 £000

ChairoftheBoardbasicfee 216.2 202.0

ViceChairoftheBoardbasicfee 81.5 76.1

Non-ExecutiveDirectorbasicfee 57.5 53.7

Additional fee for:

AuditCommittee-Chair 23.4 21.8

AuditCommittee-Member 9.7 9.0

RemunerationCommittee–Chair 19.1 17.8

RemunerationCommittee–Member 7.0 6.5

GroupRiskCommittee-Chair 23.4 21.8

GroupRiskCommittee-Member 9.7 9.0

BoardGovernance&NominationsCommitteeMember

(N.B.AdditionalfeedoesnotapplytotheChairorViceChair)

7.0 6.5

2023 2022

Non-Executive Director Basic Fees Committee

Fees

Total Basic Fees Committee

Fees

Total

£000 £000 £000 £000 £000 £000

John Heaps (Chair) 209.1 - 209.1 201.5 - 201.5

Alison Hutchinson* 78.8 24.0 102.8 75.6 23.3 98.9

Guy Bainbridge 55.6 38.8 94.4 53.3 35.2 88.5

Mark Parsons 55.6 18.8 74.4 53.3 18.1 71.4

Dina Matta 55.6 6.8 62.4 53.3 6.5 59.8

Jennelle Tilling 55.6 6.8 62.4 53.3 6.5 59.8

Angela Darlington 55.6 32.0 87.6 35.7 18.8 54.5

Debra Davies** 24.8 10.3 35.1 - - -

Annemarie Durbin*** 8.3 - 8.3 - - -

* AlisonHutchinsonsteppeddownasChairoftheRemunerationCommitteeon18September2023

** DebraDaviesjoinedtheSocietyon26July2023andbecameChairoftheRemunerationCommitteeon19September2023

*** AnnemarieDurbinjoinedtheSocietyon18December2023asChairoftheBoardDesignate.ThefeepayabletoAnnemarieisinlinewiththeexistingfeestructure

fortheChairoftheBoard.

Directors Remuneration report (continued)

CEO pay ratio reporting (continued)

* TheCEOpayratiofor2023includesthereplacementawardswhichhavebeengrantedtoSusanAllenuponjoiningtheSociety.Ifthesereplacementawardswerenot

includedinthecalculations,themedianCEOpayratiowouldreducefrom110:1to44:1.

Year Defined Method 25th percentile 50th percentile 75th percentile

2023* Option B 148:1 110:1 68:1

2022 OptionB 28:1 21:1 14:1

2021 OptionB 29:1 21:1 14:1

2020 OptionB 39:1 28:1 20:1

2019 OptionB 40:1 35:1 22:1

116 | Governance 117

2024 Remuneration Policy

Thefollowingpagessetoutthe

proposedRemunerationPolicyforour

ExecutiveDirectorsandNon-Executive

Directors.Theproposedkeychanges

applicabletoExecutiveDirectorsare

highlightedwithinthefollowingtables,

withnochangesbeingproposedtothe

RemunerationPolicyforNon-Executive

Directors.Wewillseekmember

approvalforthepolicyattheAnnual

GeneralMeeting(‘AGM’)on23April

2024and,ifapproved,thepolicyis

intendedtoapplyforthreeyearsto

theAGMin2027.Itisintendedthat

nopaymentstoDirectorswillbemade

outsideofthispolicy,unlessrequired

asaresultofregulatorychange.

Review of Remuneration

Policy

During2023theCommitteeundertook

acomprehensivereviewofthe

RemunerationPolicy,consideringinput

fromanumberofcolleaguesinthe

Society,whileappropriatelymanaging

anyconflictsofinterestarising.This

includedtheBoard,theExecutive

Committee,PeopleLeaders,the

PerformanceandRewardCommittee

aswellasassessingfeedbackfrom

theColleagueForumandcolleague

engagementsurveys.Inaddition,to

supportthereview,theCommittee

engagedDeloitteLLPtoprovide

marketinsightandbestpractice.

Beingamutual,howwedeliverforour

membersisoftheupmostimportance;

thiswasakeyfocusthroughout

thereview.Simplicitywasalsoa

keythemetoensurethatthenew

remunerationframeworkistransparent

andwellunderstoodbyparticipants,

whilealsosupportingthedeliveryof

theSociety’sstrategyandcreationof

long-termvalueformembers.

Thestartingpointofthereviewwas

toconsiderourRewardPrinciples,to

ensuretheyremainedalignedtoand

supportedtheSociety’sstrategy;the

CommitteebelievetheexistingReward

Principlesremainfitforpurposeand

thereforedidnotproposeanychanges.

Our Reward Principles

Wefollowfivekeyprinciplestosupportusinachievingourlong-term

aspirationswhichapplytoallcolleagueswithintheSociety.Thesehelp

usknowwhenwearedoingtherightthingsandsetoutwhatwebelieve

goodrewardpracticeforallofourcolleagueslookslike.

Ourfiverewardprinciplesdevelopedwithourcolleaguesare:

Ourrewardprinciplesareappliedconsistentlyregardlessofgender,

ethnicity,age,disabilityoranyotherfactorunrelatedtoperformance

orexperience.

Attract and retain talent

Alignedtoourmutualvaluesandforwardthinkingtoensure

relevanceinachangingworld.

Focused on total reward

Recognisingthatrewardismorethanjustpay,itispartofa

broaderEmployeeValueProposition.

Reward decisions are clear and transparent for

colleagues

Deliveredthrougheffectiveandopencommunication.

Flexible within a framework

Toensureaconsistentapproachwhilstrespondingtodifferent

challenges,supportedbyeducationtohelpmanagersbalance

doingtherightthingforboththeSocietyandtheirpeople.

Recognising contribution

Ourrewardarrangementsarereflectiveofsociety,teamand

individualachievements,withtheabilitytorecognisethe

contributionallcolleagueshavemadetooursuccess.

AsoutlinedintheOurstrategysectionoftheStrategicreporttheSocietystarts

anewstrategiccyclein2024,andhasoutlinedambitiousplanstoscaleup

andchangeatpace,whileremaininganchoredtoitspurpose,toguidetowards

aSocietythatisfuture-readyandfittoservegenerationstocome.Following

thereviewoftheRewardPrinciplesandtheSociety’sstrategy,theCommittee

focussedtheirreviewonthevariablepayschemesinoperationforcolleagues

acrosstheSociety,includingExecutiveDirectors.

Anewvariablepayschemehasbeendevelopedandtheall-colleagueschemehas

beenrefinedtosupporttheSociety’sstrategyincreatinganambitiousculture,and

tofosteranenvironmentwherehighperformanceisrecognisedandrewarded,

notjustthrough‘what’isdelivered,butalso‘how’itisdelivered.Whilethereare

separatevariablepayschemesforSeniorLeaders,includingExecutiveDirectors,

andthebroadercolleaguepopulation,theCommitteedeemeditimportant

toretainadegreeofalignmentbetweenthetwoschemesthroughtheuseof

commonperformancemetricsandgateways.Thisalignmentsupportsacollective

culture,whereeveryoneworkstogethertoputourmembersneedsfirst,aswellas

beingabletorecognisehighperformance.

Thereviewalsoincludedamarketbenchmarkingexercise,andtheCommitteereviewedanddefinedanewcompetitor

peergroupforthispurpose.TherefinedpeergroupincludesBuildingSocietiesandCategoryOneUKBankstoensure

remunerationispositionedatalevelthatsupportstheattractionandretentionoftherequiredtalentandcapability.

Overview of changes to Variable Pay Schemes for 2024

All Colleague Scheme

Theexistingallcolleagueschemehasbeeninoperation

since2019.Itwasdesignedtosupportcollaborative

working,withallcolleaguesreceivingthesamepercentage

ofsalaryawardwhentheSocietyachieveditsperformance

goals.

Theallcolleagueschemewillcontinuetobeunderpinnedby

performanceagainstCoreProfitBeforeTaxandNetPromoter

Scoremetrics,retainingthecommitmenttolongterm

financialsustainabilityandexceptionalcustomerservice.

TheallcolleagueschemeisalsosubjecttotheSociety’s

BusinessControlsOverlayprocess,whichincludesafinancial

sustainabilityreview.Subjecttoperformancelevelsbeing

met,allcolleagues(excludingSeniorLeaders)willbeeligible

forthesamepercentageofsalaryaward.

InrecognitionofthechangesintheSociety’sstrategy,some

changeshavebeenmadetotheoperationoftheschemefor

2024tobetterrecognisethecontributionofcolleagueswho

haverolemodelledexceptionalbehaviours.Thescheme

willnowallowforadditionalindividualdiscretionaryawards

oncethecoremeasureshavebeenmet.

New Senior Leader Bonus Scheme

Tosupporttheaimofsimplicity,itisproposedthatfor2024

onwardsSeniorLeaders,includingExecutiveDirectors,will

nolongerparticipateinBuildingTogethernorLeadingfor

Value,andinsteadtheseschemeswillbereplacedbyanew

singlevariablepayscheme.

Theschemehasbeendesignedtoensurethatthe

remunerationofourSeniorLeaders,includingExecutive

Directors,hasadirectlinktothesuccessoftheSociety,

supportingdeliveryoflong-termstrategicobjectiveswhilst

protectingandenhancingmemberandcolleagueinterests

inlinewithourpurpose.However,participationinthisnew

schemerecognisestheroleandimpacttheSeniorLeaders

intheSocietyhaveonthedeliveryofthelong-termstrategy.

Therewillcontinuetobeastronglinkbetweentheall

colleagueschemeandtheseniorleaderschemewiththe

samefinancialandcustomerunderpinsinplaceacrossboth

schemes.Priortoanyawardoneitherscheme,existing

financialsustainabilitycheckswillremaintoensurethe

levelofcapitalheldbytheSocietyremainssustainableand

compliantwithregulationaswellasanassessmentwhich

determinesthattheSociety’scostmanagementpracticesare

robust.Theschemeswillalsocontinuetobesubjecttothe

Society’sBusinessControlsOverlayprocess.

MaximumopportunitylevelsforExecutiveDirectorsare

unchangedunderthenewschemewhencomparedto

previousopportunitylevelsacrossbothBuildingTogether

andLeadingforValue.

Performancewillbeassessedonanannualbasisbasedon

aSocietyscorecardconsistingofbothfinancialandnon-

financialmetrics,aswellasperformanceagainstindividual

personalobjectives.TheBusinessControlsOverlayand

riskadjustmentprocesseswillcontinuetoapplyasinprior

years.Thescorecardwillbereviewedandapprovedby

theCommitteeonanannualbasis,andclearlylinkedto

thelong-termStrategyoftheSociety.Anexampleofthe

proposed,simplifiedscorecardisoutlinedbelow.

Category Performance measures

Financial and strategic/

non-financial measures

Coreprofitbeforetax

Cost

Extendreachanddeepenourimpact

1.Membervalue

2.Mortgagepropositions

Createjoyfulexperiences

1.Customerexperience

2.NPS

Buildafuturereadysociety

1.Buildingagreenersociety

2.Growingsustainably

Cultivateanambitiousculture Organisationalhealth

Individual objectives

Directors Remuneration report (continued)

118 | Governance 119

Executive Director remuneration policy

Fixed remuneration – base salary

Change for

2024

Purpose and

link to strategy

ToenabletheattractionandretentionofhighperformingexperiencedExecutiveDirectorsbyensuring

thattheyareappropriatelyrewardedfortheirrole.

ThelevelofbasesalaryawardedservestoreflectthecontributionofExecutiveDirectorsintheirroleas

definedbythecombinationof:

•

Skills,knowledgeandexperience

•

On-goingperformance

•

DemonstrationoftheSociety’sbehavioursandvalues.

Nochange

In practice Basesalaryistypicallyreviewedannuallyanddeterminedwithreferenceto:

•

Roleandresponsibilities

•

Skills,experienceandindividualperformance&behaviours

•

Comparisontotheexternalmarket,supportedbyreferencetotheSociety’sgradingstructure,andthe

CareerFramework

•

Internalrelativitiesandwiderworkforcebasesalarylevels

•

Affordability–theeconomicenvironmentandoverallfinancialpositionoftheSociety.

Nochange

Opportunity Thereisno‘maximum’basesalaryopportunity.

Weseektotargetanappropriateexternalmarketpositioninrelationto‘totalremuneration’.Toensure

thatthisisachievedbasesalaryrangesaredevelopedwithreferencetothetotalpackageincluding

variablepay.

Nochange

Fixed remuneration – benefits

Change for

2024

Purpose and

link to strategy

ToprovideatotalremunerationpackagethatenablestheattractionandretentionofExecutiveDirectors

oftherequiredcalibre. 

Nochange

In practice ExecutiveDirectorsareeligibletoreceiveanumberofbenefits,whichmayinclude:

•

Privatemedicalinsurance

•

AnnualHealthAssessment

•

Lifeassurance(6xsalary)

•

Insuredsickpay

•

Provisionofacompanycar,orcashequivalent

•

Travelallowances.

Nochange

Opportunity Thereisnomaximumvaluetothebenefitsprovided.Thelevelofbenefitisregularlyreviewedtoensure

theyremainappropriatefortheroleundertaken.

Nochange

Fixed remuneration – retirement benefits

Change for

2024

Purpose and

link to strategy

TheSociety’spensionarrangementssupporttheattractionandretentionofExecutiveDirectorsthrough

theprovisionofcompetitiveretirementbenefits.

Nochange

In practice TheSocietyoperatesasingledefinedcontributionpensionscheme,andallcolleagueshavethe

opportunitytoparticipate.Whereparticipationintheschemeistaxinefficient,ExecutiveDirectors,

inlinewiththeapproachforallcolleagues,maybepermittedtotakeacashallowanceinsteadof

contributionstotheplan.

Nochange

Opportunity AllExecutiveDirectorsreceiveamaximumpensioncontribution(orcashallowance)of11%ofbase

salary,thesameasthecontributionlevelsforallcolleagues.

Nochange

Variable pay – Senior Leaders Bonus Scheme

Change for

2024

Purpose and

link to strategy

ToensurethatanExecutiveDirector’sremunerationhasadirectlinktothesuccessoftheSocietyand

supportsdeliveryoflong-termstrategicobjectivesinlinewiththeSociety’spurposeandvalues.

Nochange

In practice AllExecutiveDirectorsareeligibletoparticipateinthisschemewhichaimstorewardtheachievement

ofstretchingannualSocietyandindividualtargetswhicharealignedtothelonger-termstrategy.Awards

willbebasedonaSocietyscorecardoffinancialandnon-financialmetricsalignedtotheStrategy

togetherwithindividualperformance.

Paymentsundertheplanaredeterminedinthefollowingway:

•

Forallmetricswithinthescorecardtherewouldnormallybespecifictargetssettoreflectminimum

threshold,targetandmaximumperformancelevels

•

Scorecardmetricsareweightedsuchthatfinancialmetricsandnon-financial/strategicmetrics(which

mayincludemetricsrelatingtomembervalue,customers,ESGandrisk)areweightedat80%ofthe

scorecardandindividualperformanceisweightedat20%

•

Followingtheendofthefinancialyear,theRemunerationCommitteewillassessperformanceacross

allperformancemetrics,includingindividualperformanceofeachExecutiveDirector,todeterminethe

scorecardoutcome

•

Organisationalfinancialperformance,customerexperienceandriskgatewaysapply.Failuretomeet

thesewouldnormallyresultinzerovariablepayawarded

•

Anindividualcompliancegateway,whichwouldincludeanassessmentofindividualconduct,would

alsounderpinthepaymentofanyaward.Failuretomeetthiswouldreduceanyaward(including

potentiallytozero).

Allawardsaresubjecttodeferral,paymentin'shareequivalentinstruments'andmalusandclawback

provisionsinlinewithregulatoryexpectations.

Replacement

ofexisting

Building

Together

andLeading

forValue

schemes

withone,

simplified

schemefor

allSenior

Leaders,

including

Executive

Directors.

Opportunity An‘ontarget’achievementagainstallperformancecriteriawouldresultinavariablepayawardof75%

ofeligiblepayfortheChiefExecutiveand50%ofeligiblepayforotherExecutiveDirectors.

Maximumachievementagainstallperformancecriteriawouldresultinavariablepayawardof125%of

eligiblepayfortheChiefExecutiveand100%ofeligiblepayforotherExecutiveDirectors.

Nochange

tomaximum

opportunity

levels.

Theon-target

opportunity

forExecutive

Directors,

excluding

theCEO,

hasbeen

reducedfrom

60%to50%

ofeligible

pay.

Deferral and Share Equivalent Instruments

Inlinewithrelevantremunerationregulations,including

theRemunerationsectionofthePRARulebookandthe

FCA’sDual-RegulatedFirmsRemunerationCode,allvariable

payawardsforExecutiveDirectorsaresubjecttodeferral.

DeferralensuresthattheSocietydeliversvariablepayover

amulti-yearperiod,inamannerthatmitigatesunnecessary

risktaking,whilstachievingalevelofsustainable

performance.

Alsorequiredbyregulation,isthat50%ofeachvariablepay

awardwillbedeliveredviaaShareEquivalentInstrument

(‘SEI’)whichissubjecttoafurtherholdingperiodfollowing

vesting.

Forthe2024performanceyear,anExecutiveDirectorwhose

remunerationexceedsthede-minimislimitwillreceive

20%oftheirtotalvariablepayin2025,withafurther20%

deliveredviaSEIin2026.Theremaining60%isdeferred

oversevenyears,witha12monthholdingperiodapplying

tothepaymentsmadeviaSEI.

Forexample:

•

Year 1–40%ofanyvariablepayearnedispaidoutin

theyearfollowingtherelevantperformanceyear.Halfof

thisamountispaidincash(in2025)andtheotherhalf

isdeliveredinaSEIandsubjecttoanadditionalholding

periodpriortorevaluationandpayment(in2026).

•

Deferral Years–theremaining60%isdeferredfor7

yearsandpaidequallyeachyearfrom3yearsafterthe

award.Eachyear,theawardissplitintwo,withhalfthe

amountpaidincashandthesecondhalfheldinaSEIand

subjecttoanadditionalholdingperiodpriortorevaluation

andpayment.SEIvaluationscontinueevery12months

untilthevariablepayscheduleiscomplete.

Directors Remuneration report (continued)

120 | Governance 121

£2,000

£1,800

£1,600

£1,400

£1,200

£1,000

£800

£600

£400

£200

£0

Minimum Target Maximum

Chief Executive Officer

Minimum MinimumTarget TargetMaximum Maximum

Chief Finance Officer Chief Commercial Officer

100%

57%

62%

23%

17%

£1,490

£900

26%

45%

50%

30%

22%

15%

£540

£770

£1,010

£420

£600

£790

20%

£1,890

33%

2024 Bonus Delivery 2025 2026 2027 2028 2029 2030 2031 2032 2033

Un-deferred:April Cash

Un-deferred:April SEI

DeferredYear3:April Cash

DeferredYear3:April SEI

DeferredYear4:April Cash

DeferredYear4:April SEI

DeferredYear5:April Cash

DeferredYear5:April SEI

DeferredYear6:April Cash

DeferredYear6:April SEI

DeferredYear7:April Cash

DeferredYear7:April SEI

Variable pay – control framework

Change for

2024

Business

controls overlay

process

VariablepayawardsaresubjecttotheoperationofaBusinessControlsOverlay(‘BCO’)assessment

thatconsiderscurrentandfuturerisksthrougharangeofkeymetricsprovidedbytheSociety’s

controlfunctionstoevidencetherobustmanagementoftheSocietiescontrolse.g.,auditactions

andothermetrics.Beforeanyvariablepayawardsaregranted,anumberoffinancialsustainability

reviewsarecompletedtoensurethelevelofcapitalheldbytheSocietyremainssustainable

andcompliantwithregulationaswellasanassessmentwhichdeterminesthattheSociety’scost

managementpracticesarerobust.Thisformalriskoverlayprocessensureskeyriskindicatorsare

consideredtoprovideassurancethatnoinappropriaterisk-takingbehaviourshavetakenplace.

IninstanceswhereissuesareidentifiedaspartoftheBCOassessment,theRemunerationCommittee

reservetherighttoreducethescorecardoutturn,applyamalusadjustment(reducevariablepay

awardorlapsedeferredelements)and/orapplyclawback(recovervariablepayawardsalready

made)asapplicable.Awardsaresubjecttoclawbackforuptoamaximumoftenyears.

Nochange

Remuneration

Committee

discretion

TheRemunerationCommitteeretainsthediscretiontoadjustvariablepayawardstoensurethatit

reflectsatrueviewoftheunderlyingperformanceoftheSocietyandholdssufficientcapitallevels

tosupportthepaymentofanyvariablepayaward.

Nochange

Key

Cashbonusdeferral SEIdeferral SEIholdingperiod

Length of time variable pay at risk

Remuneration scenarios in relation to the Remuneration Policy in 2024

Thechartbelowshowsanillustrationofthepotentialsplitofremunerationbetweenfixedremuneration(basesalary,benefits

andpension)andtotalvariablepayfortheCEOandotherExecutiveDirectorsalignedtothenewpolicy.Forthepurposesof

thisillustration,wehaveusedthedatapertainingtotheChiefExecutive,theChiefFinancialOfficerandtheChiefCommercial

Officerunderthefollowingscenarios:

•

Minimum–undercertainperformanceconditions,variablepaycanbezero.

•

Target-representsavariablepayaward(75%ofeligiblepayfortheChiefExecutiveand50%fortheremainingExecutive

Directors)thatwouldbepaidifSocietyandpersonalperformancemeasuresareachievedin2024.

•

Maximum–themaximumvariablepayaward(125%ofeligiblepayfortheChiefExecutiveand100%fortheremaining

ExecutiveDirectors)thatcouldbepaidassumingstretchobjectivesandoutcomesarefullyrealisedin2024.

Key .FixedPay.Undeferred.Deferred

Directors Remuneration report (continued)

Deferral and Share Equivalent Instruments (continued)

Figuresinthistablearerepresentedin£000’s.

122 | Governance 123

New hires Change for 2024

Remuneration

package

WhenagreeingthecomponentsofaremunerationpackagefortheappointmentofExecutive

Directors,theRemunerationCommitteewillapplythefollowingprinciples:

•

Thepackageswillbesufficienttorecruithighperformingindividuals,inahighlycompetitive

market,toleadthebusinessandeffectivelyexecutethestrategyformembers;

•

TheRemunerationCommitteewilllooktoaligntheremunerationpackageofferedwiththe

Society’sRemunerationPolicy;and,

•

TheRemunerationCommitteewillensurethatthelevelofpayisnecessarybutnotexcessive.

Indeterminingremunerationarrangements,theRemunerationCommitteewillconsidersimilar

positionsinthemarket,thestructureoftheremunerationpackageandtheexperienceofthe

candidate.ThisensuresthatarrangementsareinthebestinterestsofboththeSocietyandits

memberswithoutpayinginexcessofwhatisnecessarytorecruitanExecutiveDirectorofthe

requiredcalibre.

Therearenoproposed

changestothe

maximumopportunities

whichremain125%

forCEOand100%for

ExecutiveDirectors.

Theon-target

opportunityfor

ExecutiveDirectors,

excludingtheCEO,

hasbeenreduced

from60%to50%of

eligiblepay.

Replacement

awards

TheRemunerationCommitteemaymakeawardsonhiringanexternalcandidatetocompensate

themforanypreviouslyawardedvariableremunerationandanyotherremuneration

arrangementsforfeiteduponleavingthepreviousemployer.

Indeterminingwhethertoapproveanysuchreplacementawards,theRemunerationCommittee

willconsiderthestructureandformofthepreviousarrangementsandwillseektoensure

awardsaremadeonmateriallysimilartermstothearrangementsbeingforfeitedintermsof

value,timehorizonsandtheextenttowhichperformanceconditionsappliedtotheoriginal

awards.

AnyreplacementawardswillbesubjecttotheSociety’smalusandclawbackprovisions.The

awardswillbeforfeitedintheeventofearlydeparturefromtheSociety.

Nochange

Leaver arrangements and loss of office Change for 2024

The Remuneration Committee shall apply the policy in relation to leavers, considering performance, conduct and

commercial justifications, as summarised below:

Notice period Thestandardnoticeperiodis12monthsfromtheSocietyand12monthsfromtheExecutive

Director.

Innormalcircumstances,ExecutiveDirectorswillberequiredtoworktheirnoticeperiod.In

theeventExecutiveDirectorsarenotrequiredtofulfiltheirnoticeperiod,theymayreceivea

paymentinlieuofnotice,ortheymaybeplacedongardenleave.

Nochange

Termination

payment

Typically,terminationpaymentswillconsistofcontractualpaymentsforthenoticeperiod,the

emphasisbeingtonotrewardfailure.

Nochange

Annual variable

pay – leaver

provisions

Onterminationofoffice,theleaverprovisionsassetoutbelowwillapply.Thesearealso

outlinedintheSociety’svariablepayplanrules.

•

Intheeventofretirement,redundancy,ill-healthordisability,anyvariablepayawardwill

bepro-ratedtoreflectthetimeservedduringtheperformanceperiod,withanypayment

remainingsubjecttorelevantperformanceconditionsandtheSociety’sBCOassessment.

Paymentofanyvariablepayawardwouldbeatthenormaltimeanddeferralwillcontinue

toapply,inlinewithregulatoryrequirements.Therewouldtypicallybenoaccelerationof

paymentorthevestingofdeferredawards.Foranyunvesteddeferredawardswhichremain

outstanding,thesewouldtypicallyberetainedandwouldvestinlinewiththeoriginal

vestingschedule.Malusandclawbackprovisionswouldcontinuetoapply.

•

Inthecaseofdeath,anyvariablepayawardwillnormallybepro-ratedtoreflectthetime

servedduringtheperformanceperiod.TheRemunerationCommitteehasthediscretionto

acceleratethepaymentofdeferredvariablepayaheadofitsdefinedvestingschedulein

exceptionalcircumstances.

•

IntheeventoftheresignationofanExecutiveDirectorwhohasunvesteddeferredbonus

paymentsoutstanding,theywillnottypicallyremaineligibletoreceiveunvestedawards.The

RemunerationCommitteehasthediscretionincertaincircumstancestoallowthecolleague

toremaineligibletoreceivethedeferredbonuspaymentsearnedinpreviousyears,subject

totherulesofthescheme,includingbutnotlimitedtotheSociety’sBCOassessmentand

malusandclawbackprovisions.

NoChange

Remuneration Policy for Non-Executive Directors

Non-Executive Director Fees Change for 2024

Purpose and

link to strategy

Remunerationsetatalevelthatreflectsmarketconditionsandissufficienttoattractindividuals

withappropriateknowledgeandexperiencetoprovideameaningfulcontributiontothe

Society.

Nochange

In practice FeesarebasedontheleveloffeespaidtoNon-ExecutiveDirectorsandChairsservingon

boardsofcomparableorganisations,thetimecommitmentrequired,andcontributionexpected

fromtherole.

•

BoththeChairoftheBoardandNon-ExecutiveDirectorsfeesarereviewedperiodically,

normallyatleastannually.

•

TheChairoftheBoardispaidanall-inclusivefee.ForNon-ExecutiveDirectors,abasicfeeis

paid,withadditionalfeespayableforadditionalresponsibilities,forexample,thechairingor

membershipofaBoardCommittee.

•

TheChairoftheBoard’sfeesaredeterminedbytheRemunerationCommittee.

•

Non-ExecutiveDirectorfeesshallbeamatterfortheChairoftheBoard.

•

TheChairoftheBoardandNon-ExecutiveDirectorsfeesarenotsubjecttoanyspecific

performancemeasures;however,theiroverallperformanceisreviewedonaregularbasis.

•

Non-ExecutiveDirectorsdonotreceiveanybenefitsbutarere-imbursedforanyexpenses

incurred.

•

Non-ExecutiveDirectorswillnotbeinvolvedinanydecisionsastotheirownremuneration.

Nochange

Opportunity Thereisno‘maximum’feeopportunity.

FeesaresetwithreferencetotheleveloffeespaidtoNon-ExecutiveDirectorsandChairs

servingonboardsofcomparableorganisations,thetimecommitment,andcontribution

expectedfromtherole.

Non-ExecutiveDirectorsarenoteligibletoreceivevariablepayawards.

Nochange

Our committees

Toensureourrewardpoliciesandproceduresarerobustand

assuredwehavetwomaincommitteesinplacetosupport

this:theRemunerationCommitteeandthePerformanceand

RewardCommittee.Thesecommitteesplaydifferentrolesin

makingsureourapproachtorewardmeetsourrequiredlevels

ofcompliance,asexplainedbelow.

Remuneration Committee

TheRemunerationCommitteehasspecificresponsibility

formakingsurewehavetherightpoliciesandprocessesin

placeforChiefOfficers(includingthosethatareExecutive

Directors)oftheSociety,andindividualsidentifiedasMaterial

RiskTakers(MRTs–seniordecisionmakers),aswellasthe

overarchingRemunerationPolicyandpaypracticesthat

impactallcolleagueswithintheSociety.Thepurposeofthe

RemunerationCommitteeistooverseetheRemuneration

PolicyinplacefortheSociety,makingsurethisalignstoour

businessstrategyandanyregulatoryrequirements.Detailsin

relationtothecompositionandtheTermsofReferenceofthe

RemunerationCommitteecanbeaccessedontheSociety’s

website.

TheRemunerationCommitteeoverseesabroadrangeof

activitieswithintheSocietysuchas:

•

SettingoftheRemunerationPolicyforallcolleagueswithin

theSociety.

•

Reviewingandapprovingtheindividualremuneration

arrangementsforallChiefOfficers(includingthosethatare

ExecutiveDirectors)andChairoftheBoard.

•

RatifyingtheannualobjectivesoftheChiefOfficers

(includingthosethatareExecutiveDirectors).

•

DeterminingindividualvariablepayawardsforotherMRTs.

•

Overseeingandapprovingthevariablepayoutturnforall

bonusschemes

•

Theapplicationofmalusand/orclawbackforMRTsifany

evidenceofrisktakingorbehaviournotconducivewithour

principlesisidentified.

•

Overseeingremunerationprocessesandproceduresin

relationtoMRTs,includingensuringMRTsdonotundertake

hedgingstrategiesinrelationtotheirvariablepay

opportunities.

•

ResponsibilityfortheBusinessControlsOverlayprocess.

•

Howremunerationisconsideredforallcolleaguesinthe

organisation,andtherelativityoftheirremunerationtothe

Executives.

TheRemunerationCommitteeissupportedbytheChairofthe

Board,theChiefPeopleOfficerandtheDirectorofPeopleand

Culture.Whereitisfelttobeappropriate,theChiefExecutiveis

invitedtoattendtoprovidefurtherbackgroundandcontextto

assisttheCommitteeindischargingitsduties.

Directors Remuneration report (continued)

Remuneration scenarios in relation to the Remuneration Policy in 2024 (continued)

124 | Governance 125

Our committees

TheCommitteemeteighttimesduring

theyearandcoveredthefollowing

activities:

•

ReviewingtheSociety’sRemuneration

PolicyforExecutiveDirectorsand

allcolleagues,ensuringitisfitfor

purposeinrelationtoTier1firm

•

Ensuringremunerationpoliciesand

practicesremainappropriateandare

operatingasintended

•

Ongoingworkinrelationtothe

PrudentialRegulatoryAuthority’s(PRA)

RemunerationCodeandhowitapplies

totheSociety

•

ReviewingtheSociety’svariablepay

schemestructureandtargets

•

Overseeingperformanceand

remunerationoftheSociety’sMaterial

RiskTakers

•

Reviewingandmonitoringtherisk

measuresinplacerelatingtoDirector

performance

•

ReviewingtheSociety’sgenderpay

gapreporting

•

Reviewingandapprovingthe

remunerationarrangementsforMRTs

•

Additionalmeetingswereheldin

2023tosupportthereviewofthe

DirectorsRemunerationPolicy.

Details of the number of scheduled

meetings attended by each

Committee member during 2023

can be found in the Attendance at

Board and Committee meetings

section of the Corporate

Governance report.

Appendices

Appendix 1 – Statement of member voting

TheSocietyremainscommittedtoongoingmemberdialogueandtakesanactiveinterestinvotingoutcomes.Thepolicyhas

receivedstrongsupportfrommemberstodate.

Appendix 2 - Aggregate remuneration data (Pillar 3)

ForfulldetailsontheSociety’sfullPillar3disclosure,pleasevisit

www.ybs.co.uk/your-society/financial-results.

TheRemunerationCommitteedrawson

theadviceofanindependentexternal

consultanttosupportitinperformingits

duties.Duringtheyear,theCommittee

soughtadviceonExecutiveDirector

salaries,variablepaystructuresand

regulatorymattersfromEY.The

Committeeissatisfiedthattheadvice

receivedisobjectiveandindependent.

EY’sfeesforadviceprovidedtothe

RemunerationCommitteein2023were

£53,340(includingirrecoverableVAT).

FurthertotheadvicereceivedfromEY,

additionaladvicewasobtainedfrom

WillisTowersWatsonandDeloitteLLP,

whoprovidedsupportandguidanceon

thereviewoftheExecutiveDirectors

RemunerationPolicy.Thisincluded

marketbenchmarking,aswellassupport

andguidancerelatingtovariablepay

structures.

Performance & Reward

Committee

ThePerformance&RewardCommitteeis

inplacetoensureeffectivegovernance

andoversightofourRemuneration

Policywithafocusonconductand

alignmenttoourbusinessstrategy.

Thiscommitteealsoensuresthatany

variablepayarrangementsthatweoffer

colleaguesdrivetherightbehaviours

towardsrisktakingandsafeguardgood

customerandmemberoutcomes.The

Performance&RewardCommittee

comprisesseveralseniorleadership

teammemberswithintheorganisation

withrepresentationfromtheCustomer

Services,Commercial,People,Finance

andRiskfunctions.

Our approach to risk

management and

governance of reward

Ourrewardprovisionsmeetallthe

requirementsofbothourinternal

governanceprocessesandexternal

regulators.Ourprovisionofreward

andtheassociatedpolicies,processes,

proceduresandpracticesrelatingto

thesearecreatedinawaywhichensures

theappropriatelevelofgovernance

isinplacetomitigateanypotential

currentandfutureriskstotheSociety,

colleagues,membersandcustomers.

Thevariablepayschemeissubjecttoa

BusinessControlsOverlayProcess,under

whichtheRemunerationCommittee

mayadjustvariablepayoutcomesinthe

eventriskissuesareidentified.

Our regulators

Asafinancialservicesproviderwe

areregulatedbyboththeFinancial

ConductAuthority(FCA)andthe

PrudentialRegulationAuthority(‘PRA’).

Therelationshipwithourregulatorsis

importanttous,andbuildstrustboth

insideandoutsideoftheSociety.This

meansthatfromaperformance,reward

andbenefitsperspectiveweensure

thatourbasesalary,variablepayand

benefitsnotonlymeetanynecessary

obligationsofourregulatorsbutare

designedandprovidedinawaywhich

developsatrustedrelationshipwith

them.

Non-Executive Director 2017 2018 2019 2020 2021 2022 2023

To approve the Directors’ Remuneration Report 89.67% 90.29% 91.86% 91.32% 92.45% 91.77% 93.15%

To approve the Directors’ Remuneration Policy n/a n/a 90.95% n/a 91.58% n/a n/a

Directors’

report

Our directors

ThenamesofthedirectorsofYorkshire

BuildingSociety(‘theSociety’)who

servedduringtheyearanduptothe

dateofthisreport,theirroles,previous

experienceandmembershipofboard

committeesaredescribedintheOur

BoardandExecutiveTeamareaof

theGovernancesection.Noneofthe

directorshadaninterestin,orshare

of,anyassociatedbodyoftheSociety

atanytimeduringthefinancialyear.

Atour2024AnnualGeneralMeeting

(‘AGM’)ourdirectorswillallretireand

standforelection/re-election,with

theexceptionofJohnHeapswhowill

retirefromhisroleasChairofthe

BoardinApril2024.

Our strategy, future

developments and Key

Performance Indicators

('KPIs')

Informationonthestrategyof

YorkshireBuildingSocietyandits

controlledentities(‘theGroup’)canbe

foundintheOurpurposeandstrategy

sectionoftheStrategicreport.Details

offuturedevelopmentsareincludedin

theLookingaheadsectionoftheChief

Executive’sSummaryandKPIsareset

outinthePerformanceataglance

section.

Details of our corporate governance

practices are included in our

Corporate Governance report.

Thisreportcontainsthestatutorydisclosures

requiredundertheBuildingSocietiesAct1986

(‘theAct’)andtheDisclosureGuidanceand

TransparencyRulesoftheFinancialConduct

Authority(‘theDTR’).Italsoincludesdetailsof

voluntarilyapplieddisclosurerequirements,

includingthoseinrespectoftheUKCorporate

GovernanceCode(‘theCode’),theCompanies

Act2006andthestreamlinedenergyand

carbonreporting(‘SECR’)rules.

How we manage risks

OurbusinessactivityexposestheGrouptoavarietyofrisks,includingretailand

commercialcredit,treasury,fundingandliquidity,market,operational,model,

capital,andcomplianceandconductrisk.Weseektomanagealltherisksthat

arisefromourbusinessactivitiesandwehaveanumberofcommitteesand

policiesinplacetodoso.

Details of these risks are included in the Risk overview section of the

Strategic report and the Risk Management report.

Our mortgage arrears

Detailsofthemortgageaccountsthatwere12monthsormoreinarrearsat31

Decemberareasfollows:

Further details of the arrears position are set out in the Our Financial

Review section of the Strategic report. Note 31 to the financial statements

also details the various forms of support offered to borrowers experiencing

difficulties in meeting their repayments.

2023 2022 2023 2022

% of mortgage account/balances

Number of

accounts

194 217 0.07% 0.08%

Balances outstanding

on accounts

£25.4m £30.2m 0.05% 0.07%

Amount of arrears

included in balances

£3.5m £3.7m 0.01% 0.01%

Directors Remuneration report (continued)

126 | Governance 127

Directors' report (continued)

Our charitable and political

donations

Charitabledonationsmadebythe

Groupduringtheyearwere£0.9

million(2022:£0.9million),more

detailsandfurtherinformation

onfundraisingbyourcolleagues,

membersandcustomers,including

thevalueofvolunteeringtimeofYBS

colleaguescanbefoundintheOur

communitiessectionofEngaging

withourstakeholdersintheStrategic

report.Nopoliticaldonationswere

madeintheyear(2022:nil).

Our colleagues

Wecontinuetolistenandrespondto

ourcolleagues’needs.Itisimportant

thatallourcolleaguesfeelconnected

totheSocietyandcancontribute

tooursuccess.Toachievethis,we

communicatebusinessinformationto

ourcolleaguesacrossourorganisation

inanappropriateandtimelyway.

Werecognisethatemployingpeople

fromdifferentbackgroundsandwith

arangeofexperienceenhances

thewayinwhichwework.Weare

buildingadiverseworkforceand

wemakeworkplaceadjustments

whereverwepossiblycantoprovide

aninclusiveworkingenvironmentfor

allcolleagues.

See the Engaging with our

stakeholders section of the

Strategic report for more details.

Our responsibilities in

respect of Accounting

Records and Internal Control

Weareresponsibleforensuringthat

theSociety:

•

keepsaccountingrecordsin

accordancewiththeBuilding

SocietiesAct1986('theAct');and

•

takesreasonablecaretoestablish,

maintain,documentandreview

suchsystemsandcontrolasare

appropriatetoitsbusinessin

accordancewiththerulesmadeby

thePrudentialRegulationAuthority

undertheFinancialServicesAct

2012.

Wehaveageneralresponsibilityfor

thesafeguardingoftheassetsofthe

Societyandfortakingreasonable

stepsforthepreventionanddetection

offraudandotherirregularities.

Directors’ responsibilities in

respect of the preparation

of the Annual Report and

Accounts

Thefollowingstatement,which

shouldbereadinconjunctionwith

theAuditors’responsibilitiesforthe

auditofthefinancialstatementsinthe

Independentauditors’reporttothe

membersofYorkshireBuildingSociety,

ismadebythedirectorstoexplain

theirresponsibilitiesinrelationtothe

preparationofthefinancialstatements.

WearerequiredbytheActtoprepare

financialstatements,forboththe

SocietyandtheGroup,thatgivea

trueandfairviewoftheincomeand

expenditureforthefinancialyear,

andthestateofaffairsattheend

ofthefinancialyear.Wearealso

requiredtoprovidedetailsofdirectors’

remunerationinaccordancewithpart

VIIIoftheActandregulationsmade

underit.

Inpreparingthefinancialstatements,

thedirectorsarerequiredto:

•

selectsuitableaccountingpolicies

andapplythemconsistently;

•

makejudgementsandaccounting

estimatesthatarereasonable;

•

statewhetherthefinancial

statementshavebeenprepared

inaccordancewithInternational

AccountingStandards;and

•

preparethefinancialstatementson

agoingconcernbasis,unlessitis

inappropriatetopresumethatthe

Groupwillcontinueinbusiness.

Thedisclosureandtransparencyrules

oftheFinancialConductAuthority('the

DTR')requireanannualfinancialreport

toinclude:

•

auditedfinancialstatementsforboth

theSocietyandGroup;

•

amanagementreportthatincludes

afairreviewofthebusinessand

adescriptionoftheprincipalrisks

anduncertainties(seetheStrategic

reportandtheRiskManagement

report);and

•

responsibilitystatements(see

ResponsibilityStatementsbelow).

Weareresponsibleforthe

maintenanceandintegrityof

statutoryandauditedinformationon

theSociety’swebsite.Information

publishedontheinternetisaccessible

inmanycountrieswithdifferentlegal

requirements.LawsintheUnited

Kingdomgoverningthepreparation

andcommunicationoffinancial

statementsmaybedifferentfromlaws

inotherjurisdictions.

Annual Business Statement

TheActalsorequiresthedirectorsto

prepare,foreachfinancialyear,an

annualbusinessstatementcontaining

prescribedinformationrelatingtothe

businessoftheGroup.

See pages 235 to 236 for the

2023 Annual Business Statement.

Non-financial and sustainability statement

TheSocietyaimstovoluntarilyapplytherequirementsofs414CBoftheCompaniesAct2006byincludingnon-financial

informationintendedtohelpstakeholdersunderstandourpositiononkeynon-financialmatters.Informationregardingthese

matterscanbefoundinthefollowingsectionsofthisdocument:

Directors’ duties

Section172oftheCompaniesAct2006(s172)describesthedutiesofcompanydirectorsinrespectofpromotingthe

businessandconsideringotherstakeholders.ThisdoesnotapplytotheSociety’sDirectorsasweareabuildingsocietynota

company,buttheCodeexpectsboardstoreportonhowtheyhaveconsideredthematterssetoutins172indecisionmaking.

Thetablebelowsummarisesthes172requirementsandcrossreferencestowherethisconsiderationiscoveredinother

sectionsofthisdocument.

Area Strategic report reference

Environment matters SeeBuildingagreenersocietysection

Employees SeetheInvestinginourpeoplesubsectionofOurESGprioritiessection

Social matters SeetheOurCommunitiessubsectionoftheEngagingwithourstakeholderssection

Respect for human

rights

SeetheOurCommunitiessubsectionoftheEngagingwithourstakeholderssection

Anti-corruption and

anti-bribery

SeetheAnti-briberyandanticorruptionsubsectionofOperatingresponsiblysection

Our business model SeeOurbusinessmodelsubsectionofOurpurposeandstrategysectionoftheStrategicreport

Principal risks SeetheRiskoverviewsectionoftheStrategicreport

Key performance

indicators

SeePerformanceataGlancesectionintheIntroductionandtheEngagingwithour

stakeholderssectionforadescriptionofemployeeengagementscores

Summary of s172

Requirements

Yorkshire Building Society Board Relevant disclosure

A director must act in a way

they consider, in good faith,

would most likely promote

the success of the business

for the benefit of its members

as a whole (i.e. the company’s

shareholders) and in doing so

have regard (amongst other

matters) to the:

AsamutualtheSocietydoesnothaveexternal

shareholders,weareownedbyourmembers.The

Boardiscommittedtopromotingthelong-term

successoftheSocietyforthebenefitofourcurrent

andfuturemembers.Buildingonourpurpose

toprovideRealHelpwithRealLifeourStrategic

Blueprintstrategyunderpinsourcommitmentto

thesuccessofthebusinessforourmembersboth

nowandinthefuture.

Our Business Model section

Our Purpose and Our Strategy

sections

•

likely consequences of any

decision in the long-term

OurBoardrecognisestheimportanceofensuring

thelikelyconsequencesofdecisionsinthelong

termareconsideredwhichisreflectedinour

StrategicBlueprintbuiltaroundourpurposeof

providingRealHelpwithRealLife.

Our Business Model section

Our Purpose and Our Strategy

sections

•

interests of employees TheBoardunderstandsthatourpeoplearethe

foundationofourbusinessandrecognisesthe

importanceofensuringthattheirvoiceisheard

intheboardroom.Eachpaperconsideredbythe

Boardsetsouttheimplicationsforouremployees

and,whererelevant,howtheyhavebeenconsulted

ontheproposals.

TheBoardhasalsoputinplaceaframeworkto

ensurecolleagueviewsinformitsdecision.

Our Communities subsection

of the Engaging with our

Stakeholders section

Corporate Governance report

colleague section

128 | Governance 129

Streamlined Energy and Carbon Reporting

('SECR')

UndertheStreamlinedEnergyandCarbonReporting(‘SECR’)

frameworkmandatedbytheUKgovernment,theSociety

maintainsongoingdisclosure.

TheSocietyhasimplementedthefollowingenergy

efficiencyactionsinthisreportingyear:

•

RolloutofLEDlightingupgradesto31Branches

•

LEDlightingreplacementsatYorkshireDrive–310light

fittingsreplaced

•

RolloutofAirConditioningReplacementsto8Branches

•

Acquiredone100%electricmaintenancevehicleto

replaceadieselmaintenancevehicle

Comprehensive insights into the Society’s

environmental accomplishments, commitments,

and approach to managing climate related risks are

available within the Building a greener society section

of the Strategic report.

Limited level assurance

RicardoEnergy&Environment,ourexternalcarbon

footprintverifiers,havecarriedoutalimitedlevel

assurancereviewofthesefigures.Thisreviewassessed

datacollectionandcalculationmethodologiesagainst

theapplicablerequirements.Basedontheprocessand

proceduresconducted,theyhaveconcludedthatthereis

noevidencethatthe2023GHGassertion:isnotmaterially

correctandisnotafairrepresentationofGHGdataand

information,hasnotbeenpreparedinaccordancewiththe

ISO14064-1

specificationwithguidanceforthevalidation

andverificationofgreenhousegasassertations

andthe

GHGProtocolCorporateStandard.Thisstatementisvalid

forthecarbonfootprintverificationreviewfortheperiods

from1January2023,to31December2023.

Summary of s172

requirements

Yorkshire Building Society Board Relevant disclosure

•

need to foster business

relationships with

suppliers, customers and

others

TheSociety’sBoardiscommittedtofosteringand

monitoringtheeffectivenessofourwiderbusiness

relationshipswithallourkeystakeholders.Thiswas

reflectedintheshapingofourStrategicBlueprint

whichwassupportedthroughdetailedstakeholder

engagementexercises.

Our Purpose and Our Strategy

sections

Our Communities subsection

of the Engaging with our

Stakeholders section

•

impact of the business’s

operations on the

community and the

environment

Theenvironment,socialandgovernanceimpactof

theSocietyunderpinstheStrategicBlueprintand

eachpaperconsideredbytheBoardsetsoutany

socialorenvironmentalimplicationsofadecision

ensuringthattheBoardhasregardtotheimpactof

theseaspartofitsoverallapproachtopromoting

thesuccessoftheSociety.

Our Communities subsection

of the Engaging with our

Stakeholders section

Building a Greener Society

section

•

desirability of maintaining

a reputation for high

standards of business

conduct

TheBoard’scommitmenttomaintaininghigh

standardsofbusinessconducthelpstoensurethe

long-termsuccessoftheSocietyforourcurrent

andfuturemembers,customers,colleaguesandall

otherstakeholders.TheSociety’sbehaviourshelp

drivethecultureandsupportsthedeliveryofthe

StrategicBlueprint.

Our Business Model section

Our Purpose and Our Strategy

sections

•

need to act fairly as

between members (i.e. the

company’s shareholders)

TheSocietydoesnothaveexternalshareholders,

insteadourmembersareourownersandatthe

heartofwhatwedo.TheBoardunderstandsthe

importanceofengagingwithourmembersandis

committedtoensuringtheirviewsinformfuture

decisionmakingtoensureitisfairandinthe

interestsofourmembershipasawhole.

Our Communities subsection

of the Engaging with our

Stakeholders section

Corporate Governance report

member’s section

Internal Energy Usage (kWh) 2023 2022

Heatingandemergencyfuelusage 3,982,219 5,165,030

Companyownedvehicletransport 7,706 3,509

Scope 1 3,989,925 5,168,539

NationalGridElectricityConsumption 8,400,778 8,183,123

OnsiteSolarElectricityGenerationConsumption 150,157 144,500

CompanyownedEVvehicleusage 200 -32

Scope 2 8,551,135 8,327,623

Leased/hiredbusinesstransport 520,637 382,648

Scope 3 520,637 382,648

Total 13,061,697 13,878,810

tCO2e tCO2e

Total emissions from internal energy usage 2,591 2,619

Energy use and emissions report

AspertheGreenhouseGasProtocolCorporateAccountingandReportingStandard(‘GHGProtocol’)31,energyusageand

emissionsfromourbusinessactivitiesareclassifiedasfollows:

31 Greenhousegas(GHG)emissionsdataiscalculatedinaccordancewiththeGreenhouseGasProtocol,awidelyrecognisedaccountingframeworkformeasuringand

managingemissions.OurmethodologyhasbeenpreparedusingguidancefromISO-14064-1standardspecifications.

32 During2022reportingperiod,YBSdidnotownanyEVsandthereforethereisnoreportingonthiscategoryduringthatperiod.

Directors' report (continued)

130 | Governance 131

Methodology

OurapproachtocalculatinggreenhousegasemissionsandenvironmentalimpactwithintheGroupalignswiththeGHG

Protocol.Emissionsarereportedinmetrictonnesofcarbondioxideequivalent(‘tCO2e’),whilstenergyusageisquantifiedin

kilowatthours(‘kWh’).TheSocietyusesthemostuptodateUKGovernmentGHGConversionFactorsforCompanyReporting

exceptfor'market-based'renewableelectricityandgastariffs.AllemissionsandenergyusageareUK-basedapartfroma

smallpercentageofGHGScope3businesstravel.TheintensitymetricthattheSocietyusestonormaliseemissionsforannual

comparisonistCO2eper£mincome,andpercolleague.ForcalendaryearendingDecember2023,theprinciplesprovidedby

theGHGProtocolScope2GuidancehavebeenappliedtocalculatetheSociety'sScope1'market-based'emissionsfromthe

consumptionofgassourcedfromthegrid.

Intensity ratios

2023 2022

Location

tCO

Market

tCO

Location

tCO

Market

tCO

Scope 1 Generationofheat(gasconsumption) 728 - 941 -

Back-upgeneratorfuel 0.11 0.11 0.04 0.04

VehiclesusedonSocietybusiness 2 2 1 1

Refrigerantgases 3 3 7 7

Total 733 5 949 8

Scope 2 Electricityconsumption 1,740 - 1,582 -

Electricityforownedvehicle 0.04 0.04 - -

Total 1,740 0 1,582 0

Scope 3 Well-to-tank–Electricity 419 33 413 35

Well-to-tank–Land,AirTravelandFuels 177 57 197 36

Transmissionanddistributionlosses-Electricityconsumption 150 150 145 145

Businesstravel–Transport 268 268 161 161

Businesstravel–Hotel 24 24 15 15

Homeworkingandcommuting33 3,648 3,648 - -

Watersupplyandtreatment 12 12 8 8

Wastedisposal 9 9 8 8

Total 4,707 4,201 947 408

Total Carbon Footprint 7,180 4,206 3,478 416

2023 2022

Income GHG Emissions Intensity ratio Income GHG Emissions Intensity ratio

Income intensity ratio £m tCO

e tCO

e/£m £m tCO

e tCO

e/£m

Location

787

7,180 9.1

811

3,479 4.3

Market 4,206 5.3 416 0.5

Colleague intensity ratio Colleagues tCO

e tCO

e/person Colleagues tCO

e tCO

e/person

Location

4,77334

7,180 1.5

4,530

3,479 0.8

Market 4,206 0.9 416 0.1

Scope 1

Scope1emissions‘Location-based’

emissionsencapsulatethosestemming

fromthegenerationofemissions

throughburninggasorfuelsfor

heatingourGroupoccupiedbuildings,

hydrotreatedvegetableoil(‘HVO’)use

withinourenergygenerators,Society

ownedvehicles(facilitymanagement

vans)andrefrigerant/airconditioning

gaseslosttotheatmospherethrough

pipeworkleakages.During2023,YBS

procured100%ofthegassourced

toheatourbuildingsfromthegrid

backedbyRenewableGasGuarantees

ofOrigin(‘RGGO’).RGGO’sarea

typeofEnergyAttributeCertificate

thatmeettheGHGProtocolScope2

qualitycriteriaandarereflectedinour

‘market-based’calculations.35

Scope 2

Theemissionscalculatedwithin

Scope236accountforalldirect

electricityusagewithinYBSGroup

ownedbuildingsandSocietyowned

electricvehicles.'Location-based'

calculationsareassociatedwiththe

generationofpurchasedelectricity

fromthegridandenableusto

trackandmanageourconsumption.

TheSocietyhaschosentosource

electricityfromasuppliersupported

by100%renewablesourcesas

evidencedbyRenewableEnergy

GuaranteesofOrigin(‘REGO’)

certificates.Emissionsassociated

withthischosentariffofelectricity

calculations.

Scope 3

Scope3encompassesindirect

businessactivities.Wecalculatethese

emissionsbasedonavailabledata

andwewillcontinuetodevelopour

calculationsoftheseemissions.This

yearwehavecontinuedtoinclude

ourbusinesstravel37,well-to-tank

(‘WTT’)fuelandelectricity,our

operationalwasteandwater38.For

2023weaddedhomeworkingand

employeecommutingemissions.

Themethodologyforcalculating

ouremployeecommutingand

homeworkingemissionsisbelow.

Employee commuting

YBSconductedanemployeesurvey

whichcontainedinformationon

whatcommutingmethodsareused,

thedistanceofthecommute,how

frequentlyapersoncommutes,and

detailsabouttheenginesizeand

fuelsusedinacarifacarisused

tocommute.Thetotalmileageper

commutingtypeperyearwasthen

calculated39.Dataarrivedwith

stipulationsoftherespondent’spay

gradeandworkinglocation.After

theaforementionedprocesswas

completed,weextrapolatedthe

resultingenergyconsumptionbythe

gapfromhowmanyrespondentsare

atalocationandpaygrade,versusthe

overalltotal.

Homeworking and appliance

energy

TheSocietyconductedanemployee

surveywhichrequestedinformation

onemployeebuildingandheating

types,alongsidetheroomsizeworked

within,andemissionswerecalculated

usingtheseresponses40.Benchmarks,

sourcedfromTheCharteredInstitution

ofBuildingServicesEngineers(‘CIBSE’),

allowedforthecalculationofaverage

energyusedforheatingandelectrical

loadwithinthespecifiedhousingtype

andwithinthesquaremetresized

room.Theenergyconsumedwithinthe

roomwasthenmultipliedupbased

onhowmanydaysaweektheywork

fromhometocalculatetheenergy

consumedinayear.

Surveyresponsesalsocontained

informationonwhatappliances

areusedwhilstworkingfromhome

andthequantitiesofthoseused.

AssumptionsweremadeonthekW

ratingofthosetechnologiesandhow

manyhoursadaytheappliances

wouldbeinuse.

Going concern

Thedirectorsconfirmthatthey

considerthattheGroupandthe

Societyhasadequateresourcesto

continueinexistenceforatleast12

monthsfromthedateofthisreport.

Thisconfirmationismadeafter

havingreviewedassumptionsabout

futuretradingperformance,liquidity

requirements,capitalrequirements

andorganisationalsustainability,

aswellasplannedimprovements

todataandregulatoryreporting

controls.Thedirectorsalsoconsidered

potentialrisksanduncertaintiesinthe

business,credit,marketandliquidity

risks,includingtheavailabilityand

repaymentprofileoffundingfacilities.

Details of how the Board monitor

longer term risks are included in

the Risk Management report in

the Governance section.

Basedontheabove,togetherwith

availablemarketinformationandthe

directors’knowledgeandexperience

ofthebusinessandourmarkets,the

directorscontinuetoadoptthegoing

concernbasisinpreparingtheAnnual

ReportandAccountsfortheyear

ended31December2023.

35 Estimateshavebeenmadefor2023Q4naturalgasconsumptionforheatingduetounavailableactualactivitydata.Theseestimateswerebasedon2022usagedata

ormorerecentavailableusagedata.

36 Estimateshavebeenmadefor2023Q4electricityconsumptionwhereactualactivitydatawasunavailable.Theseestimateswerebasedon2022dataormorerecent

availableusagedata.

37 Mostbusinessdatawasprovidedinmileage,howeverwhereunavailable,costdatawasprovided.Thecostisconvertedtomileageusingthemostuptodatebusiness

travelconversionfactoravailableatExpensesandbenefits:businesstravelmileageforemployees'ownvehicles:Rulesfortax-GOV.UK(www.gov.uk)

38 Estimateshavebeenmadefor2023Q4waterandwasteconsumptionwhereactivitydatawasunavailableduetotheinvoicingperiod.Theseestimateswereused

basedon2022dataandmorerecentusagedataaverages.Watertreatmentisbasedonestimationthat95%ofwatersupplywouldbecometreatedwater.

39 Emissionsandconversionswerecalculatedusingtheappropriatefactorsfromthe2023UKGovernmentGHGConversionFactorsforCompanyReportingproducedby

DESNZandDEFRA.

40 Emissionsandconversionswerecalculatedusingtheappropriatefactorsfromthe2023UKGovernmentGHGConversionFactorsforCompanyReportingproducedby

DESNZandDEFRA.

33 Thisfigureincludeswell-to-tankandtransmissionanddistributionlosseswhichrelatetohomeworkingandcommuting.

34 Thisincludesallfull-andpart-timecolleaguesaswellasallcontractors,consultants,managedservicesandagencystafffortheperiod1January2023–31December2023.

Directors' report (continued)

Streamlined Energy and Carbon Reporting ('SECR') (continued)

Carbon footprint

132 | Governance 133

Viability

TheUKCorporateGovernanceCode('theCode'),whichthe

SocietyadoptstotheextentthatitappliestoaBuilding

Society,requiresthedirectorstoassesstheprospectsand

ongoingviabilityoftheGroupoveralongerperiodthanthe

12monthsrequiredforthegoingconcernassessment.

Forthepurposesofassessinglongertermviability,the

directorshavedeterminedthreeyearstobethemost

appropriateperiodasthiscoversthetypicaltermofmostof

ourfixedrateproductsandisthelongestperiodoverwhich

thedirectorsconsiderthattheycanformareasonablyfirm

viewoverthemacroeconomicenvironmentandassociated

keydriversofbusinessperformance.Thedirectorshave

thereforeassessedtheviabilityoftheGroupandthe

SocietyoverthethreeyearstoDecember2026,taking

accountofthecurrentpositionandthepotentialimpactof

therisksdocumentedintheStrategicreportandtheRisk

Managementreport.

Ourfinancialplanningprocessconsistsofanoperating

planforthenextfinancialyearandacorporateplanfor

thefollowingadditionalfourfinancialyears.Theone-year

operatingplanhasagreaterlevelofcertaintyandisused

tosetnear-termtargets.Thefive-yearcorporateplanisless

certainthantheoperatingplanbutprovidesalongerterm

outlookagainstwhichstrategicdecisionscanbemade.

ThefinancialplanningprocessforecaststheGroup’s

profitability,capitalposition,liquidityandotherkeyfinancial

metricsovertheperiod,includingregulatorymeasuressuch

asMREL(MinimumRequirementforEligibleLiabilities).

Thesemetricsaresubjecttosensitivityanalysisthroughthe

annualGroupICAAP(InternalCapitalAdequacyAssessment

Process)andILAAP(InternalLiquidityAdequacyAssessment)

processes.TheGroupstressesitscapitalandliquidityplans,

under‘severebutplausible’stresstestscenarios,inlinewith

PRArequirements.

TheICAAPstresstestensuresthattheplanprojectionsfor

capitalrequirementsandcapitalgenerationareresilientto

stressesshouldtheenvironmentdeterioratebeyondthe

levelscurrentlyenvisaged.TheGroupmaintainscapital

buffersthataresufficienttoabsorbthelevelofcapital

erosioninthestressscenariooverandaboveitsminimum

capitalrequirement,ensuringthattheGroupcancontinueto

meetitsminimumcapitalrequirementsthroughouta‘severe

butplausible’stress.TheILAAPstresstestensuresthatthe

Groupholdsadequateliquidassetsintermsofbothquality

andquantitysufficienttomeetbothitsbusiness-as-usual

liquidityneedsandincreasedrequirementsthatcouldoccur

asaresultoftheGroupenteringintoaperiodofstress.

PlannedliquiditylevelsmeettheGroup’skeyriskappetite

measuresoveraperiodofthreeyears.

TheBoardhasundertakenarobustassessmentofthe

principalrisksanduncertaintiesthatcouldthreatenthe

businessmodel,futureperformance,solvencyorliquidity

oftheGroupandtheSociety.Basedonthisassessment,

thedirectorshaveareasonableexpectationthattheGroup

andtheSocietywillbeabletocontinueinoperation

andmeetitsliabilitiesastheyfalldueovertheperiodto

December2026.

Responsibility statements

AsrequiredbytheDisclosureGuidanceandTransparency

RulesoftheFinancialConductAuthority,thedirectors

confirmthat,tothebestoftheirknowledge:

•

Thefinancialstatementsgiveatrueandfairviewofthe

assets,liabilities,financialpositionandprofitorlossofthe

SocietyandtheGroup;and

•

TheStrategicreportincludesafairreviewofthe

developmentandperformanceofthebusinessandthe

positionoftheSocietyandtheGroup,andtheStrategic

reportandtheRiskManagementreportcontaina

descriptionoftheprincipalrisksanduncertainties.

Fair, balanced and understandable

AsrequiredbytheUKCorporateGovernanceCode,which

theGroupadoptstotheextentthatitappliestoaBuilding

Society,thedirectorsaresatisfiedthattheAnnualReport

andAccounts,takenasawhole,arefair,balancedand

understandableandprovidetheinformationnecessaryto

assessourperformance,businessmodelandstrategy.

External auditor

ThereappointmentofPricewaterhouseCoopersLLPasthe

Group’sexternalauditoristobeproposedatthe2024AGM.

Thedirectorsinofficeatthedateofthisreportconfirm

that,sofarastheyareaware,thereisnorelevantaudit

informationofwhichtheexternalauditorisunaware.Each

directorhastakenallthestepsnecessaryinordertomake

themselvesawareofanyrelevantauditinformationandto

establishthattheexternalauditorsarealsoawareofthat

information.

John Heaps

ChairoftheBoard

28February2024

Directors' report (continued)

Report on the audit of the financial statements

Opinion

In our opinion, Yorkshire Building Society’s Group financial statements and Society financial statements (the “financial

statements”):

•

give a true and fair view of the state of the Group’s and Society’s affairs as at 31December 2023 and of the Group’s and

Society’s income and expenditure and the Group’s and Society’s cash flows for the year then ended;

•

have been properly prepared in accordance with UK‑adopted international accounting standards; and

•

have been prepared in accordance with the requirements of the Building Societies Act 1986.

We have audited the financial statements, included within the Annual Report and Accounts (the “Annual Report”), which

comprise: the Group and Society Balance Sheets as at 31December 2023; the Group and Society Income Statements,

Statements of Comprehensive Income, Statements of Cash Flows and Statements of Changes in Members’ Interest and Equity

for the year then ended; and the notes to the financial statements, which include a description of the significant accounting

policies.

Our opinion is consistent with our reporting to the Audit Committee.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our

responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements

section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our opinion.

Independence

We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the

financial statements in the UK, which includes the FRC’s Ethical Standard applicable to public interest entities and we have

fulfilled our other ethical responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non‑audit services prohibited by the FRC’s Ethical Standard were not

provided to the Group.

Other than those disclosed in the Note 6 to the financial statements, we have provided no non‑audit services to the Group in

the period from 1 January 2023 to 31December 2023.

Our audit approach

Overview

Materiality

Group financial statements

•

£22.8m (2022: £21.3m)

•

5% of the current year profit before tax adjusted to exclude net gains and losses arising from financial instruments held at

fair value

Society financial statements

•

£15.7m (2022: £17.6m)

•

5% of the average profit before tax of the last three years adjusted to exclude net gains and losses arising from financial

instruments held at fair value

Audit scope

•

The scope of our audit and the nature, timing and extent of audit procedures performed were determined by our risk

assessment, the financial significance of components and other qualitative factors.

•

We performed audit procedures over components considered financially significant in the context of the Group (full scope

audit) or in the context of individual primary statement account balances (audit of specific account balances). We also

performed analytical review procedures to mitigate the risk of material misstatement in the residual components.

Independent auditors’ report to the members of Yorkshire Building Society

134 | Governance 135

137

Report on the audit of the financial statements (continued)

Our audit approach (continued)

Overview (continued)

Key audit matters

•

The application of key judgements and assumptions in determining expected credit loss (‘ECL’) provisions on loans and

advances to customers (Group and Society);

•

Fair value hedge accounting in respect of foreign currency debt issuances (Group and Society); and

•

The appropriateness of estimates used within the valuation of the funded defined benefit pension obligation (Group and

Society).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial

statements. In particular, we looked at where the directors made subjective judgements, for example in respect of significant

accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all

of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was

evidence of bias by the directors that represented a risk of material misstatement due to fraud.

Capability of the audit in detecting irregularities, including fraud

Irregularities, including fraud, are instances of non‑compliance with laws and regulations. We design procedures in line

with our responsibilities, outlined in the Auditors’ responsibilities for the audit of the financial statements section, to detect

material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting

irregularities, including fraud, is detailed below.

Based on our understanding of the Group and its industry, we identified that the principal risks of non‑compliance with laws and

regulations related to the Financial Conduct Authority’s (‘FCA’) and Prudential Regulation Authority’s (‘PRA’) regulations, and we

considered the extent to which non‑compliance might have a material effect on the financial statements. We also considered

those laws and regulations that have a direct impact on the financial statements such as the Building Societies Act 1986. We

evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the

risk of override of controls), and determined that the principal risks were related to posting manual journal entries to manipulate

financial performance and the application of management bias in the assumptions underpinning significant accounting

estimates. Audit procedures performed included:

•

Enquiries of management, those charged with governance and the Group’s in‑house legal counsel throughout the year,

including consideration of known or suspected instances of non‑compliance with laws and regulations;

•

Assessment of matters reported on the Group’s whistleblowing helpline and the results of management’s investigation of

such matters;

•

Review of internal audit reports throughout the year, in so far as these related to the financial statements;

•

Review of correspondence with, and reports to, the PRA and FCA;

•

Incorporation of an element of unpredictability in our testing through altering the nature, timing and/or extent of work

performed;

•

Challenging estimates and judgements made by management in forming significant accounting estimates in particular

those relevant to the key audit matters below; and

•

Identifying and testing any higher risk manual journal entries.

There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of

non‑compliance with laws and regulations that are not closely related to events and transactions reflected in the financial

statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one

resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations

or through collusion.

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the

financial statements of the current period and include the most significant assessed risks of material misstatement (whether

or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the

allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we

Independent auditors’ report to the members of Yorkshire Building Society

(continued)

make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a

whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

This is not a complete list of all risks identified by our audit. The key audit matters below are consistent with last year.

Key audit matter How our audit addressed the key audit matter

The application of key judgements and assumptions in

determining expected credit loss (‘ECL’) provisions on loans

and advances to customers (Group and Society)

As at 31December 2023:

•

The Group has gross loans and advances to customers of

£46,876m, with ECL provisions of £60.0m held against them.

•

The Society has gross loans and advances to customers of

£10,951m, with ECL provisions of £30.7m held against them.

The determination of ECL provisions is inherently judgemental and

involves setting assumptions using forward looking information

reflecting the Group’s view of potential future economic events.

This can give rise to increased estimation uncertainty and the need

for post model adjustments (“PMAs”), which is compounded by the

inflationary and interest rate environment in the UK.

The Group holds an Affordability PMA of £7.1m, which is

determined by applying a lifetime loss calculation to those

customers identified as being at the greatest risk of going into

default due to the rising cost‑of‑living.

The Group holds two Model Performance PMAs totaling £10.0m,

primarily reflecting the model’s current underprediction of

probability of default.

We consider the following elements of the determination of ECL

for residential mortgages to be significant:

•

The determination of forward‑looking economic scenarios

used in the core models and the weightings assigned to those

scenarios, particularly in respect of assumptions relating to

future house prices and unemployment levels since these

have the largest impact on the provision, and

•

The appropriateness of post‑model adjustments that are

recorded to take into account latent economic risks and model

performance.

The relevant disclosures are given in Note31.

Management’s associated accounting policies are detailed in

Note1.

Management’s judgements in the application of accounting

policy and critical estimates are disclosed in Note 1 and the

considerations of the effect of the future economic environment

are given in Note31.

The Audit Committee’s consideration of the matter is described in

the Audit Committee Report.

With the support of our credit risk modelling specialists and

economics experts, we performed the following procedures.

We understood and critically assessed the appropriateness of

the ECL accounting policy and model methodologies used by

management.

Forward looking economic assumptions and weightings

assigned to them

We assessed the reasonableness of the forward looking

economic scenarios and weightings assigned to them, and

benchmarked them against market consensus data.

The severity of the scenarios were evaluated with reference

to external forecasts, including data from historical economic

downturns, to assess their reasonableness.

We critically assessed the assigned weightings, using our

independently developed model to analyse management’s

selected weights with reference to observed historical losses

and the current macroeconomic environment, including an

increased focus on the economic variables most relevant to the

determination of ECL.

Post model adjustments

Based on our knowledge and understanding of the limitations in

management’s models and emerging industry risks, we evaluated

the appropriateness of the relevant post model adjustments

proposed by management.

Our testing included reperforming the modelling of key

assumptions and their application in the determination of

modelled ECL.

We then independently reperformed a sample of management’s

model monitoring tests, which compare actual outcomes to those

predicted by the models.

Our testing of the related Model Performance PMAs included the

following:

•

understanding and evaluating management’s methodology,

and implementation thereof, including the use of

assumptions;

•

independently recalculating the under‑prediction factors

using the model monitoring testing, and testing their

implementation in the PMA calculation through code review;

and

•

testing the accuracy of other key data inputs used in the

calculation.

Our testing of the Affordability PMA included critically assessing

the key drivers and assumptions and obtaining supporting

evidence to evaluate conceptual soundness and appropriateness.

We substantively tested the implementation of these

assumptions in the calculation used to estimate the PMA.

From the evidence we obtained and our assessment of the

economic scenarios, associated weightings, and the model

performance and economic risk PMAs, we are satisfied with the

reasonableness of the ECL provision.

136 | Governance

139

Independent auditors’ report to the members of Yorkshire Building Society

(continued)

Report on the audit of the financial statements (continued)

Our audit approach (continued)

Key audit matters (continued)

Key audit matter How our audit addressed the key audit matter

Fair value hedge accounting in respect of foreign currency

debt issuances (Group and Society)

The business enters into derivative contracts in order to manage

and economically hedge interest and foreign exchange rate

risk on foreign currency debt issuances. These arrangements

create accounting mismatches which are addressed through

designating the debt instruments into fair value hedge accounting

relationships.

These hedge accounting relationships are maintained in

spreadsheets with associated reliance on manual processing,

which elevates the risk of operational errors and hence the risk

that financial reporting is not compliant with IFRS requirements.

The relevant disclosures are given in Note 17.

Management’s associated accounting policies are detailed in

Note1.

The Audit Committee’s consideration of the matter is described in

the Audit Committee Report.

We understood the nature of the hedge accounting relationships

designated by management in the context of the risk

management strategies that they are associated with.

For a sample of hedging relationships, we obtained and

evaluated the hedge accounting documentation to assess

whether each hedge was compliant with the requirements of

accounting standards.

For a sample of hedging relationships which are maintained in

manual spreadsheets, we:

•

revalued hedging derivatives and underlying hedged items;

•

re‑performed hedge effectiveness calculations, agreeing key

terms to underlying support; and

•

tested that the hedge accounting was appropriately

recorded.

Based on the evidence obtained, we determined the application

of hedge accounting to be appropriate.

The appropriateness of estimates used within the valuation

of the funded defined benefit pension obligation

(Group and Society)

The Group and Society operates funded and unfunded defined

benefit pension schemes for certain current and former members

of staff. The present value of the funded defined benefit obligation

at 31 December 2023 is £572.5m.

The critical assumptions in the measurement of the defined

benefit obligation are discount rate, inflation and mortality rates.

Changes in these assumptions can have significant impacts on the

valuation.

During the current year, the value of the scheme obligations has

reduced by £20.9m. The decrease is a result of fall in assumed

long‑term price inflation, reduction in life expectancies and

change in membership data following completion of the 2022

funding valuation. This is offset by reduction in the discount rate

and inflation experience in 2023 being higher than assumed. The

value of the obligation is based on a roll‑forward of projected

benefit cash flows from the 31 December 2022 triennial valuation.

The relevant disclosures are given in Note 17.

Management’s accounting policies are detailed in Note 1.

Management’s judgements in application of accounting policy and

critical estimates are disclosed in Note 1.

The Audit Committee’s consideration of the matter is described in

the Audit Committee Report.

We considered the independence, objectivity and competence

of the third‑party actuaries engaged by management to perform

their valuation.

We confirmed our understanding of the actuary’s roll‑forward

methodology used in determining the valuation of the defined

benefit obligation. We tested a sample of member data produced

as part of the triennial valuation back to source documents.

We have engaged our actuarial experts to evaluate the

judgements and estimates made by management in determining

the discount rate, inflation and mortality assumptions used in

calculating the defined benefit obligation.

We reviewed the third‑party actuaries’ report and enquired

of those actuaries to obtain an understanding of how key

assumptions are set and the methodologies adopted in

calculating the defined benefit obligation. We assessed the

reasonableness of the assumptions and methodologies adopted

using our knowledge of current market practice, PwC‑developed

benchmarks and external market data.

Based on the work performed and evidence obtained, we found

the methodology to be compliant with accounting standards and

key assumptions to be within our independent derived ranges.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial

statements as a whole, taking into account the structure of the Group and the Society, the accounting processes and controls, and

the industry in which they operate.

The Group comprises the Society, its wholly owned subsidiaries and special purpose vehicles over which, under accounting

standards, the Society has control. Each entity is located in the UK and is considered to be a financial reporting component.

In establishing the overall approach to our audit of the financial statements, we determined the type of work that was required to

be performed over each component. The Society and Accord Mortgages Limited were considered individually financially significant

in the context of the Group’s consolidated financial statements and were hence full scope audit components.

We considered the individual financial significance of other components in relation to primary statement account balances. We

considered the presence of any significant audit risks and other qualitative factors (including history of misstatements through

fraud or error). Any component which was not already included as a full scope audit component but was identified as being

individually financially significant in respect of one or more account balances was subject to specific audit procedures over those

account balances.

All remaining components were subject to procedures which mitigated the risk of material misstatement, including Group level

analytical review procedures.

All audit work was performed in the UK and by the same engagement team.

The impact of climate risk on our audit

As part of our audit we made enquiries of management to understand the process management adopted to assess the extent of

the potential impact of climate risk on the Group and Society’s financial statements and support the disclosures made in relation to

climate change in the Annual Report. In addition to enquiries with management, we also:

•

Read the Group’s Environmental and Climate Change policies and framework to consider the impact on our audit risk

assessment;

•

Understood the exposure of the Group and Society’s mortgage portfolios to physical and transition risks by examining the

output of assessments performed by management during the year. Management considers the impact of climate risk does

not give rise to a material financial statement impact; and

•

We also considered the consistency of the disclosures in relation to climate change (including the disclosures in the Task

Force on Climate‑related Financial Disclosures (TCFD) section) within the Annual Report with the financial statements and

our knowledge obtained from our audit.

Our procedures did not identify any material impact in the context of our audit of the financial statements as a whole, or our key

audit matters for the year ended 31 December 2023.

138 | Governance

141

Independent auditors’ report to the members of Yorkshire Building Society

(continued)

Report on the audit of the financial statements (continued)

Our audit approach (continued)

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.

These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and

extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of

misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall materiality Group financial statements

£22.8m (2022: £21.3m).

Society financial statements

£15.7m (2022: £17.6m).

How we

determined it

5% of the current year profit before tax adjusted to

exclude net gains and losses arising from financial

instruments held at fair value.

5% of the average profit before tax of the last three years

(2021 – 2023), each adjusted to exclude net gains and

losses arising from financial instruments held at fair value.

Rationale for

benchmark applied

Profit before tax is a primary measure used by

stakeholders in assessing the performance of the Group

and Society and is a generally accepted benchmark for

determining audit materiality.

Management assesses the performance of the business

using the “Core Operating Profit” measure, which itself

excludes net gains and losses on financial instruments

held at fair value through the income statement, as

these are not considered to reflect the underlying

performance of the business. The fair value movement

relates predominantly to derivatives which are not yet in

accounting hedging relationships, rather than underlying

business performance.

For the Society, we have used a three‑year average of the

adjusted profit measure (2021‑2023) to normalise for

volatility in underlying business performance over that

period.

For each component in the scope of our group audit, we allocated a materiality that is less than our overall Group materiality.

The range of materiality allocated across components was £15.2m to £21.7m.

We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and

undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope

of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example

in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to £17.1m for the Group

financial statements and £11.8m for the Society financial statements.

In determining the performance materiality, we considered a number of factors – the history of misstatements, risk

assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our

normal range was appropriate.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £1.1m

(2022: £1.0m) in respect of the Group and £0.8m (2022: £0.8m) in respect of Society as well as misstatements below these

amounts that, in our view, warranted reporting for qualitative reasons.

Conclusions relating to going concern

Our evaluation of the directors’ assessment of the Group’s and the Society’s ability to continue to adopt the going concern

basis of accounting included:

•

A risk assessment to identify factors that could impact the going concern basis of accounting, including the current and

forecast financial performance;

•

Evaluation of management’s going concern assessment, including consideration of the impact of current economic

environment;

•

Evaluation of management’s forecasts, including liquidity and regulatory capital over the going concern period;

•

Review of regulatory correspondence and reports provided to governance forums; and

•

Evaluation of the appropriateness of the relevant disclosures in the financial statements.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the Group’s and the Society’s ability to continue as a going concern

for a period of at least twelve months from the date on which the financial statements are authorised for issue.

In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s

and Society’s ability to continue as a going concern.

In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material

to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors

considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant

sections of this report.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our

auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements

does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise

explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,

consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained

in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material

misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial

statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that

there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based

on these responsibilities.

With respect to the Annual Business Statement and Directors’ Report we also considered whether the disclosures required by

the Building Societies Act 1986 have been included.

Based on our work undertaken in the course of the audit, the Building Societies Act 1986 requires us also to report certain

opinions and matters as described below.

Annual Business Statement and Directors’ Report

In our opinion, based on our work undertaken in the course of the audit:

•

the Annual Business Statement and the Directors’ Report have been prepared in accordance with the requirements of the

Building Societies Act 1986;

•

the information given in the Directors’ Report for the year ended 31 December 2023 is consistent with the accounting

records and the financial statements; and

•

the information given in the Annual Business Statement (other than the information upon which we are not required to

report) gives a true representation of the matters in respect of which it is given.

In light of the knowledge and understanding of the Group and Society and their environment obtained in the course of the

audit, we did not identify any material misstatements in the Directors’ Report.

140 | Governance

143

Corporate governance statement

ISAs (UK) require us to review the directors’ statements in relation to going concern, longer‑term viability and that part of the

corporate governance statement relating to the Society’s compliance with the provisions of the UK Corporate Governance

Code, which the Listing Rules of the Financial Conduct Authority specify for review by auditors of premium listed companies.

Our additional responsibilities with respect to the corporate governance statement as other information are described in the

Reporting on other information section of this report.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate

governance statement is materially consistent with the financial statements and our knowledge obtained during the audit,

and we have nothing material to add or draw attention to in relation to:

•

The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;

•

The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging

risks and an explanation of how these are being managed or mitigated;

•

The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going

concern basis of accounting in preparing them, and their identification of any material uncertainties to the Group’s and

Society’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial

statements;

•

The directors’ explanation as to their assessment of the Group’s and Society’s prospects, the period this assessment covers

and why the period is appropriate; and

•

The directors’ statement as to whether they have a reasonable expectation that the Society will be able to continue in

operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures

drawing attention to any necessary qualifications or assumptions.

Our review of the directors’ statement regarding the longer‑term viability of the Group and Society was substantially less in

scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;

checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and

considering whether the statement is consistent with the financial statements and our knowledge and understanding of the

Group and Society and their environment obtained in the course of the audit.

In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of

the corporate governance statement is materially consistent with the financial statements and our knowledge obtained

during the audit:

•

The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and

provides the information necessary for the members to assess the Group’s and Society’s position, performance, business

model and strategy;

•

The section of the Annual Report that describes the review of effectiveness of risk management and internal control

systems; and

•

The section of the Annual Report describing the work of the Audit Committee.

We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the Society’s

compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing

Rules for review by the auditors.

Independent auditors’ report to the members of Yorkshire Building Society

(continued)

Report on the audit of the financial statements (continued)

Responsibilities for the financial statements and the audit

Responsibilities of the directors for the financial statements

As explained more fully in the Directors’ responsibilities in respect of the preparation of the Annual Report and Accounts,

the directors are responsible for the preparation of the financial statements in accordance with the applicable framework

and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they

determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether

due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group’s and Society’s ability to continue

as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting

unless the directors either intend to liquidate the Group and Society or to cease operations, or have no realistic alternative

but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a

high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial

statements.

Our audit testing might include testing complete populations of certain transactions and balances, possibly using data

auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete

populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we

will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting

Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only for the Society’s members as a body in accordance with

Section 78 of the Building Societies Act 1986 and for no other purpose. We do not, in giving these opinions, accept or assume

responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come

save where expressly agreed by our prior consent in writing.

142 | Governance

Financial Statements

Income statements 146

Statements of comprehensive income 147

Balance sheets 148

Statements of changes in

members’ interest and equity 149

Statements of cash flows 151

Notes to the financial statements 152

Independent auditors’ report to the members of Yorkshire Building Society

(continued)

Other required reporting

Building Societies Act 1986 exception reporting

Under the Building Societies Act 1986 we are required to report to you if, in our opinion:

•

adequate accounting records have not been kept by the Society; or

•

the Society financial statements are not in agreement with the accounting records; or

•

we have not received all the information and explanations and access to documents we require for our audit.

We have no exceptions to report arising from this responsibility.

Appointment

Following the recommendation of the Audit Committee, we were appointed by the members on 30 April 2019 to audit

the financial statements for the year ended 31 December 2019 and subsequent financial periods. The period of total

uninterrupted engagement is 5 years, covering the years ended 31 December 2019 to 31 December 2023.

Other Matter

In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these

financial statements will form part of the ESEF‑prepared annual financial report filed on the National Storage Mechanism

of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’

report provides no assurance over whether the annual financial report will be prepared using the single electronic format

specified in the ESEF RTS.

Heather Varley (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

Leeds

28 February 2024

145144 | Governance

Income Statements

For the year ended 31December 2023

		Group		Society
		2023	2022	2023	2022
	Notes	£m	£m	£m	£m
Interest revenue calculated using the effective interest rate method	3	1,954.6	1,202.6	2,905.0	1,214.7*
Other interest revenue	3	1,011.7	234.4	1,011.5	234.2*
Interest revenue	3	2,966.3	1,437.0	3,916.5	1,448.9
Interest expense	4	(2,180.3)	(712.9)	(3,308.6)	(992.2)
Net interest income		786.0	724.1	607.9	456.7
Fee and commission revenue		20.0	21.6	7.6	8.7
Fee and commission expense		(16.6)	(16.3)	(7.4)	(6.6)
Net fee and commission income		3.4	5.3	0.2	2.1
Net (losses)/gains from financial instruments held at fair value	5	(5.5)	75.6	(9.7)	67.8
Income from investments	8	–	0.1	50.0	100.1
Net realised gains on disposal of financial instruments		1.6	2.9	1.6	2.9
Other operating income		0.9	3.4	99.1	93.8
Total income		786.4	811.4	749.1	723.4
Administrative expenses	6	(312.3)	(276.9)	(312.1)	(276.7)
Depreciation and amortisation		(20.4)	(21.8)	(20.4)	(21.8)
Impairment (charge)/release of financial assets	7	(4.0)	(6.0)	–	0.6
Provisions for liabilities and charges	23	0.6	(4.2)	0.8	(4.2)
Profit before tax		450.3	502.5	417.4	421.3
Tax expense	9	(118.6)	(123.2)	(101.0)	(91.1)
Profit for the year		331.7	379.3	316.4	330.2

All profit for the year arises from continuing operations and is attributable to members.

* Please refer to

Reclassification within Interest Revenue (Society only)

in Note 1 for details of the reclassification made between these lines.

The notes on pages 152 to 233 form part of these financial statements.

Statements of Comprehensive Income

For the year ended 31December 2023

		Group		Society
		2023	2022	2023	2022
	Notes	£m	£m	£m	£m
Profit for the financial year		331.7	379.3	316.4	330.2
Items that may be subsequently reclassified through profit or loss
Cash flow hedges:
Fair value movements taken to equity		–	26.1	–	26.1
Amounts transferred to the income statement		(13.2)	(28.1)	(13.2)	(28.1)
Tax on amounts recognised in equity	9	3.7	0.5	3.7	0.5
Effect of change in corporation tax rate	9	–	0.8	–	0.8
Financial assets measured through other comprehensive income:
Fair value movements taken to equity		(18.0)	(27.0)	(18.0)	(27.0)
Amounts transferred to the income statement		1.2	(1.9)	1.2	(1.9)
Tax on amounts recognised in equity	9	4.7	7.8	4.7	7.8
Effect of change in corporation tax rate	9	–	1.9	–	1.9
Items that will not be reclassified through profit or loss
Remeasurement of retirement benefit obligations		(11.2)	(80.0)	(11.2)	(80.0)
Tax on remeasurement of retirement benefit obligations	9	3.1	21.6	3.1	21.6
Effect of change in corporation tax rate	9	–	6.9	–	6.9
Total other comprehensive expense		(29.7)	(71.4)	(29.7)	(71.4)
Total comprehensive income for the year		302.0	307.9	286.7	258.8

The notes on pages 152 to 233 form part of these financial statements.

146 | Financial Statements 147

Balance Sheets

As at 31December 2023

		Group		Society
		2023	2022	2023	2022
	Notes	£m	£m	£m	£m
Assets
Cash and balances with the Bank of England	10	4,839.1	5,982.8	4,839.1	5,982.8
Loans and advances to credit institutions		397.4	814.7	208.6	568.8
Debt securities	11	7,561.9	5,684.8	19,354.3	19,233.0
Loans and advances to customers	12	46,815.9	45,203.7	10,920.6	11,238.9
Fair value adjustment for hedged risk on loans and advances to customers		(615.5)	(1,508.3)	(615.5)	(1,508.3)
Derivative financial instruments	26	1,755.0	2,356.5	1,751.9	2,323.7
Investments	8	3.3	2.8	37,462.6	35,739.8
Intangible assets	13	18.3	20.2	18.3	20.2
Investment property	14	15.7	16.0	15.7	16.0
Property held for sale		0.6	0.9	0.6	0.9
Property, plant and equipment	15	99.5	101.1	99.5	101.1
Retirement benefit surplus	17	38.6	48.8	38.6	48.8
Other assets	18	38.9	30.1	130.6	95.2
Total assets		60,968.7	58,754.1	74,224.9	73,860.9
Liabilities
Shares	19	47,056.7	42,008.2	47,056.7	42,008.2
Amounts owed to credit institutions		1,886.3	5,160.9	1,886.3	5,160.9
Other deposits	20	983.6	1,138.1	14,080.2	15,836.3
Debt securities in issue	21	4,919.4	5,259.3	5,517.6	6,153.4
Derivative financial instruments	26	697.4	666.3	584.3	507.0
Current tax liabilities		–	0.7	–	0.6
Deferred tax liabilities	16	22.5	11.9	21.1	10.2
Other liabilities	22	70.5	64.0	119.2	97.0
Retirement benefit obligations	17	8.1	7.4	8.1	7.4
Provisions for liabilities and charges	23	4.0	5.7	3.9	5.7
Subordinated liabilities	24	1,621.7	1,035.1	1,621.7	1,035.1
Total liabilities		57,270.2	55,357.6	70,899.1	70,821.8
Members’ interests and equity		3,698.5	3,396.5	3,325.8	3,039.1
Total members’ interest, equity and liabilities		60,968.7	58,754.1	74,224.9	73,860.9

Approved by the Board of Directors on 28 February 2024 and signed on its behalf by:

Susan Allen OBE Alasdair Lenman John Heaps

Chief Executive Officer Chief Finance Officer Chair of the Board

The notes on pages 152 to 233 form part of these financial statements.

Statements of Changes in Members’ Interest and Equity

For the year ended 31December 2023

Group	General	Cash flow	Fair value	Total
	reserve	hedge	through other
		reserve	comprehensive
			income
	£m	£m	£m	£m
At 1 January 2023	3,384.7	9.9	1.9	3,396.5
Profit for the year	331.7	–	–	331.7
Net remeasurement of retirement benefit obligations	(8.1)	–	–	(8.1)
Net movement in cash flow hedges	–	(9.5)	–	(9.5)
Net movement in fair value through other comprehensive income	–	–	(12.1)	(12.1)
Total comprehensive income	323.6	(9.5)	(12.1)	302.0
At 31December 2023	3,708.3	0.4	(10.2)	3,698.5
At 1 January 2022	3,056.9	10.6	21.1	3,088.6
Profit for the year	379.3	–	–	379.3
Net remeasurement of retirement benefit obligations	(51.5)	–	–	(51.5)
Net movement in cash flow hedges	–	(0.7)	–	(0.7)
Net movement in fair value through other comprehensive income	–	–	(19.2)	(19.2)
Total comprehensive income	327.8	(0.7)	(19.2)	307.9
At 31December 2022	3,384.7	9.9	1.9	3,396.5

The notes on pages 152 to 233 form part of these financial statements.

148 | Financial Statements 149

Statements of Changes in Members’ Interest and Equity (continued)

For the year ended 31December 2023

Society General

reserve

Cash flow

hedge

reserve

Fair value

through other

comprehensive

income

Total

£m £m £m £m

At 1 January 2023 3,027.3 9.9 1.9 3,039.1

Profit for the year 316.4 – – 316.4

Net remeasurement of retirement benefit obligations (8.1) – – (8.1)

Net movement in cash flow hedges – (9.5) – (9.5)

Net movement in fair value through other comprehensive income – – (12.1) (12.1)

Total comprehensive income 308.3 (9.5) (12.1) 286.7

At 31 December 2023 3,335.6 0.4 (10.2) 3,325.8

At 1 January 2022 2,746.1 10.6 21.1 2,777.8

Profit for the year 330.2 – – 330.2

Net remeasurement of retirement benefit obligations (51.5) – – (51.5)

Net movement in cash flow hedges – (0.7) – (0.7)

Net movement in fair value through other comprehensive income – – (19.2) (19.2)

Total comprehensive income 278.7 (0.7) (19.2) 258.8

Capital contribution 2.5 – – 2.5

At 31 December 2022 3,027.3 9.9 1.9 3,039.1

The notes on pages 152 to 233 form part of these financial statements.

Statements of Cash Flows

For the year ended 31December 2023

		Group		Society
		2023	Restated	2023	Restated
			2022		2022
	Notes	£m	£m	£m	£m
Cash flows from operating activities
Profit before tax		450.3	502.5	417.4	421.3
Non‑cash items included in profit before tax	35	147.0	(62.2)*	143.0	(68.8)*
Net change in operating assets	35	(1,937.2)	(3,647.2)*	(1,781.3)	(2,823.0)*
Net change in operating liabilities	35	1,744.7	6,094.7*	143.4	6,197.1*
Tax paid		(101.0)	(125.5)	(83.0)	(93.2)
Net cash flow from operating activities		303.8	2,762.3	(1,160.5)	3,633.4
Cash flows from investing activities
Purchase of property, plant and equipment, and intangible assets		(15.0)	(12.8)	(15.0)	(12.8)
Proceeds from sale of property, plant and equipment		(0.2)	0.8	(0.2)	0.8
Purchase of debt securities		(3,412.9)	(2,952.2)	(3,412.9)	(8,787.6)
Redemption and other movements of debt securities		1,520.6	1,316.9	3,276.4	4,469.1
Net cash flow from investing activities		(1,907.5)	(1,647.3)	(151.7)	(4,330.5)
Cash flows from financing activities
Redemption of debt securities in issue	35	(1,423.7)	(1,225.2)	(1,165.4)	(773.4)
Debt securities in issue	35	999.2	711.5	506.5	1,911.5
Issue of subordinated liabilities	35	650.0	300.0	650.0	300.0
Redemption of subordinated liabilities	35	(136.4)	–	(136.4)	–
Interest paid on subordinated liabilities		(51.5)	(33.7)	(51.5)	(33.7)
Interest paid on lease liabilities		(0.6)	(0.7)	(0.6)	(0.7)
Capital repayments on lease liabilities		(3.6)	(2.3)	(3.6)	(2.3)
Net cash flow from financing activities		33.4	(250.4)	(201.0)	1,401.4
Net change in cash and cash equivalents		(1,570.3)	864.6	(1,513.2)	704.3
Opening balance		6,630.3	5,765.7	6,384.4	5,680.1
Closing cash and cash equivalents		5,060.0	6,630.3	4,871.2	6,384.4
Cash and cash equivalents
Cash and cash equivalents	10	4,839.1	5,982.8	4,839.1	5,982.8
Less Bank of England cash ratio deposit	10	(176.5)	(167.2)	(176.5)	(167.2)
Loans and advances to credit institutions		397.4	814.7	208.6	568.8
Closing cash and cash equivalents		5,060.0	6,630.3	4,871.2	6,384.4

* Please see Note 1

Basis of preparation

for details.

The notes on pages 152 to 233 form part of these financial statements.

150 | Financial Statements 151

Notes to the Financial Statements

1. Statement of accounting policies

Basis of preparation

These financial statements present the

results of Yorkshire Building Society

(‘YBS’ or ‘the Society’) and its controlled

entities (collectively ‘the Group’ or

‘the YBS Group’) for the year ended

31 December 2023.

The Group is required under the

Building Societies Act 1986 to apply

‘UK‑adopted international accounting

standards’ as endorsed by the UK

Endorsement Board (‘UKEB’). As a

result, these financial statements have

been prepared in accordance with

international accounting standards

– being International Accounting

Standards (IAS), International

Financial Reporting Standards (IFRS)

and interpretations (IFRICs) issued

by the International Accounting

Standards Board (IASB) endorsed by

the UKEB and effective from 1 January

2021 – and with those parts of the

Building Societies Act 1986 and the

Building Societies (Accounts and

Related Provisions) Regulations 1998

applicable to societies reporting under

international accounting standards.

The financial statements have been

prepared on the historical cost basis, as

modified by the revaluation of certain

financial instruments measured at

fair value. Pounds sterling is both the

functional currency of the YBS Group

and the presentation currency applied

to these financial statements. Except

where otherwise stated, all figures in

the financial statements are rounded to

the nearest hundreds of thousands of

pounds sterling (£0.0 million).

Accounting policies have been

consistently applied, except where a

new accounting standard has been

introduced.

The preparation of financial statements

under international accounting

standards requires the use of certain

critical accounting estimates and

judgements. The areas involving

a higher degree of judgements or

complexity, or areas where assumptions

and estimates are significant to the

financial statements are set out in

note 2.

Going concern

The YBS Board of Directors (the Board)

undertake regular assessments of

whether the Group is a going concern,

taking into account changing economic

and market conditions, and using all

available information about future risks

and uncertainties.

Given its strong capital position and

high liquidity levels, the Group is well

placed to cope with economic volatility.

As a result, the directors confirm that,

based on the latest formal review

undertaken in February 2024, and

stress tests performed throughout the

period, they consider the Group has

adequate resources to continue in

existence for the foreseeable future.

Accordingly, they continue to adopt the

going concern basis in preparing these

financial statements.

Basis of consolidation

The Group financial statements

consolidate the financial statements of

the Society and the entities it controls

as listed in note 8. Control is deemed

to exist when the Group has the power

to govern the financial and operating

policies of an entity so as to obtain

benefits from its activities. Upon

consolidation, intra‑group assets and

liabilities, equity, income, expenses

and cash flows relating to transactions

between members of the Group are

eliminated. Investments in controlled

entities are stated in the Society

accounts at cost less any provisions for

impairment.

Securitisation transactions

The Group securitises mortgage loans

by transferring them into special

purpose vehicles (SPVs) and issuing

debt securities to investors, using the

underlying loan assets as collateral. As

the Society is deemed to control these

SPVs, they are fully consolidated into

these financial statements.

Generally, the transfer of the mortgage

loans to the structured entities does

not meet the derecognition criteria

under IFRS 9 Financial Instruments

as the Society/Accord substantially

retains all the risks and rewards of

ownership through the receipt of the

residual profits or losses of the SPVs.

In this instance, the Society/Accord

continues to recognise the mortgage

loans on their own balance sheets

after the transfer, with the proceeds

received from the transfer accounted

for as a deemed loan from the SPVs.

For covered bonds, the Society issues

the covered bonds, not the structured

entity. The proceeds are then lent to

the structured entity on back‑to‑back

terms. These proceeds are used as

consideration for the loans transferred

from the Society. Neither the loan to the

structured entity nor the consideration

for the transfer of mortgage loans is

recognised separately as an additional

asset and liability in the accounts of the

Society.

To manage interest rate risk, the Society

enters into derivative transactions with

its structured entities, receiving a rate

of interest based on the securitised

mortgages and paying a rate inherent

in the debt issuances. These internal

derivatives are treated as part of

the deemed loan and not separately

measured at fair value because the

relevant mortgage loans are not

derecognised.

Change in presentation

A balance sheet line item has been

created in these financial statements

to present

Fair value adjustment for

hedged risk on loans and advances

to customers

as a separate item

on the balance sheet as permitted

under IAS 39. The balance of

Fair

value adjustment for hedged risk on

loans and advances to customers

was

previously reported within the loans

and advances to customers balance.

Notes to the financial statements have

been updated to reflect this change in

presentation (note 12, note 27, note 31,

note 32 and note 35).

Reclassification within Interest

Revenue (Society only)

The

Income Statement

and, accordingly,

Note 3 Interest revenue

for the Society

for the year ended 31 December 2022,

have been updated in these financial

statements to correct the classification

of interest earned by the Society on an

intercompany arrangement.

£79 million of interest previously

reported within

Other interest

revenue (Note 3: Derivatives not

included in hedge relationships)

has

been reclassified to

Interest revenue

calculated using the effective interest

rate method (Note 3: Loans secured

on connected undertakings)

. This

reclassification has no impact on the

previously reported total interest

revenue. This matter has no impact on

the Group financial statements.

Reclassification of cashflow

balances (Group and Society)

Note 35

Notes to the cashflow

statements

and, accordingly, the

Statement of Cashflows

for the year

ended 31 December 2022, have been

updated in these financial statements

to correct the classifications of the

line items within the

Net cash from

operating activities

sub total. Please

refer to Note 35 for details.

Accounting developments

Changes to Accounting Standards

Effective in the Period

IFRS 17 Insurance Contracts

IFRS 17

Insurance Contracts

is the

comprehensive standard establishing

recognition and measurement

requirements for insurance contracts.

This standard is effective for periods

beginning on or after 1 January 2023.

Only a small equity release portfolio

in run‑off falls under the scope of

IFRS 17 so the impact of applying

this revised standard is not deemed

material.

Standards issued but not yet

effective

The following standards or

amendments were in issue but were

either optional, or not yet effective,

and have not been adopted in these

financial statements.

IFRS 9 and hedge accounting

IFRS 9

Financial Instruments

was issued

in 2014 as a replacement of IAS 39

Financial Instruments: Recognition and

Measurement

and was mandatorily

effective for periods beginning on or

after 1 January 2018.

However, IFRS 9 did not replace the

requirements for portfolio fair value

hedge accounting for interest rate risk

since this phase of the project was

separated out due to its longer‑term

nature.

As a result, IFRS 9 included a

transitional relief allowing the

continued use of the hedge accounting

requirements of IAS 39, and the Group

continue to adopt this approach.

The development of requirements will

be closely monitored and the Group

will continue to assess the impacts

of full adoption of IFRS 9 for hedge

accounting.

Material accounting policies

Change in Accounting Policy

IAS 1 Presentation of financial

statements

The IASB issued amendments to IAS 1

Presentation of Financial Statements

IAS 1 now mandates disclosure of

material accounting policies rather

than significant accounting policies.

The accounting policies of the Group

have been reviewed in respect of

IAS 1 amendments with no significant

changes deemed necessary.

There are no other new accounting

standards applicable for this set of

financial statements expected in the

near future, and only a small number

of narrow amendments or some annual

improvements to existing standards,

none of which have an impact on these

financial statements.

Interest revenue and expense

calculated using the effective

interest rate method

The effective interest rate method

is used to calculate the revenue and

expense for financial instruments

held at amortised cost. The effective

interest rate is the rate that exactly

discounts estimated future cash flows

(excluding credit losses) over the

expected life of the instrument back to

the fair value on initial recognition.

For mortgage loans and advances to

customers this includes an estimate of

any early repayment income. Directly

attributable acquisition costs, such as

application and arrangement fees, are

also incorporated in the calculation.

This has the effect of spreading these

fees and costs over the expected

life of the mortgage. Expected lives

are estimated using historical data

and management judgement. The

calculation is adjusted when actual

experience differs from estimates, with

changes in deferred amounts being

recognised immediately in the income

statement.

Fees and commissions

Fees and commissions on referral

of customers to third party service

providers of financial products is

accounted for on an effective interest

rate basis, similar to interest revenue

and expense calculated using the

effective interest rate method. Other

fees and commissions are recognised

on an accruals basis as the relevant

service is provided or at a point in

time if the service or product provided

relates to a one‑off action.

Other operating income

Other operating income comprises

profits on disposal of fixed assets,

rental income from investment

property and software licensing

income. The Society also includes the

recharge of administrative expenses to

its subsidiaries.

Income from investments

This consists of dividend income and is

recognised when the rights to receive

the payment have been established.

Financial instruments

Classification and measurement of

financial assets and financial liabilities

The Group initially recognises

financial assets and liabilities at their

fair value (adjusted for any directly

attributable transaction costs for those

subsequently classified at amortised

cost) on the date that the Group

becomes a party to the contractual

provisions of the instrument.

Subsequent measurement of financial

assets and financial liabilities

depends on the contractual cash flow

characteristics of the instrument.

152 | Financial Statements 153

Notes to the Financial Statements (continued)

1. Statement of accounting policies (continued)

Material accounting policies (continued)

Financial instruments (continued)

Amortised cost: this measurement approach is applied to instruments that are held to collect interest and principal payments

over the life of the contract. Subsequent measurement is via the effective interest rate method (see

Interest revenue and

expense calculated using the effective interest rate method)

, subject to impairment (see

Impairment)

, plus any adjustment if

designated as part of an effective hedge arrangement (see

Hedging)

Fair value through other comprehensive income: this measurement approach is applied to financial assets whose business

objective is the collection of interest and principal payments but that are also bought and sold. Subsequent measurement is

at fair value with changes in fair value recognised in other comprehensive income. When the instrument is derecognised, the

cumulative gain or loss previously recognised in reserves is reclassified to the income statement.

Fair value through profit and loss: this method is applied to those instruments that are not classed as amortised cost or fair

value through other comprehensive income. Subsequent measurement is at fair value with any movements recognised in the

income statement in the period in which they arise.

The table below summarises the Group’s financial instruments and the treatment adopted in these financial statements:

Financial instrument	Description	Subsequent measurement
Cash and cash equivalents	Cash balances and statutory deposits	Amortised cost
Loans and advances to credit institutions	Fixed and variable interest rates	Amortised cost
Debt securities	Fixed, variable and indexed linked interest	Fair value through other comprehensive
	rates	income, amortised cost and fair value
		through profit and loss
Loans and advances to customers	Primarily mortgage products offering a	Amortised cost
	variety of fixed and variable interest rates
Derivative financial instruments*	Swaps and options to manage interest rate	Fair value through profit and loss (unless
	and foreign exchange risk exposures	designated as a cash flow hedge, see
		‘Hedging’ section of note 1, then fair value
		through other comprehensive income)
Investments in subsidiaries	Equity investments in controlled entities	Cost less accumulated impairment losses
Investment in equities	Equity investments in non‑controlled	Fair value through profit and loss
	entities
Shares	Deposits made by members with a variety of	Amortised cost
	fixed and variable interest rates
Amounts owed to credit institutions	Time Deposits at fixed and variable interest	Amortised cost
	rates
Debt securities in issue, subordinated	Fixed and variable interest rates	Amortised cost
liabilities and other deposits

Derecognition of financial instruments

Financial assets are only derecognised when the contractual rights to receive cash flows from the financial assets have

expired, or when the Group has transferred substantially all the risks and rewards of ownership. As described in

Securitisation

transactions

, the Group has not derecognised the loans transferred to the SPVs to secure the issue of covered bonds and

mortgage backed securities because substantially all the risks and rewards are retained.

Financial liabilities are only derecognised when the obligation is discharged, cancelled, or has expired.

* The Society holds intra group derivatives to manage interest rate risk within the special purpose securitisation vehicles and these are measured at

amortised cost. These internal derivatives are treated as part of the deemed loan with the SPV.

Impairment of financial assets

At each reporting date the Group

assesses financial assets held at

amortised cost for impairment.

For

loans and advances to customers

the Group uses the expected credit

loss (ECL) staging model to assess any

impairment in the carrying value of

the mortgage assets. This model uses

forward looking assessments of overall

expected credit losses and recognises

impairment based on a three‑staged

approach as follows.

Stage 1: financial assets are

categorised into ‘stage 1’ on initial

recognition. Impairment is based on

expected credit losses resulting from

default events projected within the

next 12 months (12 month ECL).

Stage 2: financial assets move into

‘stage 2’ when they are deemed

to have experienced a significant

increase in credit risk (SICR), based

on quantitative and/or qualitative risk

grade thresholds. Impairment is then

based on expected losses over the full

lifetime of the contract (lifetime ECL).

The Group assesses a SICR to have

occurred when the accounts are more

than 30 days past due or there has

been a significant relative increase in

the lifetime probability of default (PD)

compared to that at initial recognition.

For retail accounts, PD is based on the

customer’s credit quality, including

analysis of their behaviour scores

and other account characteristics.

For non‑retail portfolios, the Group

assess a significant increase in credit

risk using a combination of individual

and collective information, including

monitoring through the watch list

process. For further information on the

watch list process see note 31.

Stage 3: financial assets are moved

into ‘stage 3’ when there is objective

evidence that the loan is credit

impaired, with expected credit losses

still calculated on a lifetime basis.

A loan is considered credit impaired

when it is 90 days past due, has been

renegotiated for credit risk reasons, or

otherwise considered to be in default

(including possession, insolvency and

assets beyond term expiry).

The Group’s use of forbearance tools,

including arrears arrangements,

payment deferrals, term extension,

transfers to interest only and interest

capitalisation, are factored into

the criteria for identifying stage 3

accounts. The impairment provision is

determined using the same calculation

as stage 2 accounts, but with the PD

set to 100%.

Loans that are either purchased or

originated credit impaired (POCI)

are classified as stage 3 at initial

recognition and cannot be transferred

to stage 1 or 2 even if the credit

quality of these assets improves. The

Group has a portfolio of loans acquired

as part of the Chelsea Building

Society and Norwich & Peterborough

acquisitions that meet this definition.

ECL calculations: these are assessed at

individual loan level using three main

components.

•

PD, being the probability, at the

point of assessment, that the

customer will default in the future.

The definition of default includes

accounts that are 90 days past

due, interest only accounts past

term end, those under certain

forbearance measures and others

exhibiting other unlikeliness to pay

indicators.

•

Exposure at default (EAD), being

the outstanding value of the loan,

taking into account the repayment

of principal and interest between

the date of assessment and

expected default date.

•

Loss given default (LGD), is the

net impact of the EAD after taking

into account the mitigating effect

of collateral and the time value of

money.

PD is a calculation based on current

conditions and adjusted to take into

account estimates of future conditions

that will impact PD. EAD is modelled

based on expected payments over the

term and is not floored at the current

balance.

LGD takes into account the expected

impact of future economic conditions,

such as changes in value of collateral,

and does not include any floors.

Only costs directly associated with

obtaining/selling collateral are

included. Discounting of the expected

cash flows is performed using the

effective interest rate of the loan.

The ECL is calculated using models

that build up separate estimates for

PD, EAD and LGD for every month that

a loan is due to be outstanding.

PD and LGD estimates are then

flexed under different scenarios to

capture the effects of changes to

the forward looking macroeconomic

variables (including interest rates,

unemployment, house prices and

inflation). The final ECL figure takes a

probability weighted average of these

different scenarios.

Loans are written off against this ECL

balance when there is no realistic

prospect of recovery. This is generally

after receipt of any proceeds from the

realisation of the collateral backing the

loan.

Other financial assets are considered

low credit risk at the reporting date as

they are investment grade instruments.

As a result, impairment is based on

12 month ECL as per stage 1 above.

If changes in an instruments’ rating

breaches the risk appetite then an

ECL assessment will take place on the

individual asset basis.

154 | Financial Statements 155

Notes to the Financial Statements (continued)

1. Statement of accounting policies (continued)

Material accounting policies (continued)

Financial instruments (continued)

Financial instruments acquired in

business combinations

Financial assets and liabilities

acquired in a business combination

are recognised at fair value upon

acquisition. To the extent that this

differs from the underlying amortised

cost carrying value assumed on

the transaction date, a fair value

adjustment is recognised on the

balance sheet.

This balance is then amortised

through the income statement over

the expected life of the acquired

portfolio in a manner that reflects

the consumption of the economic

benefits arising from the underlying

assets and liabilities. To the extent that

the fair value adjustment relates to

estimated credit losses on a portfolio

of mortgage assets, the

fair value credit

adjustment

is included in the overall

ECL balance.

The Group continues to run off

balances in relation to the Chelsea

Building Society and Norwich &

Peterborough acquisitions. In addition

to the

fair value credit adjustments

, it

also includes

interest rate fair value

adjustments

in the

loans and advances

to customers

and

balances.

Hedging

As discussed, IFRS 9

Financial

Instruments

included a transitional

relief allowing the continued use of

the hedge accounting requirements

of IAS 39

Financial Instruments:

Recognition and Measurement

, and the

Group continue to adopt this approach.

The Group applies hedge accounting

when the specific rules and conditions

in IAS 39 are fulfilled. The Group

has designated the majority of its

derivatives as either fair value or

cash flow hedges in order to reduce

volatility in the income statement.

Fair value hedges

Where a derivative financial

instrument meets the requirements of

a fair value hedge, changes in the fair

value of the hedged item are taken to

the income statement offsetting the

effect of the related movements in the

fair value of the derivative.

Where the hedge no longer meets

the criteria, the adjustment to the

hedged item is released to the income

statement over the remaining life of

the original hedged relationship.

Cash flow hedges

Where a derivative financial instrument

is designated as a cash flow hedge,

the effective part of any gain or loss

on the derivative financial instrument

is recognised directly in other

comprehensive income and recycled to

the income statement. Any ineffective

portion of the gain or loss on the

hedging instrument is recognised in

the income statement immediately. If

a cash flow hedge is terminated, the

cumulative unrealised gain or loss

recognised in equity is then amortised

to profit and loss over the remaining

life of hedging instrument provided the

cash flows on hedged items are still

expected to occur.

Segmental reporting

The Executive Committee (EXCO) is

responsible for allocating resources

and assessing the performance of the

Group and is therefore identified as

the chief operating decision maker.

The Group has one reportable segment

that EXCO reviews performance and

makes decisions on for the Group as

a whole. As a result, no segmental

disclosure is provided.

Intangible assets

Intangible assets held by the Group

consist primarily of externally

acquired and internally developed

computer software. This is measured

at cost less accumulated amortisation

and impairment.

Costs incurred in the development of

computer software for internal use are

capitalised as intangible assets where

the expenditure leads to the creation

of an identifiable non‑monetary asset

and it is probable that the expected

future economic benefits that are

attributable to the asset will flow to

the Group.

Purchased software is classified

as an intangible asset where it is

not an integral part of the related

hardware. Computer software costs

are amortised using the straight line

method over their estimated useful

lives, which are generally three to five

years.

Intangible assets are reviewed for

impairment at each reporting date

or at any point in time where there

is an indication of impairment.

Impairment is assessed by estimating

the recoverable amount of the asset,

being the higher of: fair value less

costs of disposal; and value in use.

In assessing value in use, the

estimated future cash flows are

discounted to their present value. If

the recoverable amount of the asset is

estimated to be less than its carrying

amount, the carrying amount of the

asset is reduced to its recoverable

amount. Any impairment in the

value of these assets is recognised

immediately in the income statement.

Investment property

Investment property comprise

freehold properties, and parts of

freehold properties, that are not used

in the business and held for rental

income or capital appreciation. These

properties are generally flats and

offices ancillary to branch premises.

Investment properties are held at cost

less accumulated depreciation and

impairment.

Property, plant and equipment

Freehold properties used in the

business, major alterations to office

premises, fixtures and fittings,

equipment and other tangible

fixed assets are stated at cost less

accumulated depreciation and

impairment. Costs incurred after the

initial purchase of fixed assets are

expensed unless it directly results in

increased future economic benefits that

can be reliably measured. Repairs and

maintenance are treated as an expense.

Depreciation is a measure that

recognises the cost, less estimated

residual value, over the estimated

useful economic lives as follows:

•

Freehold/long leasehold buildings

(including investment properties) –

50 years

•

Short leasehold property and

right‑of‑use property assets – Life

of lease

•

Equipment, fixtures, fittings and

vehicles – 3 to 20 years

•

Freehold land is stated at cost less

accumulated impairment losses

and is not depreciated.

Property, plant and equipment and

investment properties are reviewed

for impairment annually and where

there is an indication that events or

circumstances may mean that the

carrying amount is not recoverable.

Where the recoverable amount of the

asset is estimated to be less than the

carrying amount, the carrying amount

is written down immediately to the

recoverable amount. Any impairment in

the value of assets is recognised in the

income statement as it arises.

Leases

Contracts are accounted for as leases

when the terms of the contract

transfer substantially all the risks and

rewards of ownership to the lessee.

For such arrangements a ‘right‑of‑use’

asset, included in property, plant and

equipment, and a corresponding lease

liability, included in other liabilities,

are recorded on the balance sheet

upon initial recognition.

The right‑of‑use asset is measured

at the lower of its fair value and the

present value of the minimum lease

payments at inception of the lease,

less accumulated depreciation and

impairment. The lease liability is

measured at the present value of the

minimum lease payments.

Depreciation is recorded by the

Group to write off the cost over the

estimated useful economic life of the

asset. Rent payable on finance leases

is apportioned between the finance

element, charged to the income

statement, and the reduction of the

lease obligation so as to achieve

a constant rate of interest on the

remaining balance of the liability.

Leases with a short life, or relating

to low value assets, are expensed to

the income statement on a straight

line basis over the period of the lease

agreement.

Retirement benefit obligations

The asset or liability is recognised in

respect of the Group’s defined benefit

pension scheme measured at the

present value of the defined benefit

obligation at the reporting date, less the

fair value of the plan assets, together

with adjustments for unrecognised past

service costs.

An asset is only recognised to the extent

that it is recoverable by the Group via

available refunds and reductions in

future contributions to the scheme.

The defined benefit obligation is

calculated annually by independent

actuaries using the projected unit credit

method. Gains or losses arising from

changes in assumptions are recognised

in other comprehensive income in the

period in which they occur.

Defined benefit obligations are

discounted to present value using the

rate of return available on high quality

corporate bonds of an equivalent term

to the obligations.

Past service costs are recognised

immediately in the income statement

to the extent that benefits are already

vested and otherwise are amortised on

a straight line basis over the average

period until the benefits become vested.

156 | Financial Statements 157

1. Statement of accounting policies (continued)

Material accounting policies (continued)

Taxation including deferred tax

Tax comprises current tax and deferred

tax. Tax is recognised in the income

statement except to the extent

that it relates to items recognised

directly in equity, in which case the

tax is recognised in the statement of

comprehensive income.

Current tax is the expected tax

payable on the taxable profits for

the year, using tax rates enacted or

substantively enacted at the reporting

date, and any adjustment to tax

payable in respect of previous years.

Deferred tax is recognised for

temporary differences arising between

the carrying amount of certain assets

and liabilities for accounting purposes

and for taxation purposes. Deferred tax

is provided using tax rates enacted or

substantively enacted at the reporting

date effective on the date at which

they are expected to reverse.

The following temporary differences

are not provided for:

•

The initial recognition of assets

or liabilities that affect neither

accounting nor taxable profit.

•

Differences relating to investments

in subsidiaries, to the extent that

the parent is able to control the

reversal of temporary differences,

and it is probable they will not

reverse in the foreseeable future.

Deferred tax assets are recognised

to the extent that it is probable that

future taxable profits will be available,

against which a temporary difference

can be utilised. The carrying amount

of the deferred tax asset is reviewed

at the reporting date and reduced to

the extent that it is no longer probable

that sufficient taxable profits will be

available to allow all or part of the

asset to be recovered.

Provisions

Provisions are recognised when: the

Group has a present obligation (legal

or constructive) as a result of a past

event; it is probable that the Group will

be required to settle that obligation;

and a reliable estimate can be made of

the amount of the obligation.

The amount recognised as a provision

is the best estimate of the net present

value of the consideration required

to settle the obligation, taking into

account the risks and uncertainties

surrounding the obligation.

A restructuring provision is recognised

when the Group has developed

a detailed formal plan for the

restructuring and raised a valid

expectation that it will carry out the

restructuring through announcing the

main features of the plan to those

affected by it.

Capital management

As at the 31 December 2023,

and throughout the year, the

Group complied with the capital

requirements that were in force.

Information on the Group’s capital

management can be found in the

Capital risk section of the Risk

Management Report.

Foreign currency

Assets and liabilities denominated in

foreign currencies are translated into

Sterling at the appropriate rates of

exchange prevailing at the reporting

date and exchange differences are

recognised in the income statement. All

income and expense is translated into

Sterling at the rate of exchange on the

day of receipt or payment.

Statements of cash flows

For the purposes of the statements of

cash flows, cash and cash equivalents

comprise cash and liquid financial

instruments maturing within 3 months.

The statement of cash flows has been

prepared using the indirect method.

Notes to the Financial Statements (continued)

2. Critical accounting judgements and key sources of estimation uncertainty

In applying its accounting policies, the

Group makes judgements that have

a significant impact on the amounts

recognised in the financial statements.

In addition, estimates and assumptions

are used that could affect the reported

amounts of assets and liabilities. The

estimates and underlying assumptions

are reviewed on an ongoing basis. As

explained in the

Audit Committee

Report

in the

Governance

section, the

Audit Committee has considered the

accounting judgements and estimates

applied in the financial statements.

The Audit Committee have confirmed

to the Board that they consider these

to be appropriate.

The key assumptions concerning

the future, and other key sources of

estimation uncertainty at the reporting

date that may have a significant risk

of causing a material adjustment to

the carrying amount of assets and

liabilities within the next financial year,

are discussed below.

Retirement benefit obligations

The Group’s accounting policy

states that a net defined benefit

pension scheme asset should only be

recognised to the extent that the Group

has the ability to access the pension

scheme surplus in the form of a refund

or reduction in future contributions.

The scheme trustees could act

unilaterally in order to restrict the

ability of the Group to seek a refund

or reduce future contributions, hence

a judgement on the likelihood of

this event is required. The Group has

received a legal opinion supporting

the judgement that any surplus of

the scheme can be recovered in full

and that pension scheme trustees are

unable to act to amend the scheme

rules, and ultimately prevent the

Society accessing the surplus, without

the Society’s support.

In addition, significant estimation

uncertainty in respect of areas such

as future interest rates and mortality

rates have to be applied in estimating

the value of the assets and liabilities of

the defined benefit scheme. These are

outlined in note 17.

The impact of a 0.5% increase in the

rate used to discount future liabilities

from 4.5% to 5.0% would result in

a decrease of liability of 7% (2022:

decrease of 7%). The impact of a 0.5%

increase in inflation would increase

liabilities by 4% (2022: increase of

4%). The impact of a one‑year increase

in life expectancy at age 60 would

be to increase liabilities by around

3% (2022: increase of 3%). Note that

these sensitivities have been modelled

independently as single variable

adjustments and have not anticipated

any correlation between movements

in the inputs. A summary of the impact

of these sensitivities on the scheme

liabilities is included in note 17.

Impairment of loans and

advances to customers

The impairment calculation of

expected credit losses (ECL) for

a portfolio of mortgage loans

is inherently uncertain. ECL are

calculated using historical default and

loss experience but require judgement

to be applied in predicting future

economic conditions (e.g. interest

rates and house prices) and customer

behaviour (e.g. default rates). The

most critical judgements that lead to

estimation uncertainty are as follows:

Economic scenarios and

weightings

A forum, supported by Finance, Credit

Risk, Balance Sheet Management

and economic experts considers the

forward‑looking macroeconomic

assumptions with the objective

of developing internally coherent

economic scenarios to propose

to the Group Asset and Liability

Committee (ALCO) for challenge and

approval. ALCO ensures that the ECL

meets the requirement for unbiased

and weighted amounts derived

by evaluating a range of possible

outcomes and assumptions, or

economic scenarios.

Judgements are made in arriving at

the level of each economic variable,

such as house price index (HPI)

and unemployment, applied in

each economic scenario to support

the estimate of ECL. ALCO applies

judgements to arrive at these

assumptions.

The UK Economy technically entered

recession at the end of 2023,

attributed to the ongoing cost of

living crisis and higher interest rate

environment. Growth will likely remain

weak by historical standards in the

medium term and there remains more

downside risk than upside. Headline

inflation continues to fall, although

there are re‑emerging risks around the

price of energy following the recent

geopolitical tensions. Core inflation,

services inflation and wage inflation

continue to provide headwind to the

inflation target being met consistently

throughout 2024.

Management evaluated these

uncertainties, with the economic

assumptions applied to the ECL

model adjusted to reflect any material

changes in view of the macro‑

economic environment. A post model

adjustment was raised in 2022 and

has been updated to reflect the risks

relating to affordability and the impact

of cost‑of‑living increases on our

mortgage customers (see note 31 for

more details).

The provision is calculated by applying

a range of economic scenarios that are

weighted.

The Group continue to apply four

economic scenarios, with a higher

weighting attributed to the downturn

and severe downturn scenarios

than in 2022, reflecting the ongoing

uncertainty around the health of

the UK economy. SME judgement is

applied in determining the relative

weighting of each economic scenario

in the ECL estimate, informed both by

an assessment of external data and

statistical model results.

The Group considered alternative sets

of weightings. The most severe shifted

a further 5% from core and downside

to severe downturn resulting in a

£4.1 million increase in ECL. The least

severe shifted 10% from downside

and severe downturn to core resulting

in a £7.9 million decrease in ECL.

These changes in weightings have

been fully modelled and been allowed

to impact staging but impact on post

model adjustments (PMA) has been

excluded.

158 | Financial Statements 159

3. Interest revenue

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Calculated using the effective interest rate method:
Loans secured on residential property	1,366.2	1,027.3	346.7	272.0
Loans secured on connected undertakings	–	–	1,349.0	554.8*
Other loans	44.7	26.7	44.7	26.7
Other interest income/(expense)**	(61.5)	(15.5)	(61.5)	(15.5)
Liquid assets	364.0	93.0	352.6	91.0
Debt securities	241.2	71.1	873.5	285.7
Interest revenue calculated using the effective interest rate method	1,954.6	1,202.6	2,905.0	1,214.7
Other:
Derivatives in hedge relationships	926.4	212.2	926.4	212.2
Derivatives not included in hedge relationships	82.7	20.4	82.5	20.2*
Investments held at fair value	2.6	1.8	2.6	1.8
Other interest revenue	1,011.7	234.4	1,011.5	234.2
Total interest revenue	2,966.3	1,437.0	3,916.5	1,448.9

4. Interest expense

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Shares held by individuals	1,509.6	442.7	1,509.6	442.7
Deposits from banks	126.8	76.1	126.8	76.1
Deposits from connected undertakings	–	–	1,182.1	231.4
Other deposits	24.2	9.3	24.2	9.3
Debt securities in issue	164.6	75.5	186.8	81.3
Subordinated liabilities	51.5	33.7	51.5	33.7
Other interest payable	0.2	0.1	0.2	0.1
Derivatives in hedge relationships	174.4	38.7	105.7	3.3
Derivatives not included in hedge relationships	128.4	36.1	121.1	113.6
Interest expense for leasing arrangements	0.6	0.7	0.6	0.7
Total interest expense	2,180.3	712.9	3,308.6	992.2

Notes to the Financial Statements (continued)

2. Critical accounting judgements and key sources of estimation uncertainty (continued)

Impairment of loans and advances to customers (continued)

Economic scenarios and weightings (continued)

In terms of sensitivity to changes in key economic variables within the model, the ECL model was run with a 100% weighting

applied to the Core scenario, in both Core and Non‑Core models. When the HPI forecast was replaced with the respective

forecasts from the Downturn and Severe Downturn scenarios ECL, excluding PMAs, increased by £5.3 million and £28.4

million (2022: £11.1 million and £15.9 million). Below is the percentage change in HPI forecast for both downturn scenarios

for the next 5 years in relation to the Core scenario. The downturn scenario in 2023 replaced the stagflation downturn

scenario applied in 2022.

		2023	Scenario (% change)
HPI	2024	2025	2026	2027	2028
Downturn	(3.5)	(6.0)	(0.5)	(3.0)	(2.8)
Severe Downturn	(8.0)	(14.5)	(9.0)	(4.5)	(3.5)
		2022	Scenario (% change)
HPI	2023	2024	2025	2026	2027
Stagflation Downturn	(6.7)	(3.0)	(1.3)	(0.5)	(0.3)
Severe Downturn	(7.5)	(9.8)	(8.1)	(2.0)	(1.5)

The key in‑year impact of changes to economic variables came from applying quarterly Office of National Statistics (ONS) HPI

updates, which accounted for £0.7 million of impairment charge over 2023 (2022: £12.5 million release).

Post model adjustments

The determination, application and calculation of PMAs also requires judgement to be applied. Further detail on economic

assumptions, weightings and PMAs can be found in note 31.

Core model assumptions

Significant increase in credit risk

A judgement is applied to determine the threshold at which a significant relative increase in credit risk is deemed to have

occurred. If 10% of the accounts in stage 1, on a proportional basis, were to be transferred to stage 2 and subject to a

calculation of full lifetime expected credit losses, this would result in a £2.2 million (2022: £1.9 million) increase in ECL. This

change in staging has not been allowed to impact PMAs.

Acquired interest-only mortgages

A judgement has been applied in determining which probability of default assumptions to apply to different cohorts of

customers for acquired interest‑only mortgages.

The existence of an appropriate repayment vehicle has only been substantiated for 26% (2022: 27%) of these customers and

so there is a risk that the full amount due at maturity (average maturity being 2028) will not be collected. A model is applied

to estimate the probability that accounts will reach the end of the term without being recovered, with the average probability

across these accounts being 8.1% (2022: 9.2%). This results in an ECL of £7.9 million (2022: £8.2 million).

Two alternative probability of default (PD) estimates are applied, one for those customers that we are unable to contact, and

another for those that have confirmed there is no appropriate repayment vehicle in place. If the ‘no vehicle’ PD is applied to

the ‘unable to contact’ customers, expected credit losses increase by £3.8 million (2022: £5.1 million).

* Please refer to Reclassification within Interest Revenue (Society only) in Note 1 for details of the reclassification made between these lines.

** Includes net interest income on clearing collateral agreements.

160 | Financial Statements 161

Notes to the Financial Statements (continued)

5. Net (losses)/gains from financial instruments held at fair value

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Equity investments held at fair value	0.5	1.4	0.5	1.4
Hedge accounting ineffectiveness	(29.1)	(32.4)	(29.0)	(44.3)
Derivatives and debt securities not included in hedge relationships	23.1	106.6	18.8	110.7
Net (losses)/gains from financial instruments held at fair value	(5.5)	75.6	(9.7)	67.8

Derivatives and hedging

The Society enters into interest rate swaps to hedge their exposure to interest rate risk. All interest rate swaps are transacted

for economic hedging purposes, however not all are designated into accounting hedges. Those interest rate swaps not

designated into accounting hedges are recorded at fair value through profit and loss within derivatives and debt securities

not included in hedge relationships. This portfolio consists of interest rate swaps that receive fixed cash flows (receive fix) and

that pay fixed cash flows (pay fix).

2022 saw a significant increase in swap rates which in turn had a significant impact on the fair value of the interest rate swaps

not designated in the accounting hedge. In 2023, whilst swaps rates remained volatile, the movement across the year has

been much less significant with rates decreasing overall. The volume of receive fix swaps has grown considerably driven by an

increase in retail deposits, along with the volatile rate environment, this has generated an overall fair value gain in the year.

Hedge accounting ineffectiveness includes the ineffective portion of the accounting hedges and amortisation adjustments

relating to the inception and de‑designation of these hedges.

Investments held at fair value include the fair value gains and losses on equity shares investment.

6. Administrative expenses

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Staff costs:
Salaries and wages	138.2	125.4	138.2	125.4
Social security costs	14.2	13.4	14.2	13.4
Pension costs – defined benefit plans	1.1	0.3	1.1	0.3
Pension costs – defined contribution plans	11.4	10.4	11.4	10.4
Contractor staff costs	30.4	26.9	30.4	26.9
Other staff costs	1.6	1.5	1.6	1.5
Professional consultancy costs	6.1	12.3	6.1	12.3
Regulatory fees	6.2	6.0	6.2	6.0
Premises costs	15.6	14.3	15.6	14.3
IT costs	47.8	33.4	47.8	33.4
Marketing	15.5	14.8	15.5	14.8
Other expenses	24.2	18.2	24.0	18.0
Total administrative expenses	312.3	276.9	312.1	276.7

The Society operates a salary sacrifice scheme whereby employees can opt to make pension contributions from their pre‑tax

salaries. The amount shown in the table above under salaries and wages includes the headline salary (i.e. before the salary

sacrifice deduction) and pension costs exclude the additional contributions made by the Society on employees’ behalf as a

result of the salary sacrifice scheme.

Full details of directors’ remuneration, including the number of directors, the total remuneration of directors, including that of

the highest paid director, bonuses and pensions are given in the

Directors’ Remuneration Report

within the

Governance

section.

Staff numbers

The average number of persons employed by the Group and Society during the year (including executive directors) was as

follows:

	2023		2022
	Full time	Part time	Full time	Part time
Central administration	2,145	428	1,969	425
Branches	383	344	357	366
Total staff numbers	2,528	772	2,326	791

Remuneration of the auditors

	Group		Society
	2023	2022	2023	2022
	£000	£000	£000	£000
Audit fees for the Group and Society statutory audit	783.5	734.5	783.5	734.5
Audit fee for the statutory audit of controlled entities*	449.5	375.5	–	–
Audit related assurance services required by law or regulation	129.5	131.0	129.5	131.0
Total audit and audit related assurance services	1,362.5	1,241.0	913.0	865.5
Other permitted non‑audit services	232.5	257.6	232.5	215.1
Total remuneration of the auditors	1,595.0	1,498.6	1,145.5	1,080.6

The above figures, relating to auditor’s remuneration, exclude value added tax. Details of the Society’s policy on non‑audit

work is given in the

Audit Committee Report

The classifications of audit related assurance services required by law or regulation and other permitted non‑audit services

reflect the terminology included in updated guidance issued by the UK Financial Reporting Council.

Other permitted non‑audit services primarily consist of the half‑year review and profit verification as well as assurance work

in respect of our debt issuances.

7. Impairment charge/(release) of financial assets

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Impairment charge on loans and advances to customers	4.5	7.0	0.2	0.1
Recoveries relating to loans and advances previously written off	(0.8)	(0.9)	(0.5)	(0.6)
Impairment charge/(release) of other financial assets	0.3	(0.1)	0.3	(0.1)
Impairment charge/(release) on financial assets	4.0	6.0	–	(0.6)

* Includes £12k, related to the prior year audit of Norwich and Peterborough Insurance Brokers Limited.

162 | Financial Statements 163

Notes to the Financial Statements (continued)

8. Investments

Income from investments

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Dividend income from subsidiaries	–	–	50.0	100.0
Dividend income from equity investments	–	0.1	–	0.1
Income from investments	–	0.1	50.0	100.1

During 2023, the Society received dividends from Accord Mortgages Limited of £50.0 million (2022: £100.0 million).

Investments

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Equities	3.3	2.8	3.3	2.8
Equity in controlled entities	–	–	104.9	104.9
Loans with controlled entities	–	–	37,354.4	35,632.1
Total investments	3.3	2.8	37,462.6	35,739.8

All loans with controlled entities are charged interest with amounts recognised in interest revenue.

Investment in equities

The Group holds equity investments in a banking and credit card service provider due to our historic participation in their card

servicing operations. A tranche of these equity shares was sold for £4.1 million in December 2022, there has been no sale of

equity shares in 2023. The investments are held at fair value through profit or loss and the valuation technique is detailed in

note 32.

Subsidiaries

The Society holds 100% of the ordinary equity share capital for each of the following subsidiary entities, all of which are

audited and consolidated.

Subsidiary Principal activity

Accord Mortgages Limited .................................................................................................................................................................................................................. Mortgage lending

Norwich and Peterborough Insurance Brokers Limited ................................................................................................................................................................... Non‑trading

Norwich and Peterborough (LBS) Limited ....................................................................................................................................................................................Mortgage finance

The Group has taken advantage of the audit exemptions available for small and dormant subsidiaries under sections 479 and

480 of the

Companies Act 2006

for the following subsidiary entities, all of which are consolidated:

•

BCS Loans & Mortgages Limited

•

Chelsea Mortgage Services Limited

•

YBS Limited

•

Yorkshire Direct Limited

•

YBS Group Limited

•

YBS Pension Trustees Limited

•

Yorkshire Group Limited

•

Yorkshire Insurance Services Limited

•

Yorkshire Life Assurance Services Limited

•

Yorkshire Mortgage Services Limited

•

Yorkshire Personal Financial Services Limited

•

Yorkshire Property Services Limited

•

Yorkshire Services Limited

•

Yorkshire Key Services Limited

All subsidiaries have a 31 December accounting period end, are registered in England and have their registered office as

Yorkshire Drive, Bradford, BD5 8LJ.

Other controlled entities

The following entities are deemed to be controlled as, whilst the Group does not have a controlling equity shareholding, it has

the right to variable returns from its involvement in the entity. The Society’s interests in these entities are, in substance, no

different than if they were wholly‑owned subsidiary undertakings and, as a result, they are consolidated into the Group. The

carrying value of the equity holdings in these entities in the Society is £nil (2022: £nil).

•

Brass No.6 PLC*

•

Brass No.6 Mortgage Holdings Limited*

•

Brass No.7 PLC*

•

Brass No.7 Mortgage Holdings Limited*

•

Brass No.8 PLC

•

Brass No.8 Mortgage Holdings Limited

•

Brass No.9 PLC

•

Brass No.9 Mortgage Holdings Limited

•

Brass No.10 PLC

•

Brass No.10 Mortgage Holdings Limited

•

Brass No.11 PLC

•

Brass No.11 Mortgage Holdings Limited

•

Tombac No.2 PLC*

•

Tombac No.2 Mortgage Holdings Limited*

•

Tombac No.3 PLC

•

Tombac No.3 Mortgage Holdings Limited

•

Yorkshire Building Society Covered Bonds LLP

•

YBS Covered Bonds Finance (Holdings) Limited

•

YBS Covered Bonds Finance Limited

All these entities are subject to audit and have a 31 December year end, apart from those entities currently in liquidation.

Their registered office is Third Floor, 1 King’s Arms Yard, London, EC2R 7AF, with the exceptions of

Yorkshire Building Society

Covered Bonds LLP

whose registered address is Yorkshire Drive, Bradford, BD5 8LJ.

Joint ventures

The Society has a 22.2% joint venture investment in Arkose Funding Limited. The carrying value of the investment at

31 December 2023 is £nil (2022: £nil).

* in liquidation

164 | Financial Statements 165

Notes to the Financial Statements (continued)

9. Tax expense

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Corporation tax – current year charge	95.9	120.9	78.0	88.4
Corporation tax – adjustment in respect of prior periods	0.6	1.3	0.6	1.4
Total current tax	96.5	122.2	78.6	89.8
Deferred tax – current year	22.5	0.9	22.8	1.2
Deferred tax – adjustment in respect of prior periods	(0.6)	(1.1)	(0.6)	(1.1)
Deferred tax – impact of rate change	0.2	1.2	0.2	1.2
Total tax expense in the income statement	118.6	123.2	101.0	91.1

On 1 April 2023 the UK corporation tax rate increased from 19% to 25%, giving an average corporation tax rate for the year

of 23.5% (2022: 19.0%). The Group has an effective tax rate of 26.3% (2022: 24.5%), which is higher than the average UK

statutory corporation tax rate of 23.5% for the year. This is mainly due to the effects of the banking surcharge on the taxable

profits of the Society. A full breakdown of the difference is provided below:

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Profit before tax	450.3	502.5	417.4	421.3
Tax calculated at a tax rate of 23.5% (2022: 19%)	105.8	95.5	98.1	80.1
Effects of:
Income not subject to tax	(0.3)	(0.3)	(12.1)	(19.3)
Fair value movements on securitisation	(1.0)	0.8	–	–
Expenses not deductible for tax purposes	0.9	0.8	1.9	3.8
Banking surcharge	13.1	25.1	13.1	25.1
Adjustment to tax charge in respect of prior periods	–	0.2	–	0.3
Recognition and utilisation of capital losses	–	(0.1)	–	(0.1)
Change in tax rate	0.1	1.2	–	1.2
Total tax expense in income statement	118.6	123.2	101.0	91.1
Tax (credit)/expense recognised directly in equity:
Tax on financial instruments held at fair value through other comprehensive income	(4.7)	(7.8)	(4.7)	(7.8)
Change in tax rate on financial instruments held at fair value through other comprehensive income	–	(1.9)	–	(1.9)
Tax on remeasurement of net retirement benefit obligations	(3.1)	(21.6)	(3.1)	(21.6)
Change in tax rate on net retirement benefit obligations	–	(6.9)	–	(6.9)
Deferred tax on cash flow hedges	(3.7)	(0.5)	(3.7)	(0.5)
Change in tax rate on cash flow hedges	–	(0.8)	–	(0.8)
Total tax recognised directly in equity	(11.5)	(39.5)	(11.5)	(39.5)

On 1 April 2023 the UK corporation tax rate increased from 19% to 25%. This measure was substantively enacted on 24 May

2021 and deferred tax assets and liabilities at 31 December 2023 and at 31 December 2022 have been calculated based on

the 25% rate.

On 1 April 2023 the banking surcharge decreased from 8% (on taxable profits in excess of £25 million) to 3% (on taxable

profits in excess of £100 million). This change was substantively enacted on 2 February 2022. Deferred tax assets and

liabilities at 31 December 2023 and at 31 December 2022 have been calculated based on the 3% rate.

On 11 July 2023, the government enacted legislation to implement the G20‑OECD Inclusive Framework Pillar Two rules in the

UK. The intention of the legislation is to ensure that UK‑headquartered multinational enterprises pay a minimum tax rate of

15% on UK and overseas profits arising after 31 December 2023. The rules include a Qualified Domestic Minimum Top‑Up

Tax, which aims to ensure that large UK groups pay a minimum tax rate of 15% on their UK profits.

The Group’s operations are entirely based in the UK and are subject to UK corporation tax. The Group has carried out an

assessment of Pillar Two impact during the year, and based on this assessment, the Group is not currently expecting to be

materially impacted by Pillar Two rules. Work to further assess the Group’s exposure to the Pillar Two legislation will continue

during 2024, and full Pillar Two calculations will be carried out in 2024, which is when the legislation becomes effective.

Pillar Two legislation applies to profits arising after 31 December 2023. The tax expense arising from Pillar Two is £nil for the

years ended 31 December 2023 and 31 December 2022.

The IAS 12 exceptions from recognising and disclosing information about deferred tax assets and liabilities related to Pillar

Two income taxes have been applied.

10. Cash and balances with the Bank of England

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Cash in hand	9.9	10.6	9.9	10.6
Unencumbered deposits with the Bank of England	4,652.7	5,805.0	4,652.7	5,805.0
Cash in hand and unencumbered deposits	4,662.6	5,815.6	4,662.6	5,815.6
Cash ratio deposit with the Bank of England	176.5	167.2	176.5	167.2
Cash and balances with the Bank of England	4,839.1	5,982.8	4,839.1	5,982.8

Cash ratio deposits are mandatory requirements of the Bank of England. They are considered to be encumbered assets and

are non‑interest‑bearing.

11. Debt securities

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Debt securities issued by:
UK public bodies	852.4	582.4	852.4	582.4
Other public bodies	958.9	965.6	958.9	965.6
Other	5,750.6	4,136.8	5,750.6	4,136.8
Group companies	–	–	11,792.4	13,548.2
Total debt securities	7,561.9	5,684.8	19,354.3	19,233.0

Debt securities issued by Group companies comprise retained investments in the Group’s securitisation vehicles.

166 | Financial Statements 167

Notes to the Financial Statements (continued)

11. Debt securities (continued)

Group	Held at fair	Fair value	Amortised	Total
	value through	through Other	cost
	profit and loss	Comprehensive
		Income
	£m	£m	£m	£m
Movements in debt securities during the year were:
At 1 January 2023	25.5	4,292.7	1,366.6	5,684.8
Additions	–	1,545.0	1,867.9	3,412.9
Disposals and repayments	–	(725.0)	(918.2)	(1,643.2)
Exchange translation	–	(25.9)	(21.2)	(47.1)
Other changes in value	1.8	108.9	43.8	154.5
At 31 December 2023	27.3	5,195.7	2,338.9	7,561.9
Movements in debt securities during the year were:
At 1 January 2022	28.6	3,255.4	791.5	4,075.5
Additions	–	2,097.6	854.6	2,952.2
Disposals and repayments	–	(734.1)	(261.4)	(995.5)
Exchange translation	–	11.6	10.2	21.8
Other changes in value	(3.1)	(337.8)	(28.3)	(369.2)
At 31 December 2022	25.5	4,292.7	1,366.6	5,684.8

Society	Held at fair	Fair value	Amortised	Total
	value through	through Other	cost
	profit and loss	Comprehensive
		Income
	£m	£m	£m	£m
Movements in debt securities during the year were:
At 1 January 2023	25.5	4,292.7	14,914.8	19,233.0
Additions	–	1,545.0	1,867.9	3,412.9
Disposals and repayments	–	(725.0)	(2,693.6)	(3,418.6)
Exchange translation	–	(25.9)	(21.5)	(47.4)
Other changes in value	1.8	108.9	63.7	174.4
At 31 December 2023	27.3	5,195.7	14,131.3	19,354.3
Movements in debt securities during the year were:
At 1 January 2022	28.6	3,255.4	11,656.5	14,940.5
Additions	–	2,097.6	6,690.0	8,787.6
Disposals and repayments	–	(734.1)	(3,461.0)	(4,195.1)
Exchange translation	–	11.6	11.7	23.3
Other changes in value	(3.1)	(337.8)	17.6	(323.3)
At 31 December 2022	25.5	4,292.7	14,914.8	19,233.0

12. Loans and advances to customers

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Loans secured on residential property:
Loans fully secured on residential property	45,126.4	43,793.6	9,208.5	9,810.7
Other loans secured on residential property	6.1	7.2	–	–
Loans secured on commercial property	1,743.4	1,461.3	1,742.8	1,461.3
Gross loans and advances to customers	46,875.9	45,262.1	10,951.3	11,272.0
Impairment	(37.7)	(33.1)	(8.4)	(7.8)
Fair value credit adjustment	(22.3)	(25.3)	(22.3)	(25.3)
Expected credit losses (ECL)	(60.0)	(58.4)	(30.7)	(33.1)
Total loans and advances to customers	46,815.9	45,203.7	10,920.6	11,238.9

The following tables analyse the changes in ECL impairment and fair value credit adjustments.

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Opening impairment	33.1	26.1	7.8	7.3
Amounts written off in the period	(1.3)	(1.0)	(0.6)	(0.3)
Discounting recognised in net interest income	1.4	1.0	1.0	0.7
Charge for the year recognised in the income statement	4.5	7.0	0.2	0.1
Impairment	37.7	33.1	8.4	7.8

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Opening fair value credit adjustment	25.3	28.4	25.3	28.4
Release recognised in the income statement through net interest	(2.3)	(2.4)	(2.3)	(2.4)
Write‑offs	(0.7)	(0.7)	(0.7)	(0.7)
Fair value credit adjustment	22.3	25.3	22.3	25.3

168 | Financial Statements 169

Notes to the Financial Statements (continued)

13. Intangible assets

Group and Society	Development	Software	Internally	Other	Total
	costs		generated
			assets
	£m	£m	£m	£m	£m
Cost:
At 1 January 2023	4.1	59.8	13.6	7.1	84.6
Additions	(4.1)	10.5	–	–	6.4
Disposals	–	(2.7)	(1.0)	–	(3.7)
Transfers	–	–	–	–	–
At 31 December 2023	–	67.6	12.6	7.1	87.3
Amortisation:
At 1 January 2023	–	44.0	13.3	7.1	64.4
Charged in year	–	8.2	0.2	–	8.4
Disposals	–	(2.8)	(1.0)	–	(3.8)
At 31 December 2023	–	49.4	12.5	7.1	69.0
Net book value at 31 December 2023	–	18.2	0.1	–	18.3
Cost:
At 1 January 2022	0.4	61.9	15.1	7.1	84.5
Additions	3.7	1.8	–	–	5.5
Disposals	–	(3.9)	(1.5)	–	(5.4)
Transfers	–	–	–	–	–
At 31 December 2022	4.1	59.8	13.6	7.1	84.6
Amortisation:
At 1 January 2022	–	39.5	14.4	7.1	61.0
Charged in year	–	8.3	0.3	–	8.6
Disposals	–	(3.8)	(1.4)	–	(5.2)
At 31 December 2022	–	44.0	13.3	7.1	64.4
Net book value at 31 December 2022	4.1	15.8	0.3	–	20.2

Other intangible assets primarily comprise the fair value of items acquired on mergers (retail savings and brands) and an

amount paid for the transfer of a number of employee sharesave schemes to the Society. Transfers relate to the reclassification

of assets from development costs to software and internally generated assets.

14. Investment property

Group and Society	2023	2022
	£m	£m
Cost:
At 1 January	22.0	19.7
Additions	0.3	0.5
Disposals	(0.6)	(0.6)
Transfers from Property, Plant and Equipment	–	2.4
At 31 December	21.7	22.0
Depreciation:
At 1 January	6.0	5.2
Charged in year	0.4	0.2
Disposals	(0.4)	(0.1)
Transfers from Property, Plant and Equipment	–	0.7
At 31 December	6.0	6.0
Net book value at 31 December	15.7	16.0
Fair value	12.2	13.6

Investment properties are generally flats and offices ancillary to branch premises and not used by the Group. Rental income of

£1.1 million on investment properties has been included within other operating income (2022: £1.1 million).

Transfers relate to the reclassification of assets between investment properties and property, plant and equipment, usually

due to changes in occupancy.

The fair value of the Group’s investment properties at 31 December 2023 is based predominantly on external valuations.

170 | Financial Statements 171

Notes to the Financial Statements (continued)

15. Property, plant and equipment

Group and Society	Land and	Equipment,	Right-of-use	Right-of-use	Total
	buildings	fixtures and	property	motor vehicles
		fittings
	£m	£m	£m	£m	£m
Cost:
At 1 January 2023	101.0	67.3	24.5	1.3	194.1
Additions	4.5	3.8	1.4	0.1	9.8
Disposals	(3.6)	(11.9)	(3.3)	(0.1)	(18.9)
At 31 December 2023	101.9	59.2	22.6	1.3	185.0
Depreciation:
At 1 January 2023	34.5	49.1	8.4	1.0	93.0
Charged in year	3.4	5.0	2.7	0.2	11.3
Disposals	(4.0)	(11.9)	(3.1)	(0.1)	(19.1)
Impairment	0.3	–	–	–	0.3
At 31 December 2023	34.2	42.2	8.0	1.1	85.5
Net book value at 31 December 2023	67.7	17.0	14.6	0.2	99.5
Cost:
At 1 January 2022	102.5	68.4	42.2	1.2	214.3
Additions	3.2	3.6	1.9	0.1	8.8
Disposals	(0.9)	(4.7)	(1.2)	–	(6.8)
Lease modification	–	–	(18.4)	–	(18.4)
Assets transferred to held for sale	(1.4)	–	–	–	(1.4)
Transfers to investment property	(2.4)	–	–	–	(2.4)
At 31 December 2022	101.0	67.3	24.5	1.3	194.1
Depreciation:
At 1 January 2022	32.9	48.1	10.6	0.7	92.3
Charged in year	3.7	5.5	3.5	0.3	13.0
Disposals	(0.9)	(4.5)	(0.8)	–	(6.2)
Lease Modification	–	–	(4.9)	–	(4.9)
Assets transferred to held for sale	(0.5)	–	–	–	(0.5)
Transfers to investment property	(0.7)	–	–	–	(0.7)
At 31 December 2022	34.5	49.1	8.4	1.0	93.0
Net book value at 31 December 2022	66.5	18.2	16.1	0.3	101.1

16. Deferred tax

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
At 1 January	11.9	50.4	10.2	48.4
Income statement expense/(credit) – note 9	22.1	1.0	22.4	1.3
Tax (credit)/expense recognised directly in equity	(11.5)	(39.5)	(11.5)	(39.5)
At 31 December	22.5	11.9	21.1	10.2
Deferred tax assets and liabilities are attributable to the following items:
Deferred tax assets
Fair value movements on external swap on intercompany loan	–	(3.7)	–	(3.7)
Deferred remuneration	(3.6)	(2.3)	(3.6)	(2.3)
Transitional adjustment arising following implementation of IFRS 9	(0.7)	(0.9)	(0.7)	(0.9)
Transitional adjustment arising following change in accounting treatment	(0.4)	(0.5)	(0.4)	(0.5)
Pensions and other post‑retirement benefits	(2.3)	(2.1)	(2.3)	(2.1)
Financial instruments held at fair value through other comprehensive income	(4.0)	–	(4.0)	–
Capital losses	(0.2)	(0.2)	(0.2)	(0.2)
Other temporary differences	(0.1)	(0.2)	(0.1)	(0.2)
Total deferred tax assets	(11.3)	(9.9)	(11.3)	(9.9)
Deferred tax liabilities
Pensions and other post‑retirement benefits	10.8	13.6	10.8	13.6
Capital allowances in excess of depreciation	1.2	0.9	1.2	0.9
Fair value movements on external swap on intercompany loan	19.2	–	19.2	–
Financial instruments held at fair value through profit and loss	0.4	0.4	0.4	0.4
Financial instruments held at fair value through other comprehensive income	–	0.7	–	0.7
Cash flow hedging	0.1	3.9	0.1	3.9
Transitional adjustment arising following implementation of IFRS 9	1.1	1.3	–	–
Transitional adjustment arising following change in accounting treatment	0.3	0.3	–	–
Other temporary differences	0.7	0.7	0.7	0.6
Total deferred tax liabilities	33.8	21.8	32.4	20.1
Net deferred tax liabilities	22.5	11.9	21.1	10.2

172 | Financial Statements 173

Notes to the Financial Statements (continued)

16. Deferred tax (continued)

The deferred tax expense/(credit) in the income statement comprise the following temporary differences:

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Pensions and other post‑retirement benefits	0.1	0.2	0.1	0.2
Capital allowances in excess of depreciation	0.3	–	0.3	–
Fair value movements on external swap on intercompany loan	22.9	0.8	22.9	0.8
Deferred remuneration	(1.4)	(0.6)	(1.4)	(0.6)
Financial instruments held at fair value through profit and loss	0.1	(0.5)	0.1	(0.5)
Transitional adjustment arising following implementation of IFRS 9	(0.1)	0.1	0.2	0.3
Transitional adjustment arising following change in accounting treatment	–	0.1	0.1	0.2
Capital losses	–	1.2	–	1.2
Other temporary differences	0.2	(0.3)	0.1	(0.3)
Total deferred tax expense/(credit) in the income statement	22.1	1.0	22.4	1.3

17. Retirement benefit obligations

The Group operates one main employee benefit scheme (the Scheme), the costs of which are borne by the Society, with both

defined benefit and defined contribution sections.

In addition, the Group operates unfunded defined benefit (DB) pension schemes for certain current and former members of

staff. The present value at 31 December 2023 of the defined benefit obligation in relation to these schemes was £8.1 million

(2022: £7.4 million) and the relevant disclosures have been separated from those of the main employee benefits scheme

where appropriate.

Net defined benefit asset

As at 31 December 2023 the defined benefit asset is £38.6 million, a decrease of £10.2 million from 31 December 2022.

Pensioner buy-in

In mid‑November 2018, the Scheme entered into a pensioner buy‑in with Pension Insurance Corporation (PIC). The premium

of c.£248 million was paid for out of the Scheme’s assets, with no additional funding required from the Society. The asset loss

from the buy‑in was approximately £25 million on an accounting basis. The transaction covered around £250 million of the

Scheme’s pensioner liabilities, based on the Technical Provisions basis. As such, some pensioners remain uninsured and not

covered by the buy‑in. At 31 December 2023, we have valued the YBS Scheme insurance contract with PIC to be equal to the

corresponding IAS 19 defined benefit obligation in respect of the insured members. The assessed value of £155.8 million was

calculated using a methodology consistent with the approach used to calculate the total pension benefit. Benefits paid over

2023 in respect of the buy‑in members totalled £9.4 million.

Defined contribution post-employment benefits

In addition to the defined benefit section (see below), the Group operates a defined contribution (DC) section of the main

scheme. This Scheme is used by the Society to fulfil its auto enrolment duties. In 2023, the total Society contribution into

the pension scheme in respect of DC benefits was c.£11.9 million (2022: c.£9.8 million). In addition to this YBS also paid

£1.0 million (2022: £0.9 million) into the pension scheme to cover the approximate cost of DC expenses, including the cost of

life assurance which is provided through the Scheme for all YBS colleagues.

Defined benefit post-employment benefits

The Group operates a funded defined benefit scheme for certain employees, providing benefits based on final salary. However,

benefits earned by members of the defined benefit section of the main scheme, with the exception of N&P Section members,

from 1 April 2010 are based on career average revalued earnings. N&P Section members’ benefits are based on their Final

Pensionable Salary (following the removal of the 31 March 2010 freeze). The defined benefit section was closed to new

employees in 2000 and to future accrual on 31 December 2015. The assets of the scheme are held in a separate trustee‑

administered fund. Contributions are assessed in accordance with the advice of an independent qualified actuary using the

projected unit method.

The defined benefit section of the Scheme has a weighted average maturity of around 14 years (2022: 15 years). This weighted

average duration of a pension scheme is the average discounted term until benefit payments are due, weighted by the size of

the payment. A breakdown of the scheme liabilities by members is included below.

	Funded DB scheme		Unfunded DB scheme
	2023	2022	2023	2022
	£m	£m	£m	£m
Deferred in service liability	36.5	64.2	–	–
Deferred liability	166.3	175.1	–	3.8
Pensioner liability	369.7	354.1	8.1	3.6
Total liabilities	572.5	593.4	8.1	7.4

GMP equalisation

On 26 October 2018, the High Court ruled that the Lloyds Bank schemes had to equalise pension scheme benefits between

males and females for the effects of Guaranteed Minimum Pension (GMP) and identified acceptable methods as to how this

can be achieved. The benefits provided under the Scheme are uncertain to the extent that the impact of GMP equalisation has

not yet been fully reflected in Scheme benefits. An allowance has been included in the liabilities to reflect the expected value

of these additional benefits in line with what was calculated at last year end, i.e. uplifting the DBO by 0.2%.

On 20 November 2020, the High Court ruled that individual transfer payments made since 17 May 1990 would need to be

equalised for the effects of GMP. No further allowance has been made for this judgment as the impact is not material.

Scheme specific risks

The ultimate cost of the Scheme to the Society will depend upon actual future events rather than the assumptions made.

Many of the assumptions made are unlikely to be borne out in practice and, as such, the cost of the schemes may be higher or

lower than disclosed. In general, the risk to the Society is that the assumptions underlying the disclosures, or the calculation

of contribution requirements, are not borne out in practice and the cost to the Society is higher than expected. This could

result in higher contributions being required from the Society and a higher deficit being disclosed. This may also impact the

Society’s ability to grant discretionary benefits or other enhancements to members.

The assumptions not being borne out in practice could include:

I. The investment return on the Scheme’s assets being lower than assumed, resulting in an unaffordable increase in the

contributions required from the Society. The level of bond returns will be a key determinant of overall investment return;

the investment portfolio is also subject to a range of other risks typical of the asset classes held, in particular equity

returns, credit risk on bonds and exposure to the property market.

II. Falls in asset values (particularly equities) not being matched by similar falls in the value of liabilities. This risk has been

mitigated to some degree by the implementation of an asset liability matching investment strategy which is designed to

match a proportion of the Scheme’s interest rate exposure.

III. Future levels of inflation being higher than assumed, resulting in higher than anticipated annual increases to benefits in

payment, revaluations of benefits prior to retirement and salary increases. This risk has been mitigated to some degree

by the implementation of an asset liability matching investment strategy which is designed to match a proportion of the

Scheme’s inflation exposure.

IV. Unanticipated improvements in the longevity of members leading to an increase in the Scheme’s liabilities.

174 | Financial Statements 175

Notes to the Financial Statements (continued)

17. Retirement benefit obligations (continued)

Assets

The Scheme’s investment strategy, with a significant proportion of the assets invested in liability driven investments

(consisting of index‑linked government and corporate bonds and swaps), is expected to reduce the volatility of the difference

between the market value of the assets and the IAS 19 liabilities.

Disaggregation of assets

	Funded DB scheme
	2023	2022
	%	%
Equities	1	1
Index‑linked bonds	53	58
Corporate and other bonds	7	1
Cash and other	13	13
Swaps	1	–
Pensioner buy‑in insurance contract	25	27
	100	100

Approximately 61% of the Scheme’s investments are in quoted assets, with the exception of the liability matching assets

classified as ‘Swaps’ and reinsurance assets included in ‘Cash and other’, where a proportion of these will be invested in

unquoted assets and ‘Buy in’.

Scheme investment strategy

The Trustees set the investment strategy for the Defined Benefit scheme taking into account considerations such as the

strength of the Society’s covenant, the long‑term liabilities of the DB scheme and the funding agreed with the Society.

The Scheme’s investment strategy is set in conjunction with the Scheme’s investment adviser, recognising and managing a

number of risks involved in the investment of the Scheme’s assets in order to achieve the Scheme’s investment objective.

The Trustees agreed that the investment objectives for the DB scheme should be:

•

To achieve a return on the Scheme’s assets that is consistent with the long‑term assumptions in determining the funding

of the Scheme, whilst at the same time balancing risk.

•

To aim for the assets to exceed the liabilities as determined in the event of the Scheme winding up on the basis of cash

equivalent transfer values.

•

To minimise the requirement for the Society to make further deficit recovery plan contributions.

The investment strategy is set out in its Statement of Investment Principles (SIP). The strategy is to hold:

•

A range of instruments that provide a better match both to changes in liability values and expected liability cash flows,

including (but not limited to) gilts, corporate bonds, derivatives, secure income assets and insurance policies.

•

A diversified range of return‑seeking assets, including (but not limited to) equities (implemented physically and/or through

equity futures), corporate bonds and secure income assets.

•

Passive and actively managed portfolios as appropriate, following consideration of efficiency, liquidity and level of

transaction costs likely to prevail within each market as well as the impact of the investment managers’ fees on future

expected returns.

Between the end of September and mid‑October 2022, the assets the Scheme invests in experienced large market

fluctuations following the UK government’s announcement of the mini‑budget, where bond yields increased in such a manner

that the Bank of England stepped in to stabilise the market.

The increase in bond yields reduced both the value of the Scheme’s Credit and Liability Matching portfolios and the Scheme’s

liabilities. Given the hedging properties of these mandates, the Scheme’s funding level only marginally reduced, however

the leveraged nature of the Liability Matching portfolio has forced the Scheme to fully disinvest from its Diversified Return

Seeking assets in order to increase collateral and maintain the hedging properties of this mandate. This action was crucial to

maintain the hedging properties of these mandates, but decreased the expected return on the Scheme’s assets and increased

the proportion of illiquid assets the Scheme holds in its portfolio.

As a result, during 2023, the Trustees have worked with its investment adviser to assess the investment strategy against

the journey plan and review the return and risk characteristics of the DB scheme. This assessment resulted in the Trustees

decision to re‑risk the investment strategy from the previously agreed gilts+0.7% pa return objective to gilts+1.0% pa. The

Trustees also decided to reduce the amount of illiquid assets within the Scheme back to the pre‑gilt crisis level of 5% by

partially disinvesting from the secure income assets, recognising that such decision will take time to implement.

In order to re‑risk the investment strategy and maintain the hedging properties of the Scheme’s Credit and Liability Matching

portfolios, the Trustees decided to invest in equities using derivatives, specifically equity futures.

31 December 2022 Actuarial valuation

The most recent actuarial valuation of the Scheme was carried out with an effective date of 31 December 2022 and was

completed in November 2023. The next actuarial valuation is expected at 31 December 2025. The value of the benefits

promised to members that fall within the DB section of the Scheme are referred to as the Technical Provisions and are valued

on a prudent basis as determined by the Trustee, having received advice from the Scheme Actuary.

The funding level (the ratio of assets to Technical Provisions) at 31 December 2022 was 102.0%. As the Scheme was in

surplus at 31 December 2022, no recovery plan was required, and therefore, currently the Society does not have to pay any

deficit reduction contributions.

War in Ukraine

The Trustees are monitoring the unfortunate events happening in Ukraine and our thoughts are very much with all those

impacted during these extremely difficult times. In line with the western sanctions, the Trustees reviewed the exposure of

the Scheme to Russian and Belarussian assets, to which the Scheme had minimal direct exposures for both the DB and DC

sections of the Scheme. These exposures were subsequently written down to zero price as they were removed from market

indices. The Trustees expects its Investment Managers to gradually divest from these exposures and will continue to monitor

their progress in this area.

The Trustees continue to actively monitor the Scheme’s investments as part of the Investment Sub Committee, which includes

analysis on future expected returns for the investments. Further, the Trustees have an integrated risk management framework

in place to monitor and challenge the Covenant, Investment and Funding risk linked to the Scheme.

176 | Financial Statements 177

Notes to the Financial Statements (continued)

17. Retirement benefit obligations (continued)

Summary of assumptions

	2023	2022
	% pa	% pa
Retail prices index (RPI) inflation	3.2	3.5
Consumer price index (CPI) inflation	2.5	2.8
Discount rate	4.5	4.8
Salary increases	3.8	4.0
Rate of increase of pensions in payment*:
In line with RPI, subject to a min of 3% and a max of 5% pa	3.7	3.8
In line with RPI, subject to a min of 0% and a max of 5% pa	3.1	3.3
In line with RPI, subject to a min of 0% and a max of 2.5% pa	2.1	2.2
In line with CPI, subject to a min of 0% and a max of 3% pa	2.2	2.4

The most significant non‑financial assumption is the assumed rate of longevity. The assumptions made are equivalent to the

following life expectancies for scheme member at age 60.

	2023	2022
	Years	Years
For a current 60 year old male	27.8	28.4
For a current 60 year old female	29.7	30.1
For a current 45 year old male	28.9	29.4
For a current 45 year old female	30.7	31.2

Defined benefit actual contributions paid wholly relate to contributions made by the Society.

Changes in market conditions generate an actuarial gain (decrease in liabilities) and a return on plan less than discount rate

(decrease in assets).

Reconciliation of funded status

Group and Society	2023	2022
	£m	£m
Present value of defined benefit obligation	(572.5)	(593.4)
Assets at fair value	611.1	642.2
Funded status/defined benefit asset	38.6	48.8

Reconciliation of unfunded status

Group and Society	2023	2022
	£m	£m
Present value of unfunded defined benefit scheme	(8.1)	(7.4)
Present value of unfunded defined benefit scheme	(8.1)	(7.4)

Statement of comprehensive income (SCI)

Group and Society	Funded DB scheme		Unfunded DB scheme
	2023	2022	2023	2022
	£m	£m	£m	£m
Cumulative actuarial (loss)/gains recognised at 1 January	(30.8)	53.7	16.4	11.9
(Loss)/gain due on change in financial assumptions	(4.0)	342.7	(0.1)	4.5
Gain due to demographic assumptions	12.2	0.6	0.1	–
Gain/(loss) due to experience	13.2	(39.3)	(0.8)	–
Loss due to investment return different from return implied by the discount	(31.8)	(388.5)	–	–
rate
Total actuarial (loss)/gain recognised in SCI	(10.4)	(84.5)	(0.8)	4.5
Cumulative actuarial (losses)/gains recognised at 31 December	(41.2)	(30.8)	15.6	16.4

Components of pension expense as shown in the income statement

	Group and Society Funded DB scheme		Unfunded DB scheme
	2023	2022	2023	2022
	£m	£m	£m	£m
Administrative expenses	2.1	1.7	–	–
Interest on net defined benefit asset/liability	(2.3)	(2.5)	0.3	0.2
Total pension expense	(0.2)	(0.8)	0.3	0.2

Reconciliation of present value of defined benefit obligation

	Group and Society Funded DB scheme		Unfunded DB scheme
	2023	2022	2023	2022
	£m	£m	£m	£m
Present value of defined benefit obligation at 1 January	593.4	916.3	7.4	11.9
Administrative expenses	2.1	1.7	–	–
Interest cost	27.8	16.6	0.3	0.2
Actuarial (gain)/loss	(21.4)	(303.8)	0.8	(4.5)
Defined benefit actual benefits and costs paid	(29.4)	(37.4)	–	–
Disbursements directly paid by the employer	–	–	(0.4)	(0.2)
Present value of defined benefit obligation at 31 December	572.5	593.4	8.1	7.4

* Term dependent inflationary increases have been adopted to reflect expected inflation in each future year. Illustrative inflationary assumptions have

been provided which have been calculated to reflect the broad profile of the Society’s pension obligations.

178 | Financial Statements 179

Notes to the Financial Statements (continued)

17. Retirement benefit obligations (continued)

Movement in defined benefit fair value of assets

	Group and Society Funded DB scheme
	2023	2022
	£m	£m
Fair value of assets at 1 January	642.2	1,049.0
Interest income on scheme asset	30.1	19.1
Return on plan assets less than discount rates	(31.8)	(388.5)
Defined benefit actual benefits and costs paid	(29.4)	(37.4)
Fair value of plan assets at 31 December	611.1	642.2

The defined benefit obligation has reduced over the period, this is primarily driven by membership movements and

experience following the 31 December 2022 valuation, a decrease in the salary escalation and price inflation assumptions,

and changes to demographic assumptions. These were slightly offset by the reduction of the discount rate to 4.50% from

4.80%, and inflation experience over 2023 being higher than assumed.

Sensitivities

The IAS 19 liability measurement and the service cost are sensitive to the assumptions made about future inflation and salary

growth levels, as well as the assumptions made about life expectation. They are also sensitive to the discount rate, which

depends on market yields on Sterling‑denominated high quality corporate bonds. A decrease in corporate bond yields will

increase the liabilities although this will be partially offset by an increase in matching assets.

The table below shows the sensitivity of the defined benefit obligation combined and Scheme assets to changes in these

assumptions. The final assumptions are chosen by the Society.

Principal Sensitivity Illustrations

	Defined benefit	Assets	Net effect
	obligation
	£m	£m	£m
Total as at 31 December 2023	580.6	611.1	30.5
Change in defined benefit obligation/assets given the following change in assumption:
Discount rate*: 1.00% decrease	86.6	85.9	(0.7)
Salary Escalation: 0.75% increase	1.2	–	(1.2)
Inflation**: 0.50% increase	21.0	24.4	3.4
Life expectancy: 1 year average increase	20.8	6.2	(14.6)

The asset liability matching strategy implemented for the Scheme means that a change in discount rate or inflation

assumption has a broadly similar impact on the liabilities and the assets, reducing the volatility of the net impact. It should be

noted that this strategy is based on liabilities on the self‑sufficiency basis, i.e. higher liabilities than on an accounting basis. As

such, on an accounting basis, for the sensitivities above, the liabilities increase by more than the assets, resulting in a decline

in the accounting balance sheet position.

18. Other assets

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Prepayments and accrued interest	23.0	19.0	23.0	17.9
Due from subsidiary undertakings	–	–	93.6	68.0
Current tax assets	3.8	–	3.8	–
Other assets	12.1	11.1	10.2	9.3
Total other assets	38.9	30.1	130.6	95.2

Included in the Group and Society’s other assets are finance lease receivables of £1.3 million (2022: £1.8 million). The Group

has entered into agency sublease arrangements as an intermediate lessor on former branch properties that are considered

to be finance leases. As substantially all risks and reward are passed over as the subleases match the payment terms and

duration of the headline leases they are classified as finance leases.

Finance income on net investment in the lease in 2023 has been £19k (2022: £17k).

19. Shares

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Shares comprising balances held by individuals	47,056.7	42,008.3	47,056.7	42,008.3
Acquisition fair value adjustments	–	(0.1)	–	(0.1)
Total shares	47,056.7	42,008.2	47,056.7	42,008.2

20. Other deposits

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Amounts owed to:
Subsidiary undertakings	–	–	13,679.0	15,141.2
Other customers	983.6	1,138.1	401.2	695.1
Total other deposits	983.6	1,138.1	14,080.2	15,836.3

* The change in the discount rate is assumed to be equivalent to a 1% decrease in gilt, swap and credit based interest rates.

** The sensitivity illustrations above are calculated changing each assumption in isolation, keeping all other assumptions constant. In practice this is

unrealistic as it ignores the impact from correlation between assumptions.

180 | Financial Statements 181

Notes to the Financial Statements (continued)

21. Debt securities in issue

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Covered bonds	2,968.4	3,365.4	4,254.9	4,715.8
Medium‑term notes	1,262.7	1,358.3	1,262.7	1,358.3
Residential mortgage backed securities	688.3	456.3	–	–
Certificate of deposits	–	79.3	–	79.3
Total debt securities in issue	4,919.4	5,259.3	5,517.6	6,153.4

Debt securities in issue include amounts secured on certain loans and advances to customers in Group £3.7 billion (2022:

£3.8 billion) and Society £4.3 billion (2022: £4.7 billion).

22. Other liabilities

		Group Group		Society
	2023	2023	2022	2023	2022
		£m	£m	£m	£m
Accruals and deferred income		43.3	38.1	43.3	38.1
Finance lease liabilities		17.3	19.0	17.3	19.0
Other		9.9	6.8	58.6	39.8
Total other liabilities		70.5	63.9	119.2	96.9

The lease liabilities are secured by the related underlying assets. The underlying maturity analysis of lease liabilities at

31 December 2023 for the Group is as follows:

	Buildings	Finance	NPV
	lease	charges
	payments
	£m	£m	£m
Within 1 year	3.6	(0.4)	3.2
1‑2 years	2.9	(0.4)	2.5
2‑3 years	2.5	(0.3)	2.2
3‑4 years	2.3	(0.2)	2.1
4‑5 years	2.0	(0.2)	1.8
5‑10 years	4.5	(0.3)	4.2
10‑15 years	0.5	(0.1)	0.4
Over 15 years	1.0	(0.1)	0.9
Total at 31 December 2023	19.3	(2.0)	17.3

The Group has elected not to recognise a lease liability for short‑term leases and leases of low value assets which consist

entirely of printing equipment. Payments made under such leases are expensed on a straight‑line basis. At 31 December

2023 the Group had no short‑term lease commitments (2022: nil).

23. Provisions for liabilities and charges

Group	Customer	Restructuring	Property	Other	Total
	redress		related
			provision
	£m	£m	£m	£m	£m
At 1 January 2023	1.0	0.5	4.1	0.1	5.7
Amounts utilised during the year	(0.2)	(0.1)	(0.8)	–	(1.1)
Provision charge/(release)	0.2	(0.2)	(0.6)	–	(0.6)
At 31 December 2023	1.0	0.2	2.7	0.1	4.0
At 1 January 2022	1.4	2.2	2.4	0.1	6.1
Amounts utilised during the year	(0.4)	(2.6)	(1.6)	–	(4.6)
Provision charge	–	0.9	3.3	–	4.2
At 31 December 2022	1.0	0.5	4.1	0.1	5.7

Society	Customer	Restructuring	Property	Other	Total
	redress		related
			provision
	£m	£m	£m	£m	£m
At 1 January 2023	1.0	0.5	4.1	0.1	5.7
Amounts utilised during the year	(0.1)	(0.1)	(0.8)	–	(1.0)
Provision release	–	(0.2)	(0.6)	–	(0.8)
At 31 December 2023	0.9	0.2	2.7	0.1	3.9
At 1 January 2022	1.4	2.2	2.4	0.1	6.1
Amounts utilised during the year	(0.4)	(2.6)	(1.6)	–	(4.6)
Provision charge	–	0.9	3.3	–	4.2
At 31 December 2022	1.0	0.5	4.1	0.1	5.7

During the course of its business, the Society receives complaints in relation to past sales or ongoing administration, as well

as being subject to enquiries from and discussions with its regulators, governmental and other public bodies, on a range of

matters. No provision is made where it is concluded that it is not probable that a quantifiable payment will be made; this will

include circumstances where the facts are unclear or further time is required to reasonably quantify the expected payment.

At 31 December 2023 the Group holds customer redress provisions of £1.0 million (2022: £1.0 million) and the Society of

£0.9 million (2022: £1.0 million) in respect of various potential customer claims and represent management’s best estimate

of the likely costs.

Restructuring provisions of £0.2 million (2022: £0.5 million) are held in relation to business and organisational changes

announced during 2023 and earlier periods.

Property related provisions of £2.7 million (2022: £4.1 million) are held in respect of lease costs for branch premises that are

no longer in use. This will be utilised over the remaining term of the unoccupied leasehold branches.

182 | Financial Statements 183

Notes to the Financial Statements (continued)

24. Subordinated liabilities

Group and Society	Maturity date	2023	2022
		£m	£m
Senior non‑preferred:
3% Senior non‑preferred bonds 2025	18 April 2025	141.4	280.6
1½% Senior non‑preferred bonds 2029	15 September 2029	249.2	248.8
3.511% Senior non‑preferred bonds 2030	11 October 2030	301.5	301.3
63/8% Senior non‑preferred bonds 2028	15 November 2028	351.8	–
73/8% Senior non‑preferred bonds 2027	12 September 2027	305.2	–
Subordinated notes:
63/8% Subordinated Bonds 2024	26 April 2024	4.1	4.1
33/8% Subordinated Bonds 2028	13 September 2028	301.9	301.5
13½% Convertible Tier 2 Capital Notes 2025	1 April 2025	26.5	26.5
Fair value hedging adjustments		(59.9)	(127.7)
Total subordinated liabilities		1,621.7	1,035.1

All senior non‑preferred bonds and subordinated bonds are denominated in Sterling. The following notes are repayable at the

dates stated or earlier at the option of the Society and with the prior consent of the PRA under the following conditions.

Senior non‑preferred:

•

Redemption of the 3% Notes at par on the optional call date of 18 April 2024 after fifteen to thirty days’ notice. In the

event the Society does not redeem the notes on this date the fixed rate of interest will become the sum of the yield on the

relevant 1‑year UK gilt‑edged reference bond plus 2.15%.

•

Redemption of the 1½% Notes at par on the optional call date of 15 September 2028 after fifteen to thirty days’ notice.

In the event the Society does not redeem the notes on 15 September 2028 the fixed rate of interest will become the sum

of the yield on the relevant 1‑year UK gilt‑edged reference bond plus 1.15%.

•

Redemption of the 3.511% Notes at par on the optional call date of 11 October 2029 after fifteen to thirty days’ notice to

the holders. In the event the Society does not redeem the notes on 11 October 2029 the fixed rate of interest will become

the sum of the yield on the relevant 1‑year UK gilt‑edged reference bond plus 2.05%.

•

Redemption of the 63/8% Notes at par on the optional call date of 15 November 2027 after giving fifteen to thirty days’

notice to the holders. In the event the Society does not redeem the notes on 15 November 2027 the fixed rate of interest

will become the sum of the yield on the relevant 1‑year UK gilt‑edged reference bond plus 2.65%.

•

Redemption of the 73/8% Notes at par on the optional call date of 12 September 2026 after giving fifteen to thirty days’

notice to the holders. In the event the Society does not redeem the notes on 12 September 2026 the fixed rate of interest

will become the sum of the yield on the relevant 1‑year UK gilt‑edged reference bond plus 2.65%.

Subordinated notes:

•

Redemption of the 33/8% Notes at par on the optional call date of 13 September 2027 after giving thirty to sixty days’

notice. In the event the Society does not redeem the notes on this date, please see Final Terms.

•

Redemption of the 13½% Convertible Tier 2 Capital Notes will occur on the optional call date of 1 April 2025 unless

the notes are converted to Profit Participating Deferred Shares (PPDS). The ‘Conversion Trigger’ shall occur if on any

Calculation Date the Society’s Common Equity Tier 1 Capital Ratio, as confirmed in a report of the auditor to the Society

and addressed to the Board of Directors of the Society, is less than 5%. Should the ‘Conversion Trigger’ occur and these

notes convert into PPDS, the PPDS will be perpetual in nature.

The rights of repayment of the holders of Subordinated notes are subordinated to the claims of all depositors and members

holding shares in the Society, as regards the principal of their shares and interest due on them.

25. Financial commitments

Group and Society	2023	2022
	£m	£m
Committed undrawn standby facilities	136.1	139.2*
Other financial commitments	2.8	–
Total financial commitments	138.9	139.2*

The above amounts represent undrawn elements on credit facilities with customers. The amount has reduced over the year

due to further drawdowns against these facilities and the maturity of a number of agreements.

In addition, the Society has a contractual commitment of £2.8 million for ongoing consultancy services.

26. Derivative financial instruments

Derivative financial instruments (derivatives) used for the management of market risk are contracts or agreements whose

value is derived from one or more underlying price, rate or index inherent in the contract or agreement, such as interest rates,

exchange rates or stock market indices.

Derivatives are used by the Group in accordance with the

Building Societies Act 1986

. This means that such instruments are

not used in trading activity or for speculative purposes and are only used to reduce the risk of loss on core assets or liabilities

arising from changes in interest rates, currency rates or other factors of a prescribed description.

The principal derivatives used in balance sheet risk management are interest rate swaps, interest rate options, cross currency

interest rate swaps and foreign exchange contracts. These are used to hedge Group exposures arising from fixed rate

mortgage lending and savings products, funding and investment activities.

The following table describes the significant activities undertaken by the Group, the related risks associated with such

activities and the type of derivatives which are typically used in managing such risks after considering any offsetting risk from

other activities.

Activity	Risk	Type of derivative
Management of the investment of reserves and	Sensitivity to changes in interest rates	Interest rate swaps
non‑interest bearing liabilities
Fixed rate savings products and debt issuance	Sensitivity to changes in interest rates	Interest rate swaps
Fixed rate mortgage lending	Sensitivity to changes in interest rates	Interest rate swaps
Management of foreign currency risk arising	Sensitivity to changes in foreign exchange rates	Cross currency interest rate swaps and
from investment and funding		foreign exchange contracts
Floating rate liabilities	Sensitivity to changes in interest rates	Capped interest rate options

The Group’s objective is to manage risk within its risk tolerance, irrespective of the accounting treatment.

Whilst all derivatives have been entered into for hedging purposes, only certain arrangements meet the conditions

necessary to be designated as such for accounting purposes. In some cases a natural offset can be achieved and applying

hedge accounting is not required. The Group only designates accounting hedges where a high degree of effectiveness can

be achieved.

* The 2022 prior year balance has been updated to reflect the correct position on committed undrawn standby facilities.

184 | Financial Statements 185

Notes to the Financial Statements (continued)

26. Derivative financial instruments (continued)

Hedging

The following table shows the balance sheet categories covered by hedge accounting relationships:

Hedge relationship	Balance sheet line item
Fair value hedge for interest rate risk
Fixed rate mortgages	Loans and advances to customers
Fixed rate debt securities held	Debt securities
Fixed rate debt securities issued	Debt securities in issue
Fair value hedge for interest rate and FX risk
Fixed rate debt securities issued	Debt securities in issue
Fixed rate debt securities held	Debt securities
Cash flow hedge for interest rate risk
Floating rate deposits	Amounts owed to credit institutions
Floating rate debt securities issued	Debt securities in issue

Interest rate risk on fixed rate mortgages and purchased debt securities (fair value)

The Group holds portfolios of long‑term fixed rate mortgages and debt securities. These instruments generate fixed rate

income whereas the Group liabilities are mostly floating rate. The Group manages this risk exposure by entering into pay

fixed/receive floating interest rate swaps. These swaps are then designated into a fair value hedge relationship along with the

issued mortgage.

Only the interest rate risk element is hedged and therefore other risks, such as credit risk, are managed but not hedged by

the Group. The interest rate risk component is determined as the change in fair value of the long‑term fixed rate mortgages

arising solely from changes in SONIA (the benchmark rate of interest). Such changes are usually the largest component of the

overall change in fair value. This strategy is designated as a fair value hedge and its effectiveness is assessed by comparing

changes in the fair value of the hedged item (the mortgage loan) attributable to changes in the benchmark rate of interest

with changes in the fair value of the hedging instrument (interest rate swap).

Possible sources of ineffectiveness are as follows:

•

differences between the expected and actual volume of prepayments for mortgage portfolios, as the Group hedges to the

expected repayment date taking into account expected prepayments based on past experience;

•

difference in timing of cash flows between the mortgage loans and the interest rate swaps;

•

difference in the designated coupon rate % of the hedged asset and the interest rate swaps; and

•

interest rate swaps with a non‑zero fair value at the date of initial designation.

The exposure from the mortgage portfolio frequently changes due to new loans being originated, contractual repayments and

early prepayments made by customers in each period. As a result, the Group adopts a portfolio hedging strategy to hedge the

exposure by closing and entering into new swap agreements. The Group uses the portfolio fair value hedge of interest rate

risk to recognise fair value changes related to changes in interest rate risk in the mortgage portfolio, and therefore reduce the

profit or loss volatility that would otherwise arise from changes in the fair value of the interest rate swaps alone. This hedge

relationship is updated on a monthly basis for changes in the portfolio.

Foreign exchange and interest rate risk on fixed rate debt issuance (fair value)

The Group accesses international markets in order to obtain effective sources of liquidity and funding. As part of this process

the Group issues fixed rate debt in both GBP and EUR and also purchases debt securities in other foreign currencies, such as

JPY and USD. The foreign currency and interest rate risk associated with these instruments is mitigated by the use of cross

currency swaps, which exchange fixed interest payments in the foreign currency for floating interest payments in GBP. The

interest rate risk associated with the GBP debt is mitigated by the use of interest rate swaps which exchange fixed interest

payments with variable payments. These instruments are entered into to match the maturity profile of the Group’s debt

instruments.

The foreign currency risk component is determined as the change in fair value of the foreign currency debt arising solely

from changes in the relevant foreign currency exchange rate. The interest rate risk component is determined as the change

in fair value of the debt arising solely from changes in the benchmark rate of interest. Such changes are usually the largest

component of the overall change in fair value. This strategy is designated as a fair value hedge and its effectiveness is

assessed by comparing changes in the fair value of the debt attributable to changes in the hedged risk(s) with changes in the

fair value of the swaps.

Possible sources of ineffectiveness are as follows:

•

differences in discounting approach between the hedged item and hedging instrument, including the cross currency basis

spread applied in the valuation of cross currency swaps;

•

swaps with a non‑zero fair value at the date of initial designation;

•

difference in the designated coupon rate % of the hedged liability and the swap; and

•

counterparty credit risk which impacts the value of uncollateralised cross currency swaps but not the hedged items.

Interest rate risk on floating rate liabilities (cash flow hedge)

The Group purchased some capped interest rate options (caps) to protect from the risk of increases in market interest rates

impacting the variable rate savings products. The caps were entered into a cash flow hedge relationship on the basis that the

pay outs on the caps will offset the increase in interest payable on these variable savings products. These caps have matured

in 2023 and the Group now has no cash flow hedge relationships.

Ineffectiveness

All ineffectiveness is recorded in the income statement in

Net (losses)/gains from financial instruments held at fair value

The following table shows the ineffectiveness in relation to the hedging relationships designated by the Group.

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Fair value hedges
Fixed rate mortgages	(27.3)	(55.4)	(27.3)	(55.4)
Fixed rate debt securities held	2.7	1.9	2.7	1.9
Fixed rate debt securities issued	(4.4)	21.2	(4.3)	9.3
Cash flow hedges
Floating rate debt securities issued	(0.1)	(0.1)	(0.1)	(0.1)
Total	(29.1)	(32.4)	(29.0)	(44.3)

Elevated ineffectiveness of fixed rate mortgage hedges is driven by the significant increase in fair values of hedging

derivatives and hedged items in 2023 caused by the volatility in market interest rates. Changes in fair values can result in

corresponding deterioration in the offset as well as higher amortisation of mortgage fair value balance sheet adjustments.

186 | Financial Statements 187

Notes to the Financial Statements (continued)

26. Derivative financial instruments (continued)

Ineffectiveness (continued)

The following tables summarise the notional and fair value of all derivative financial instruments and the hedging

designations in place at that date.

	Contract/		Fair values	Change in fair
	Notional	Assets	Liabilities	value used for
	amount			calculating
				ineffectiveness
	£m	£m	£m	£m
Group
At 31 December 2023
Interest rate risk
Interest rate swaps designated as fair value hedges	27,894.4	1,548.1	269.9	(824.6)
Interest rate caps designated as cash flow hedges	–	–	–	–
Interest rate and FX risk
Cross currency interest rate swaps designated as fair value hedges	3,091.3	68.4	235.9	(22.0)
Derivatives not designated as hedges:
Interest rate swaps	21,432.1	129.9	191.2	n/a
Foreign exchange	171.1	8.6	0.4	n/a
Total derivative financial instruments	52,588.9	1,755.0	697.4	(846.6)
Society
At 31 December 2023
Interest rate risk
Interest rate swaps designated as fair value hedges	27,894.4	1,548.1	269.9	(824.6)
Interest rate caps designated as cash flow hedges	–	–	–	–
Interest rate and FX risk
Cross currency interest rate swaps designated as fair value hedges	1,787.7	68.4	122.8	(91.9)
Derivatives not designated as hedges:
Interest rate swaps	31,215.6	129.9	191.2	n/a
Foreign exchange	104.5	5.5	0.4	n/a
Total derivative financial instruments	61,002.2	1,751.9	584.3	(916.5)

The expected future cash flows have been discounted using the Overnight Indexed Swap (OIS) curve (SONIA) for all

derivatives. Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments (DVA) are incorporated into the fair value

of derivative valuations to reflect the impact of counterparty credit risk and the Group’s own credit quality respectively for

uncollateralised derivatives.

Credit risk on derivative exposures is significantly mitigated within the Group by the existence of a Credit Support Annex

(CSA) with the vast majority of our derivative counterparties. Under a CSA, cash is passed between parties to mitigate the

counterparty risk inherent in the outstanding positions. Where cash collateral is received, to mitigate the risk inherent in

amounts due to the Group, it is included as a liability within amounts owed to credit institutions. Where cash collateral is

given, it is included as an asset in loans and advances to credit institutions. Credit risk is also mitigated by the use of central

counterparties (CCPs) for eligible derivatives.

	Contract/	Fair values		Change in fair
	Notional	Assets	Liabilities	value used
	amount			for calculating
				ineffectiveness
	£m	£m	£m	£m
Group
At 31 December 2022
Interest rate risk
Interest rate swaps designated as fair value hedges	29,812.7	2,216.2	191.2	1,137.9
Interest rate caps designated as cash flow hedges	1,515.0	24.8	–	–
Interest rate and FX risk
Cross currency interest rate swaps designated as fair value hedges	3,621.4	57.6	306.3	(22.0)
Derivatives not designated as hedges:
Interest rate swaps	12,016.0	38.1	167.9	n/a
Foreign exchange	281.2	19.8	0.9	n/a
Total derivative financial instruments	47,246.3	2,356.5	666.3	1,115.9
Society
At 31 December 2022
Interest rate risk
Interest rate swaps designated as fair value hedges	29,812.7	2,216.2	191.2	1,137.9
Interest rate caps designated as cash flow hedges	1,515.0	24.8	–	–
Interest rate and FX risk
Cross currency interest rate swaps designated as fair value hedges	1,848.4	37.2	147.1	127.3
Derivatives not designated as hedges:
Interest rate swaps	24,535.6*	38.1	167.9	n/a
Foreign exchange	108.5	7.4	0.8	n/a
Total derivative financial instruments	57,820.2	2,323.7	507.0	1,265.2

* As a result of the reclassification highlighted in

Note 1 – Reclassification within Interest Revenue (Society only)

, there is an equivalent reduction in the

contract/notional amount of interest rate swaps not designated in a hedge for 2022 only.

188 | Financial Statements 189

The following table shows the average price/rate of the hedging instruments by maturity used in the Group’s hedging

strategies:

Group and Society		2023			2022
	Repayable	In more than	Over	Repayable	In more than	Over
	up to	three years	five years	up to	three years	five years
	three	but less than		three	but less than
	years	five years		years	five years
Average fixed interest rate – Fair value hedges
Interest rate swaps (pay fixed)	1.65	2.56	1.50	0.85	1.09	0.83
Interest rate swaps (receive fixed)	3.69	3.19	3.51	0.93	2.37	2.60
Cross currency interest rate swaps	0.70	0.44	0.86	0.53	0.56	0.32
Average EUR:GBP FX rate – Fair value hedges
Cross currency interest rate swaps	1.13	1.15	1.14	1.14	1.12	1.17
Average JPY:GBP FX rate – Fair value hedges
Cross currency interest rate swaps	156.41	–	–	157.31	154.80	–
Average USD:GBP FX rate – Fair value hedges
Cross currency interest rate swaps	–	1.19	–	–	1.23	–

Notes to the Financial Statements (continued)

26. Derivative financial instruments (continued)

Ineffectiveness (continued)

The following tables show the maturity profile, by notional amount, of the hedging instruments designated in hedge

relationships used in the Group’s hedging strategies:

	Group and Society Repayable	In more than	Over	Total
	up to	three years	five years
	three years	but less than
		five years
	£m	£m	£m	£m
At 31 December 2023
Interest rate caps	–	–	–	–
Total cash flow hedges	–	–	–	–
At 31 December 2022
Interest rate caps	1,515.0	–	–	1,515.0
Total cash flow hedges	1,515.0	–	–	1,515.0

	Group Repayable	In more than	Over	Total
	up to	three years	five years
	three years	but less than
		five years
	£m	£m	£m	£m
At 31 December 2023
Interest rate swaps (pay fixed)	16,253.8	8,561.4	1,035.0	25,850.2
Interest rate swaps (receive fixed)	844.2	900.0	300.0	2,044.2
Cross currency interest rate swaps	1,429.7	1,582.8	78.8	3,091.3
Total fair value hedges	18,527.7	11,044.2	1,413.8	30,985.7
At 31 December 2022
Interest rate swaps (pay fixed)	17,994.9	9,320.4	966.8	28,282.1
Interest rate swaps (receive fixed)	280.6	700.0	550.0	1,530.6
Cross currency interest rate swaps	1,766.7	741.2	1,113.5	3,621.4
Total fair value hedges	20,042.2	10,761.6	2,630.3	33,434.1

	Society Repayable	In more than	Over	Total
	up to	three years	five years
	three years	but less than
		five years
	£m	£m	£m	£m
At 31 December 2023
Interest rate swaps (pay fixed)	16,253.8	8,561.4	1,035.0	25,850.2
Interest rate swaps (receive fixed)	844.2	900.0	300.0	2,044.2
Cross currency interest rate swaps	995.2	713.7	78.8	1,787.7
Total fair value hedges	18,093.2	10,175.1	1,413.8	29,682.1
At 31 December 2022
Interest rate swaps (pay fixed)	17,994.9	9,320.4	966.8	28,282.1
Interest rate swaps (receive fixed)	280.6	700.0	550.0	1,530.6
Cross currency interest rate swaps	880.2	298.0	670.2	1,848.4
Total fair value hedges	19,155.7	10,318.4	2,187.0	31,661.1

190 | Financial Statements 191

The accumulated amount of fair value hedge adjustments remaining on the balance sheet for hedged items that have ceased

to be adjusted for hedging gains and losses is a loss of £3.3 million (2022: £7.9 million loss).

The following tables show the cash flow hedge exposures (gross of tax) covered by the Group’s hedging strategies:

Group and Society	Assets	Liabilities	Change in fair	Cash flow hedge reserve
			value of hedged	Continuing	Discontinued
			item used for	hedges	hedges
			calculating
			ineffectiveness
	£m	£m	£m	£m	£m
At 31 December 2023
Floating rate debt securities issued	–	–	(5.7)	–	(0.5)
Floating rate liabilities	–	–	3.2	–	–
At 31 December 2022
Floating rate debt securities issued	–	425.0	5.1	(1.0)	(0.4)
Floating rate liabilities	–	1,090.0	(3.2)	(12.3)	–
The following table shows the movements in the cash flow hedge reserve during the year:
Group and Society				2023	2022
				£m	£m
At 1 January				9.9	10.4
Effective portion of changes in fair value of interest rate swaps:
Floating rate debt securities issued				–	8.5
Floating rate liabilities				–	17.7
Amounts reclassified from reserves to income statement:
Floating rate debt securities issued				(0.9)	(13.5)
Floating rate liabilities				(12.3)	(14.5)
Taxation				3.7	1.3
At 31 December				0.4	9.9

Notes to the Financial Statements (continued)

26. Derivative financial instruments (continued)

The following tables show the fair value hedge exposures covered by the Group’s hedging strategies. The change in fair value

of the hedged item for calculating ineffectiveness is based on all hedge relationships designated during the year.

		Carrying amount of		Accumulated fair value	Change in fair
		hedged item		adjustments on the	value of the
				hedged item	hedged item
	Assets	Liabilities	Assets	Liabilities	for calculating
					ineffectiveness
	£m	£m	£m	£m	£m
Group
At 31 December 2023
Fixed rate mortgages (interest rate risk)	23,721.6	–	(615.5)	–	892.8
Fixed rate debt securities held (interest rate and FX risk)	2,693.2	–	(254.6)	–	104.6
Fixed rate debt securities issued (interest rate and FX risk)	–	4,338.9	–	255.0	(210.2)
Society*
At 31 December 2023
Fixed rate mortgages (interest rate risk)	23,721.6	–	(615.5)	–	892.8
Fixed rate debt securities held (interest rate and FX risk)	2,693.2	–	(254.6)	–	104.6
Fixed rate debt securities issued (interest rate and FX risk)	–	3,035.0	–	161.9	(140.2)
Group
At 31 December 2022
Fixed rate mortgages (interest rate risk)	26,363.6	–	(1,508.3)	–	(1,270.0)
Fixed rate debt securities held (interest rate risk and FX risk)	2,308.3	–	(384.7)	–	(327.6)
Fixed rate debt securities issued (interest rate and FX risk)	–	4,453.6	–	460.4	450.8
Society*
At 31 December 2022
Fixed rate mortgages (interest rate risk)	26,363.6	–	(1,508.3)	–	(1,270.0)
Fixed rate debt securities held (interest rate risk and FX risk)	2,308.3	–	(384.7)	–	(327.6)
Fixed rate debt securities issued (interest rate and FX risk)	–	2,679.0	–	297.2	289.6

* For Society the exposure to mortgages includes those within Accord Mortgages Limited as this exposure is transferred via an intercompany loan that

mirrors the underlying loans in this entity.

192 | Financial Statements 193

Pledged assets

The Society’s asset backed funding programmes, reported within debt securities in issue (see note 21) are secured against

certain loans and advances to customers.

In addition, as part of its liquidity management, the Society enters into sale and repurchase agreements whereby the Society

sells but agrees to repurchase assets at a future date. Typically this is for up to three months and for UK government securities

and listed transferable debt securities. Proceeds of these sale and repurchase agreements are included within amounts owed

to credit institutions.

Assets pledged are as follows:

Group	Carrying	Carrying	Total
	amount of	amount of
	encumbered	unencumbered
	assets	assets
	£m	£m	£m
2023
Liquid assets	1,688.3	11,110.1	12,798.4
Loans and advances to customers	7,307.1	39,508.8	46,815.9
Fair value adjustment for hedged risk on loans and advances to customers	–	(615.5)	(615.5)
Other assets	–	1,969.9	1,969.9
Total assets	8,995.4	51,973.3	60,968.7
2022
Liquid assets	2,138.8	10,343.5	12,482.3
Loans and advances to customers	10,635.8	34,567.9	45,203.7
Fair value adjustment for hedged risk on loans and advances to customers	–	(1,508.3)	(1,508.3)
Other assets	–	2,576.4	2,576.4
Total assets	12,774.6	45,979.5	58,754.1

All of the assets pledged as security are shown in the balance sheet, as the Society has retained substantially all the risk and

rewards of ownership.

The Society established Yorkshire Building Society Covered Bonds LLP in November 2006. The LLP provides security for

issues of covered bonds made by the Society to external counterparties. As at 31 December 2023, the Society had in issue

£2,950 million of Sterling denominated covered bonds, of which £1,200 million was retained, and €1,500 million of Euro

denominated covered bonds.

The Group established its first securitisation programme in 2011. This year, no new securitisation structures were established,

however the Group did issue £500 million Brass 11 notes publicly in Q1 2023. Brass 11 was established in 2022 and was

initially wholly retained. As at 31 December 2023, the Group had in issue £9,716 million of securitisation notes, of which

£9,028 million were retained.

Whole mortgage loan pools are pre‑positioned at the Bank of England under the Term Funding Scheme (TFSME). The whole

loan pool is pledged and drawings are made directly against the eligible collateral. However, values shown are the whole

mortgage loan pool balances.

Notes to the Financial Statements (continued)

27. Liquidity risk

Liquidity risk is an intrinsic part of the Society’s business as long‑term mortgages are funded by short‑term retail customer

balances. Most mortgages have a contractual maturity date of around 25 years but in practice are frequently repaid early;

currently the estimated average life of a mortgage is approximately five years. Conversely, experience shows that retail

deposits, nominally repayable on demand or with short notice periods, actually remain with the Society for relatively long

periods. It is this inherent mismatch in the maturity profiles of retail assets and liabilities that creates liquidity risk.

The Society’s liquidity management policy is designed to ensure the maintenance of adequate investments in liquid assets

to cover statutory, regulatory and operational requirements. The primary function of liquidity is the provision of sufficient

assets in realisable form to ensure that the Society is able to meet its liabilities as they arise and to absorb potential cash flow

requirements created by the maturity mismatches referred to above or by a liquidity stress scenario.

The Society’s liquidity management comprises the following key areas:

•

At the highest level, the Society manages its liquidity levels to ensure compliance with the Overall Liquidity Adequacy

Rule, as set out by the PRA in Chapter 2 of the Internal Liquidity Adequacy Assessment part of the PRA Rulebook

(ILAA rules).

•

Limits are established by the Board that govern the quantity, quality and marketability of and returns from the Society’s

portfolio of liquidity investments. The portfolio is managed by the Treasury function, monitored by the first and second

line risk functions and overseen by the Asset and Liability Committee (ALCO) under a series of delegated authorities.

•

The Society conducts a series of daily stress tests that are designed to ensure that its liquidity is sufficient to meet its cash

flow needs under any one of a number of adverse scenarios should they arise. The scenarios include ones caused by both

Society‑specific and general market events, and incorporate both severe retail savings outflows and the unavailability of

wholesale funding. They are constructed on various timescales as far out as three months. These scenarios are updated

and approved by the Board annually through the Internal Liquidity Adequacy Assessment Process (ILAAP).

•

The Society also manages liquidity in line with prevailing regulatory requirements, namely the Liquidity Coverage Ratio

(LCR), as prescribed under the PRA Rulebook, Liquidity Coverage Ratio (CRR) part. The LCR measures the quantity of High

Quality Liquid Assets (HQLA) against net liquidity outflows over a 30 day period. YBS currently reports to the PRA on a

monthly basis on a Society and unconsolidated basis, with the lower of the two being reported as 156.36% for December

2023 month end. For comparison, the lowest as at 31 December 2022 was 164.02%.

•

The Society monitors and reports its Net Stable Funding Ratio (NSFR), which is a longer term measure of the stability of the

Society’s funding sources relative to the assets being funded. The Society’s NSFR as at 31 December 2023 was 148.80%

(2022: 144.49%) and was therefore in excess of the regulatory minimum of 100%.

•

The Society has also implemented internal backstop limits for liquidity, to mitigate the potential risk of liquidity levels

under a risk‑based approach being able to be reduced to below what is considered a minimum appropriate level for the

Society. These backstop limits are linked to balance sheet size.

•

The liquidity position of the Society is forecast across the next two years and measured against forecasts of the liquidity

requirements on both a regulatory and internal basis. This is to ensure that the short‑term plans of the Society do not lead

to liquidity limits being breached and the financial sustainability of the organisation being threatened.

The above metrics are the key elements of the suite of measures by which the Society actively seeks to manage its liquidity

position, along with other complimentary metrics which are included within the Society’s risk appetite framework.

Liquidity risk in subsidiary companies, with the exception of other deposits, is mitigated by the use of appropriate

intercompany loans and deposits.

194 | Financial Statements 195

The table below analyses the Group’s financial assets and liabilities into relevant maturity groupings, based on the remaining

period between the balance sheet date and the contractual maturity date.

Group	Repayable	Less than	In more	In more	Over five	Total
	on demand	three	than three	than one	years
		months	months but	year but
			not more	not more
			than one	than five
			year	years
	£m	£m	£m	£m	£m	£m
As at 31 December 2023
Financial assets
Cash in hand and balances with the Bank of England	4,839.1	–	–	–	–	4,839.1
Loans and advances to credit institutions	397.4	–	–	–	–	397.4
Debt securities	–	955.2	971.7	4,205.4	1,429.6	7,561.9
Loans and advances to customers	–	15.4	128.6	1,240.8	45,431.1	46,815.9
Fair value adjustment for hedged risk on loans and advances to customers	–	(109.2)	(244.0)	(262.5)	0.2	(615.5)
Derivatives financial instruments	–	64.9	182.8	1,298.6	208.7	1,755.0
Total financial assets	5,236.5	926.3	1,039.1	6,482.3	47,069.6	60,753.8
Financial liabilities
Shares	26,276.7	4,005.6	10,704.9	6,066.1	3.4	47,056.7
Amounts owed to credit institutions	55.4	807.6	10.3	1,013.0	–	1,886.3
Other deposits	604.2	366.8	12.6	–	–	983.6
Debt securities in issue	–	–	1,189.7	3,041.4	688.3	4,919.4
Derivative financial instruments	–	28.1	54.8	543.8	70.7	697.4
Subordinated liabilities	–	–	4.1	1,126.8	490.8	1,621.7
Total financial liabilities	26,936.3	5,208.1	11,976.4	11,791.1	1,253.2	57,165.1

Notes to the Financial Statements (continued)

27. Liquidity risk (continued)

The tables below provide an analysis of gross contractual cashflows. The sum of the balances depicted in the analysis do not

reconcile with the carrying value of the liabilities, as disclosed in the consolidated balance sheet. This is because they include

estimated future interest payments calculated using balances outstanding at the balance sheet date. Amounts are allocated to

the relevant maturity band based on the timing of individual contractual cashflows.

Group	Repayable on	In more than	In more than	Over five	Total
	demand and	three months	one year but	years
	up to three	but not more	not more than
	months	than one year	five years
	£m	£m	£m	£m	£m
As at 31 December 2023
Shares	30,281.9	10,704.9	6,066.1	3.4	47,056.3
Amounts owed to credit institutions	743.7	49.5	1,041.6	–	1,834.8
Other deposits:
Society	389.0	12.9	–	–	401.9
Subsidiaries	582.4	–	–	–	582.4
Debt securities in issue	34.3	1,364.1	4,124.1	–	5,522.5
Subordinated liabilities	–	92.8	1,409.9	574.8	2,077.5
Derivative financial liabilities	109.1	186.8	599.8	51.4	947.1
Total	32,140.4	12,411.0	13,241.5	629.6	58,422.5
As at 31 December 2022
Shares	26,664.2	9,485.5	5,858.5	–	42,008.2
Amounts owed to credit institutions	2,004.6	92.9	3,350.0	–	5,447.5
Other deposits:
Society	555.9	143.2	–	–	699.1
Subsidiaries	442.9	–	–	–	442.9
Debt securities in issue	236.4	1,002.6	3,557.7	977.8	5,774.5
Subordinated liabilities	–	36.4	424.1	899.2	1,359.7
Derivative financial liabilities	85.9	174.4	424.7	10.8	695.8
Total	29,989.9	10,935.0	13,615.0	1,887.8	56,427.7

196 | Financial Statements 197

Notes to the Financial Statements (continued)

28. Market risk

Market risk is the risk to earnings and capital arising from changes in interest rates, foreign currency exchange rates, structural

mismatches within the balance sheets and the price of financial instruments.

Value at Risk (VaR)

VaR is a risk management tool which evaluates the potential losses that may be incurred as a result of movements in market

conditions over a specified holding period and to a given level of confidence. The model used is based on a 10 day holding

period and a 99% confidence level.

The VaR model calculates potential movements in market prices by reference to market data from the last 63 days and

incorporates underlying risk factors based on historic interest rate volatilities and correlations.

VaR for the Treasury portfolios is calculated and reported on a daily basis. A back test of the VaR model is performed to test

the validity of the assumptions and parameters within the model.

A number of limitations should be considered in relation to the VaR model:

1. Historic data is not necessarily a good guide to future events.

2. The model, by definition, does not capture potential losses outside the 99% confidence level, i.e. those events that are

extreme in nature.

3. VaR is calculated on the basis of exposures outstanding at the close of business and, therefore, does not necessarily

reflect intra‑day exposures.

The VaR measures shown below are based upon Treasury positions.

Structural risk analysis (basis risk)

An analysis of interest bearing items by rate type is performed to illustrate key areas of structural mismatch. It identifies

mismatches between administered rates, fixed rates and other rates, including those linked to Bank Base Rate and SONIA. The

effect of SONIA mismatches within the Balance Sheet is measured as the impact on net interest income (for a 12 month rolling

period) of an isolated increase in SONIA of one basis point (0.01%). A one basis point sensitivity measure is an industry standard

approach to quantify the quantum and direction of the interest rate exposure within the Society.

Basis Point value (BP) sensitivity

These measures calculate the change in value of the assets and liabilities resulting from both a one basis point (PV01) and

100 basis points (PV100) parallel upward shift in interest rates. Within the Treasury portfolio, this is calculated separately for

each currency and reported on a daily basis and at the full balance sheet level on a monthly basis.

Repricing gap analysis

Repricing dates are analysed primarily to avoid repricing risk concentrations, i.e. the situation where too great a proportion

of the Group’s assets and liabilities see the interest rates earned or charged on them resetting within a given time period.

The aim is to prevent excessive volatility in the net interest margin that could arise if rates shifted adversely within a given

time period and, since the Society cannot dictate interest rate movements itself, the best approach is to limit the amount of

assets or liabilities that are exposed in this way. The analysis identifies the net asset/liability repricing position across a series

of time intervals. Positions are calculated using nominal amounts and exclude interest flows. General reserves, fixed assets

and other liabilities are classified as having ‘non‑specific’ repricing characteristics with a zero rate of interest. The measure is

calculated as a reverse cumulative gap.

	Group Repayable	Less than	In more	In more	Over five	Total
	on demand	three	than three	than one	years
		months	months but	year but
			not more	not more
			than one	than five
			year	years
	£m	£m	£m	£m	£m	£m
As at 31 December 2022
Financial assets
Cash in hand and balances with the Bank of England	5,982.8	–	–	–	–	5,982.8
Loans and advances to credit institutions	814.7	–	–	–	–	814.7
Debt securities	–	596.0	280.5	3,529.2	1,279.1	5,684.8
Loans and advances to customers*	–	38.9	84.2	1,145.4	43,935.2	45,203.7
Fair value adjustment for hedged risk on loans and advances to customers	–	(181.8)	(481.0)	(845.5)	–	(1,508.3)
Derivatives financial instruments	–	17.0	261.6	1,793.2	284.7	2,356.5
Total financial assets	6,797.5	470.1	145.3	5,622.3	45,499.0	58,534.2
Financial liabilities
Shares	24,393.4	2,270.8	9,485.5	5,858.5	–	42,008.2
Amounts owed to credit institutions	38.0	1,945.8	5.1	3,172.0	–	5,160.9
Other deposits	462.7	533.4	142.0	–	–	1,138.1
Debt securities in issue	–	222.0	948.0	2,744.2	1,345.1	5,259.3
Derivative financial liabilities	–	7.9	45.0	360.1	253.3	666.3
Subordinated liabilities	–	–	–	612.7	422.4	1,035.1
Total financial liabilities	24,894.1	4,979.9	10,625.6	12,747.5	2,020.8	55,267.9

* The

Loans and advances to customers

line has been updated to correct the classification of loans reported in the

less than three months

and the

in more

than one year but not more than five years

groupings.

27. Liquidity risk (continued)

198 | Financial Statements 199

28. Market risk (continued)

All market risk is managed in the Society on behalf of the Group, hence the tables below apply to the Group.

	Year end	Average	Maximum	Minimum
	£m	£m	£m	£m
2023
SONIA basis	1.3	1.4	1.5	1.2
PV01 sensitivity	–	0.1	0.2	–
PV100 sensitivity	1.3	10.6	28.3	(0.3)
Treasury VaR	1.5	3.2	5.7	1.3
2022
SONIA basis	1.6	1.9	2.0	1.6
PV01 sensitivity	0.2	0.2	0.3	0.1
PV100 sensitivity	21.9	27.6	36.3	13.0
Treasury VaR	7.0	5.3	9.3	1.6

	Greater than	Greater than	Greater than
	one year	five years	ten years
	£m	£m	£m
2023
Repricing gap (Treasury)	289	(30)	–
2022
Repricing gap (Treasury)	362	69	–

29. Currency risk

Currency exchange risk is monitored daily and the Society seeks to minimise its net exposure to assets and liabilities

denominated in currencies other than Sterling. In particular the Society’s existing non‑Sterling Liquidity portfolio and

Wholesale Funding exposures are swapped back into Sterling. Maximum positions throughout the year represented less than

0.02% of total assets.

Actual exposures were:

Group and Society	2023	2022
	£m	£m
Year end	5.2	6.1
Maximum	5.2	6.1

Notes to the Financial Statements (continued)

30. Wholesale credit risk

The Group’s wholesale credit risk arises principally from assets held for liquidity purposes. The risk is that counterparties with

whom the Group invests liquid assets fail to repay those investments when they fall due. The Group, through the Treasury

function, undertakes its own internal rating of all its counterparties and sets individual limits accordingly. These limits are

regularly reviewed internally and against the external rating agencies, with revocation or suspension taking place where

considered appropriate.

Limits are in place governing the types of instrument in which the Group will invest, as well as geographic limits designed to

prevent over‑exposure to a given country.

The Group uses an internal credit ratings process to identify potential risks and wholesale related credit risks are reported and

discussed monthly at the Asset and Liability Committee.

Whilst recognising that exposures will be maintained across a spectrum of counterparties the Board has maintained a low

risk appetite for wholesale credit risk. A diversified range of counterparties is in place to meet business and regulatory

requirements in order to meet the Board approved strategies with no credit risk exposures being undertaken by Treasury to

counterparties that have not been through an internal approvals process including a formal second Line of Defence function.

The following tables break down Wholesale Group exposures by type using the composite external ratings*.

	Aaa-Aa3	A1-A3	Baa1-Baa3	Ba1-B3	Caa1-C3	Unrated	Total
	£m	£m	£m	£m	£m	£m	£m
2023
Central Bank and Sovereigns	5,732.9	241.0	–	–	–	–	5,973.9
Financial Institutions	6,222.6	1,800.7	68.4	–	–	–	8,091.7
Supranationals	487.8	–	–	–	–	–	487.8
Total	12,443.3	2,041.7	68.4	–	–	–	14,553.4
2022
Central Bank and Sovereigns	6,605.4	271.9	–	–	–	–	6,877.3
Financial Institutions	6,177.9	857.4	425.2	–	–	–	7,460.5
Supranationals	501.0	–	–	–	–	–	501.0
Total	13,284.3	1,129.3	425.2	–	–	–	14,838.8

* The composite rating is derived from an average external rating

200 | Financial Statements 201

30. Wholesale credit risk (continued)

The Group has a low risk appetite to exposures outside the UK. This is reflected in the country exposures by type shown in the

tables below.

	Central Banks	Financial	Supranationals	Total
	and Sovereigns	institutions
	£m	£m	£m	£m
2023
United Kingdom	5,691.5	5,357.0	–	11,048.5
Australia	–	442.5	–	442.5
Canada	–	1,409.7	–	1,409.7
France	41.4	34.6	–	76.0
Germany	–	240.6	–	240.6
Japan	241.0	9.3	–	250.3
Netherlands	–	85.7	–	85.7
Norway	–	104.0	–	104.0
Spain	–	63.0	–	63.0
Sweden	–	61.5	–	61.5
Switzerland	–	179.9	–	179.9
United States	–	103.9	–	103.9
International	–	–	487.8	487.8
Total	5,973.9	8,091.7	487.8	14,553.4
2022
United Kingdom	6,565.3	4,989.7	–	11,555.0
Australia	–	296.7	–	296.7
Canada	–	1,275.7	–	1,275.7
France	40.1	40.9	–	81.0
Germany	–	273.4	–	273.4
Japan	271.9	319.4	–	591.3
Netherlands	–	82.6	–	82.6
Norway	–	75.4	–	75.4
Spain	–	76.1	–	76.1
Sweden	–	29.1	–	29.1
United States	–	1.5	–	1.5
International	–	–	501.0	501.0
Total	6,877.3	7,460.5	501.0	14,838.8

The Group’s main Sovereign exposure is to the UK which had an average external rating of ‘AA‑’. At the year end, UK Sovereign

exposure was £4,839.1 million (2022: £5,982.8 million) to the Bank of England and £852.4 million (2022: £582.5 million) in

UK Government bonds.

None of the wholesale exposures is either past due or impaired and there are no assets that would otherwise be past due or

impaired whose terms have been renegotiated.

The key trigger events used to evaluate impairments are set out in note 1.

Notes to the Financial Statements (continued)

Wholesale credit risk is recorded in the following balance sheet items as below:

Group	2023	2022
	£m	£m
Cash in hand and balances with the Bank of England	4,839.1	5,982.8
Loans and advances to credit institutions	397.4	814.7
Debt securities	7,561.9	5,684.8
Derivative financial instruments	1,755.0	2,356.5
Total wholesale credit risk	14,553.4	14,838.8

31. Credit risk on loans and advances to customers

Gross contractual exposure

The table below splits the loans and advances to customers balance per the balance sheet into its constituent parts and

reconciles to the gross exposures used in the expected credit loss (ECL) model. Effective Interest Rate (EIR) and hedging

adjustments have been excluded from the ECL model as these do not form part of the contractual cash flows from the assets.

EIR is the measurement method used for financial assets held at amortised cost, including loans and advances to customers,

which spreads income and fees over the life of the asset. See note 1 for more details. Hedging is described in more detail

in note 26. The fair value rate adjustment reflects the market value adjustment on acquired portfolios of mortgage assets in

respect of interest rates on the underlying products. This is amortised over the expected life of the acquired portfolio. The fair

value credit adjustment is the fair value discount applied on purchased or originated credit impaired (POCI) mortgage assets

acquired as part of the Norwich & Peterborough Building Society (N&P) and Chelsea Building Society (CBS) acquisitions.

Impairment represents the difference between the total ECL and the fair value credit adjustment.

ECL is calculated using models that take historical default and loss experience and apply predictions of future economic

conditions (e.g. unemployment and house prices) and customer behaviour (e.g. default rates). In certain circumstances, the

core models may not accurately reflect factors that have resulted in an increase in credit risk. When this happens, post model

adjustments (PMAs) are overlaid to reflect the impact on ECL. The economic scenarios and the PMAs applied at 31 December

2023 are described below.

	Group		Society
	2023	2022	2023	2022
	£m	£m	£m	£m
Gross contractual exposures	46,868.6	45,252.1	11,001.1	11,327.8
EIR and other adjustments	39.4	49.7	(17.6)	(16.1)
Fair value rate adjustment	(32.2)	(39.7)	(32.2)	(39.7)
Gross loans and advances to customers	46,875.8	45,262.1	10,951.3	11,272.0
Impairment	(37.7)	(33.1)	(8.5)	(7.8)
Fair value credit adjustment	(22.3)	(25.3)	(22.3)	(25.3)
ECL	(60.0)	(58.4)	(30.8)	(33.1)
Loans and advances to customers	46,815.8	45,203.7	10,920.5	11,238.9

202 | Financial Statements 203

31. Credit risk on loans and advances to customers (continued)

Expected Credit Losses (ECL)

Economic scenarios

Accounting standards require ECL to be calculated by applying multiple economic scenarios. Each economic scenario is

provided a weighting, and these are combined to arrive at the total ECL.

These scenarios are generated internally using external data, statistical methodologies, and senior management judgement,

to span a range of plausible economic conditions. The Group continues to apply four scenarios: an upside scenario that

assumes more benign economic conditions; our core or central best estimate scenario; a more negative downturn scenario;

and a severe downturn scenario. The downturn scenario replaced the stagflation downturn scenario applied in 2022. A

higher weighting has been attributed to the downturn and severe downturn scenarios than in 2022, reflecting the ongoing

uncertainty around the health of the UK economy.

Scenarios are projected over a 5 year window, reverting to long‑term averages past that point. The Group allows all

macroeconomic scenarios to impact staging.

Current macroeconomic conditions

The UK Economy technically entered recession at the end of 2023, attributed to the ongoing cost‑of‑living crisis and higher

interest rate environment. Growth will likely remain weak by historical standards in the medium term and there remains

more downside risk than upside. Headline inflation continues to fall, although there are re‑emerging risks around the price

of energy following the recent geopolitical tensions. Core inflation, services inflation and wage inflation continue to provide

headwind to the inflation target being met consistently throughout 2024. Since 31 December 2022, the economic outlook

has improved slightly as energy prices fell and the labour market remained resilient. Rates are expected to remain higher for

longer, and downward pressure on house prices is increased in the short term.

Upside

UK avoids a recession and grows modestly. Inflation returns to the 2% target by the end of 2025. Unemployment remains

lows and house prices grow at a moderate rate.

Core

The core scenario is the Group’s best estimate of how the UK economy will evolve and is aligned with the central scenario

used in the Group’s financial planning processes.

It assumes the economy will avoid a technical recession, but growth will be suppressed until 2025. The ongoing wage

and inflation pressures result in the Bank of England keeping interest rates higher for longer. Unemployment rises slowly

throughout 2024. House prices are impacted modestly by the higher interest rate environment but recover from 2025.

Downturn

The downturn scenario can be characterised as high inflation and low growth. The economy enters a technical recession in the

first half of 2024 and growth remains low thereafter. Inflation is embedded in the economy and remains above the 2% target

throughout the scenario. Interest rates continue to rise despite the recessionary conditions. Unemployment rises to 6.5% as a

result, and house prices fall in both 2024 and 2025.

Severe downturn

Geopolitical tensions escalate, materially impacting energy prices and supply chains. Another wave of inflation ensues, forcing

the Bank of England to raise interest rates. Consequently, the economy falls into a deep recession, resulting in significant

unemployment and house price reductions.

Notes to the Financial Statements (continued)

Macroeconomic assumptions

The following table shows the year end values of the key economic variables used by each economic scenario for the period

until December 2028. The table includes the three key parameters used to predict probability of default (PD) – unemployment,

HPI and UK Bank of England base rate. GDP is also presented as it is the key input for determining the economic parameters used

and provides context to the nature of the overall scenario.

			2023	Scenario					2022	Scenario
	2024	2025		2026	2027	2028	2023	2024		2025	2026	2027
HPI
Upside	2.0	3.0		3.5	4.0	4.5	–	1.5		2.2	3.2	3.2
Core	(4.0)	2.0		3.0	3.5	4.0	(6.0)	(2.0)		1.3	2.0	2.0
Downturn	(7.5)	(4.0)		2.5	0.5	1.2	(12.7)	(5.0)		–	1.5	1.7
Severe downturn	(12.0)	(12.5)		(6.0)	(1.0)	0.5	(13.5)	(11.8)		(6.8)	–	0.5
GDP
Upside	1.5	1.8		2.0	1.9	1.9	1.5	2.0		2.1	2.0	2.0
Core	0.3	0.8		1.0	1.2	1.3	(1.5)	0.8		1.6	1.8	1.8
Downturn	(0.1)	0.1		0.1	0.2	0.3	(6.3)	(5.3)		0.4	0.6	1.0
Severe downturn	(4.5)	(1.5)		–	0.5	1.0	(7.4)	(5.3)		(1.2)	–	0.2
Unemployment
Upside	4.0	4.0		4.0	4.0	4.0	3.5	3.6		3.6	3.8	3.8
Core	5.0	4.8		4.6	4.4	4.0	4.9	5.5		5.2	4.8	4.5
Downturn	6.5	6.0		5.8	5.5	5.0	6.5	7.0		6.7	6.5	6.0
Severe downturn	7.0	9.0		8.0	7.0	6.5	7.1	8.8		8.4	8.0	7.5
Bank base rate
Upside	4.8	4.0		3.5	3.5	3.3	2.0	2.0		1.5	1.5	1.5
Core	5.0	4.5		4.3	4.3	4.0	4.8	4.3		4.0	3.8	3.5
Downturn	6.0	5.5		5.5	4.0	3.5	6.3	5.5		5.0	4.8	4.5
Severe downturn	7.0	6.0		5.5	5.0	5.0	2.0	–		–	–	–

204 | Financial Statements 205

31. Credit risk on loans and advances to customers (continued)

Expected Credit Losses (ECL) (continued)

The values in the table below are calculated as either a simple average of the rate across the 5 year forecasting period or as

peak to trough.

	Upside		Core		Downturn		Severe downturn
	2023	2022	2023	2022	2023	2022	2023	2022
5 year average
GDP	1.8	2.1	1.0	1.2	0.2	(1.6)	(0.8)	(2.4)
HPI	3.4	2.0	1.7	(0.6)	(1.5)	(3.1)	(6.4)	(6.5)
Unemployment	4.0	3.6	4.6	4.9	5.8	6.4	7.6	7.8
Bank base rate	4.0	1.8	4.5	4.1	5.1	5.3	5.8	0.7
Peak to trough
GDP	–	–	(4.7)	(6.7)	(0.9)	(6.6)	(1.8)	(7.5)
HPI	–	–	(14.1)	(6.5)	(9.7)	(14.3)	(26.1)	(26.4)
Unemployment	4.2	3.8	5.0	5.5	6.5	7.0	9.0	8.8

Weightings

The following table shows the expected credit loss under each of our four economic scenarios along with the weightings that

have been applied to arrive at the weighted average ECL. PMAs are calculated using the weighted scenario results and so their

sensitivity in each of the individual scenarios cannot be accurately determined. For completeness they have been included as

a uniform adjustment across each scenario.

Group	2023		2022
	Weighting	ECL	Weighting	ECL
Scenario	%	£m	%	£m
Upside	5	35.3	5	37.6
Core	40	38.7	50	40.7
Downturn	35	63.9	30	73.5
Severe downturn	20	102.1	15	94.2
Weighted scenario	100	60.0	100	58.4

A modelling approach using quantitative analysis is applied to assess the weightings which uses industry‑level write‑off

data to infer the Society’s loss rates over the period, as internal loss data isn’t available to establish a historical loss rate

distribution which reflects the nature of our losses (i.e. relatively low losses in ‘normal’ times but the potential to make more

substantial losses in recessionary conditions). An econometric model was developed which could be used to infer future loss

rates based on a range of different economic scenarios.

The loss rates were mapped under each of the IFRS 9 economic scenarios to the historical loss rate distribution and using the

distribution‑defined probabilities of each loss rate being realised to derive relative likelihoods of each scenario occurring.

SME judgment is applied in the final assessment of weights, informed by assessment of the quantitative analysis/model. The

core scenario weighting has decreased and the downturn and severe downturn scenario weightings have increased to reflect

the revisions made to Bank of England forecasts as well as the ongoing economic consequences of the conflict in Ukraine and

the Middle East.

Notes to the Financial Statements (continued)

Post model adjustments

Post model adjustments (‘PMA’) are applied when an increase in credit risk is identified that is not effectively captured in the

core expected credit loss models. A rigorous review of the PMAs has been performed to determine whether the identified risks

are still applicable, and if any additional risks have been identified. Adjustments were made to which PMAs were required and

to the magnitude of those that were maintained.

A PMA working group has been established in 2023 encompassing colleagues from Finance, Balance Sheet Management

and Credit Risk. This working group has been used to review the on‑going suitability of existing PMAs and discuss whether

additional PMAs are required in relation to emerging risks or issues.

The PMAs applied at 31 December 2023 are as follows:

	2023	2022
	£m	£m
Affordability	7.1	10.8
Model Performance	10.0	6.6
Other	(1.5)	7.1
Total PMA	15.6	24.5

Affordability

Inflation is not a direct input into the underlying ECL models and, as such, does not have a direct influence on the output.

Although the lending undertaken by the Society is risk‑averse, with a significant amount of affordability assessment

undertaken as part of the decision to advance mortgage loans, there are several segments of the mortgage book that are likely

to be at greater risk of affordability stresses due to the cost‑of‑living pressures.

A post model adjustment was established to reflect the risks of rising inflation, and its impact on customers’ ability to meet

repayments on their mortgage, not captured in the underlying ECL models.

The PMA has been established by considering affordability levels of the mortgage book by applying a stress to the monthly

expenditure amounts to reflect external pressures such as increase in outgoings, interest rate changes, cost‑of‑living

challenges and income decreases. Both elements are used to identify accounts that would be most vulnerable to stresses and

find their mortgage unaffordable.

The PMA has been refined over 2023 as actual increases in credit risk in relation to affordability materialise and are being

captured within the ECL models.

PD estimates of the accounts identified as vulnerable to affordability stresses are uplifted to the equivalent of what they

would need to be for the model to assign them to stage 2 as a result of meeting the SICR criteria.

The level of uplifted PD applied varies depending on whether the customer has a fixed term end date in the next 12 months,

the current risk grade associated with the account and how close the account is to SICR thresholds with accounts that are

relatively close to meeting the SICR criteria will be higher risk.

New criteria for identifying accounts to be treated within this PMA has been established.

Further consideration has been given to segments of the book that have been under‑represented in this assessment and

the Group has considered whether the coverage in these areas is sufficient to cover the increased risk to the book given

the current macro‑economic climate. Relative insensitivity to the stresses provided above was found and so an additional

provision has been raised to cover this underestimation.

These specific segments are:

•

Commercial – The Debt Service Coverage Ratio (DSCR) test is used for assessing affordability of accounts and compares

the rental income to the mortgage payment where rent needs to cover 100% or more of the payment on a capital and

interest basis. Stress has been applied to this test to assess the impact on affordability levels.

•

Buy‑to‑let (BTL) – This segment of the book has similar behaviours to a cohort of mortgages included in the main

affordability assessment and so an appropriate uplift factor has been applied to replicate a stressed environment.

206 | Financial Statements 207

31. Credit risk on loans and advances to customers (continued)

Expected Credit Losses (ECL) (continued)

Post model adjustments (continued)

Affordability (continued)

The decrease in this PMA is due to a combination of the increased credit risk as a result of the impact of the cost‑of‑living

crisis on mortgage repayments starting to emerge as either increased modelled ECLs or write offs leading to a more targeted

methodology resulting in a lower PMA required, as well as easing inflation and mortgage rates across the industry beginning

to reduce; this means the payment shock experienced by customers might reduce going forward. This PMA will be monitored

as we progress through the year and will be held until a sufficient reduction in inflation and cost‑of‑living pressures is

observed.

Model Performance

PD Underprediction

The Society’s fourth generation models were used as the basis of underpinning the Society’s ECLs in 2023 for the first time. A

level of underprediction, that was observed within the third generation models, is also present in the new fourth generation

models. A PMA has been established to account for this which adjusts the PD estimates used to establish ECLs. Accounts are

then re‑staged if their revised PD estimate exceeds the SICR threshold for the risk grade.

Predictive accuracy monitoring on a perfect foresight basis has been developed by the Society to support an evaluation of

the risk. This monitoring has been produced at a product level over a range of outcome periods. The results for each portfolio

were evaluated and the need for an adjustment was acknowledged. The under‑prediction factors for Prime and BTL have been

incorporated into PD estimates by directly uplifting each month’s PD estimate by the associated under‑prediction factor and

recalculating staging and ECLs using the adjusted PD value.

Sensitivity of Models to Economic Stresses

The fourth generation IFRS 9 PD model has displayed limited sensitivity to the different economic scenarios as a result of the

benign economic conditions in the data period used to develop the model. A narrow range in average PD estimates across the

four economic scenarios of differing severity highlighted the model weakness. A PMA has been established to mitigate against

the lack of sensitivity in IFRS 9 PDs to economic factors.

An internally developed Credit Cycle Index (CCI) model was used with its ability to perform well under a range of different

economic conditions making it a useful tool in informing this PMA. The results of the CCI model across the different IFRS 9

scenarios were established and outcomes from the Core scenario compared to the Upside, Downside and Stress scenarios.

Adjustments were then applied to these non‑Core scenarios to produce adjusted PD estimates for each individual scenario. As

this PMA is driven by a weakness that will be inherent within both initial and current PDs, it was not considered appropriate to

adjust stage allocation based on the adjusted results.

Methodology Changes and Model Recalibration

Fourth generation IFRS 9 models and impacts were presented to the Society’s Model Risk Committee in 2023 and approved

for use. These have been used as the basis for generating Core model ECLs for this reporting period. Both the Methodology

Changes and Model Recalibration PMAs related to the third generation IFRS 9 models have been released as they are no

longer required. The reduction in ECL associated with the stage 2 movement noted has outweighed other aspects of the

migration to the fourth generation models that would have increased ECLs, leading to an overall release in 2023 on initial

implementation.

Notes to the Financial Statements (continued)

Other

Whilst we incorporate a range of economic assumptions in the scenarios and probability weightings used to calculate ECL,

this approach still has certain limitations where several assumptions cannot be considered within the model or is restricted by

when external data is available. The PMAs detailed below aim to cover for these risks.

House Price Volatility

This PMA originally focused on house price volatility developed in response to extraordinary growth in house prices since the

easing of the first COVID‑19 lockdown with two elements of uncertainty being assessed.

The first element relates to changes in HPI at a regional level not being evenly distributed and the ECL impact of changes

in collateral values is non‑linear. Management have since evaluated the support for the £1.0 million PMA recognised and

concluded that it is not significantly different to warrant a specific PMA, hence the release of this element of the PMA for 2023

year end.

The remaining element of this PMA relates to the risk that the ONS (Office for National Statistics) indexation data that is

incorporated into the ECL model on a quarterly basis is not a true representative of the market conditions as at 31 December

2023. The latest indexation from ONS was for data collected in Q3 of 2023. This PMA aims to correct for the update in market

conditions by using an average of Nationwide and Halifax more recent indexations for Q4 of 2023.

The HPI assumptions applied in the underlying economic scenarios estimate the impacts of future HPI trends at a macro level

based on the current baseline.

Climate risk

We have assessed the risks associated with climate change, both physical and transitional, in the context of ECL and

concluded that the majority of these risks do not meet the requirements for recognition as:

There have been no observed climate related defaults and therefore no identifiable significant increase in credit risks (‘SICR’);

and the material transition risks identified are expected to occur over a timescale in excess of the current behavioural life of

our portfolio (i.e. the average term before a customer either moves onto an alternative deal or transfers to another provider)

and, as such, any potential impact would be against loans yet to be underwritten.

This PMA aims to identify properties which are or will in the near future be at most risk from a climate perspective and assess

the additional ECLs that we could expect to incur if material costs/reductions to the value of security arise from those risks.

The four main risks considered are Energy Performance Certificate (EPC) impacts, flood risk, subsidence risk and coastal

erosion risk.

A similar approach has been taken within each of these areas where the properties with the very highest risks associated

are identified, appropriate adjustments are applied to the valuation of the properties and the impacts of these changes then

quantified and held as a PMA. The total PMA held is £0.7 million (2022: £1.0 million).

Standard Variable Rate (SVR)

The December 2022 Base Rate increase was not being incorporated into YBS variable rates until February 2023, and so a PMA

of £0.4 million (2022: nil) was raised to account for the impact on ECL should it take effect immediately. This PMA has been

released as the updated SVR rate has now been applied at account level.

208 | Financial Statements 209

31. Credit risk on loans and advances to customers (continued)

Expected Credit Losses (ECL) (continued)

Staging and POCI

The tables below show the staging of loans and advances plus those classed as purchased or originated credit impaired (POCI)

recognised as part of the acquisitions of Norwich & Peterborough Building Society (N&P) and Chelsea Building Society (CBS).

The fair value discount applied on acquisition is recognised as the

fair value credit adjustment

The Group has £339.7 million of POCI loans (2022: £385.4 million). Of these, 85% (2022: 88%) are now considered

performing loans but are not permitted to be reclassified to stage 1 or 2.

Details of the movements in staging are explained in the

movement analysis

section of this note.

	Gross exposure		PMA	Total ECL	Coverage	Average LTV
	£m	%	£m	£m	%	%
2023
Stage 1	41,597.7	88.8	3.0	8.5	–	50.2
Stage 2	4,521.8	9.6	13.1	26.5	0.6	36.5
Stage 3	409.4	0.9	(0.5)	13.8	3.4	42.5
POCI	339.7	0.7	–	11.2	3.3	40.1
Total	46,868.6	100.0	15.6	60.0	0.1	49.0
2022
Stage 1	40,251.1	88.9	3.0	7.5	–	49.0
Stage 2	4,277.3	9.5	18.1	26.3	0.6	33.7
Stage 3	338.3	0.7	3.4	11.3	3.3	39.4
POCI	385.4	0.9	–	13.3	3.5	40.5
Total	45,252.1	100.0	24.5	58.4	0.1	46.8

The

cost of risk

measure has been calculated using the impairment charge for the year divided by the average balance over

the period of which is 0.01% for 2023.

Problem loans

represent the total of the Group’s stage 3 balances and the non‑

performing portion of our POCI loans.

	2023		2022
	£m	%	£m	%
Gross exposures
Stage 1	41,597.7	88.8	40,251.1	88.9
Stage 2	4,521.8	9.6	4,277.3	9.5
Stage 3	409.4	0.9	338.3	0.7
POCI	339.7	0.7	385.4	0.9
Total gross exposures	46,868.6	100.0	45,252.1	100.0
Problem loans	458.9	1.0	384.7	0.9
Cost of risk	–	–	–	–
ECL and Coverage ratios
Stage 1	8.5	–	7.5	–
Stage 2	26.5	0.6	26.3	0.6
Stage 3	13.8	3.4	11.3	3.3
POCI	11.2	3.3	13.3	3.5
Total ECL	60.0	0.1	58.4	0.1
Of which impairment	37.7	62.8	33.1	56.7
Of which fair value credit adjustment	22.3	37.2	25.3	43.3

Notes to the Financial Statements (continued)

The following table shows expected credit losses, split by impairment and fair value credit adjustments, and a best estimate

of the collateral against these mortgages. The collateral is calculated as the lower of the value of the property and the

outstanding loan amount so does not represent the overall value of properties backing the loans.

Group	Gross exposure		Collateral		Impairment		Fair value credit
							adjustment
	2023	2022	2023	2022	2023	2022	2023	2022
	£m	£m	£m	£m	£m	£m	£m	£m
Stage 1	41,597.7	40,251.1	41,596.3	40,249.7	8.5	7.5	–	–
Stage 2	4,521.8	4,277.3	4,521.4	4,277.0	25.3	23.4	1.2	2.9
Less than 30 days past due	4,331.4	4,156.1	4,331.1	4,155.8	22.6	22.0	0.9	2.7
More than 30 days past due	190.4	121.2	190.3	121.2	2.7	1.4	0.3	0.2
Stage 3	409.4	338.3	409.1	338.0	10.0	9.2	3.8	2.1
Less than 30 days past due	161.1	155.6	161.1	155.6	2.2	3.3	0.5	0.4
30‑90 days past due	83.8	64.9	83.8	64.9	1.1	1.1	0.5	0.3
More than 90 days past due	164.5	117.8	164.2	117.5	6.7	4.8	2.8	1.4
POCI	339.7	385.4	339.1	385.0	(6.1)	(7.0)	17.3	20.3
Less than 30 days past due	294.5	346.7	293.9	346.3	(6.1)	(6.4)	14.6	17.3
30‑90 days past due	29.4	20.8	29.4	20.8	0.3	(0.1)	1.2	0.9
More than 90 days past due	15.8	17.9	15.8	17.9	(0.3)	(0.5)	1.5	2.1
Total	46,868.6	45,252.1	46,865.9	45,249.7	37.7	33.1	22.3	25.3

Society	Gross exposure		Collateral		Impairment		Fair value credit
							adjustment
	2023	2022	2023	2022	2023	2022	2023	2022
	£m	£m	£m	£m	£m	£m	£m	£m
Stage 1	9,233.4	8,942.6	9,232.0	8,941.3	2.8	4.0	–	–
Stage 2	1,294.3	1,889.1	1,294.0	1,889.0	10.1	9.3	1.3	3.0
Less than 30 days past due	1,236.5	1,845.8	1,236.2	1,845.7	9.1	8.9	1.0	2.8
More than 30 days past due	57.8	43.3	57.8	43.3	1.0	0.4	0.3	0.2
Stage 3	133.8	111.0	133.8	110.9	1.7	1.5	3.7	2.1
Less than 30 days past due	55.8	52.9	55.8	53.0	0.4	0.7	0.5	0.4
30‑90 days past due	24.2	22.9	24.2	22.8	0.2	0.3	0.5	0.3
More than 90 days past due	53.8	35.2	53.8	35.1	1.1	0.5	2.7	1.4
POCI	339.6	385.1	339.0	384.7	(6.1)	(7.0)	17.3	20.2
Less than 30 days past due	294.4	346.4	293.8	346.0	(6.1)	(6.4)	14.6	17.2
30‑90 days past due	29.4	20.8	29.4	20.8	0.3	(0.1)	1.2	0.9
More than 90 days past due	15.8	17.9	15.8	17.9	(0.3)	(0.5)	1.5	2.1
Total	11,001.1	11,327.8	10,998.8	11,325.9	8.5	7.8	22.3	25.3

All accounts in stage 1 are less than 30 days past due.

210 | Financial Statements 211

31. Credit risk on loans and advances to customers (continued)

Lending by type

Group	2023	2022
Percentage split of gross contractual exposure	%	%
Residential Prime	79.8	81.4
Residential Sub‑Prime/Self‑Cert	0.4	0.5
Retail Buy‑To‑Let	15.4	14.3
Social Housing	0.4	0.5
Commercial lending (exc. Social Housing)	4.0	3.3
	100.0	100.0

Credit risk management

The

Retail and commercial credit risk

section of the

Risk management report

describes how the Group manages credit risk via a

robust risk appetite, credit risk framework, governance framework and through stress testing.

The Group’s exposure to mortgage related credit risk is monitored and reporting on risk exposures is provided regularly to the

Group’s risk committees, including analysis of mortgages in arrears and monitoring of the characteristics of the loan portfolios

(e.g. geographic location and loan‑to‑value).

	Group 2023		2022
	Retail	Commercial	Retail	Commercial
Arrears	%	%	%	%
No arrears	97.6	98.7	98.3	96.8
Less than three months	2.1	0.8	1.3	3.2
Equal to or more than three months, less than six months	0.2	0.3	0.2	–
Equal to or more than six months, less than twelve months	0.1	0.1	0.1	–
Twelve months or more	–	0.1	0.1	–
Property in possession	–	–	–	–
Total gross exposure (contractual amounts)	100.0	100.0	100.0	100.0
Number of properties in possession at the year end	67	–	49	–

The percentage of retail mortgages with arrears of three months or more (as a % of outstanding balances, including

possessions) has increased during 2023 from 0.31% to 0.39%.

The UK Finance industry average ratio for mortgage arrears is measured using the number of accounts (including possessions).

On this basis, the Group’s retail mortgage arrears ratio of 0.50% (2022: 0.44%) is below the comparable UK Finance ratio

0.94% (2022: 0.74%). Arrears on more recent lending are minimal, reflecting the Group’s credit risk appetite.

Arrears for the buy‑to‑let portfolio is also lower than average with an arrears ratio of 0.23% (2022: 0.13%) with an average

LTV of 45.8 (2022: 43.1) for this cohort.

	Society 2023	2022
Arrears	%	%
No arrears	97.0	97.9
Less than three months	2.3	1.5
Equal to or more than three months, less than six months	0.3	0.3
Equal to or more than six months, less than twelve months	0.2	0.1
Twelve months or more	0.1	0.1
Property in possession	0.1	0.1
Total	100.0	100.0
Number of properties in possession at the year end	48	39

Notes to the Financial Statements (continued)

Retail mortgage lending

The Group’s retail mortgage exposure can be broken down by customer type and geographical region as follows:

	Group Book		New lending
	2023	2022	2023	2022
Retail Mortgage Customer Type	%	%	%	%
First‑time buyer	23.6	24.4	23.5	21.8
Other buyers e.g. movers	35.5	37.1	29.6	32.1
Re‑mortgage	24.8	23.5	32.5	21.3
Buy‑to‑let	16.1	15.0	14.4	24.8
Other	–	–	–	–
	100.0	100.0	100.0	100.0

	2023	2022
Retail Mortgage Geographical Distribution	%	%
Scotland	6.6	6.4
North East	3.2	3.2
Yorkshire & Humberside	8.4	8.5
North West	10.4	10.3
Midlands	13.2	13.0
East	10.8	10.7
South West	7.5	7.4
Greater London	18.1	18.7
South East	17.6	17.8
Wales & Northern Ireland	4.2	4.0
Non‑UK	–	–
	100.0	100.0

The Group’s retail mortgages are secured on property. The value of these properties is updated on a quarterly basis using the

Office for National Statistics (ONS) regional property price indices which comprise relative house price movements across the

UK. These indexed valuations provide senior management with a view of the value and risk of the properties on which retail

mortgages are secured.

212 | Financial Statements 213

31. Credit risk on loans and advances to customers (continued)

Retail mortgage lending (continued)

Group	Book		New lending
	2023	2022	2023	2022
Loan-to-value distribution of retail mortgages	%	%	%	%
100% or greater	–	–	–	–
95 to 100%	0.3	–	–	–
90 to 95%	1.6	0.2	4.6	5.3
85 to 90%	4.2	1.6	17.2	18.7
80 to 85%	5.9	4.3	15.7	16.1
75 to 80%	7.4	6.8	9.4	10.8
70 to 75%	9.5	10.0	13.0	19.1
60 to 70%	21.0	23.4	12.3	12.2
Less than 60%	50.1	53.7	27.8	17.8
	100.0	100.0	100.0	100.0
Average LTV (all retail)	49.0	46.8	67.2	71.7
Average LTV (buy‑to‑let)	54.8	53.4	58.9	68.6

	Group 2023		2022
	Not impaired	Impaired	Not impaired	Impaired
Loan-to-value distribution of retail mortgages	%	%	%	%
100% or greater	–	–	–	–
95 to 100%	0.3	–	–	–
90 to 95%	1.6	–	0.3	–
85 to 90%	4.2	–	1.7	–
80 to 85%	5.9	–	4.3	–
75 to 80%	7.4	–	6.7	–
70 to 75%	9.4	0.1	9.9	–
60 to 70%	20.8	0.2	23.1	0.3
Less than 60%	48.9	1.2	52.4	1.3
	98.5	1.5	98.4	1.6

The definition of default/impaired includes accounts that are 90 days past due, interest only accounts past term end,

those under certain forbearance measures and others exhibiting other unlikeliness to pay indicators. Accounting standards

require accounts considered to be credit impaired at the time of business combinations (POCI) to be classed as impaired

until derecognition.

Commercial lending

The Group offers commercial lending though the YBS brand, providing loans to commercial owner occupiers and corporate

entity landlords of commercial and residential property. The majority of loans are advanced against commercial properties

using a vacant possession valuation to mitigate against future losses. Loans against specialist properties are strictly limited

and no lending is given against land only.

The valuations of commercial properties are updated on a quarterly basis using MSCI’s commercial property price indices

based on region and property type. Residential valuations are indexed using the regional ONS house price indices. The

indexed valuations are used to assess the risk of loss on individual loans and to monitor whether loan‑to‑value covenants

are met. Where borrowers are more than two months in arrears, consideration is given to obtaining a professional valuation

of the property.

Group and Society	2023	2022
Average loan‑to‑value (%)	55.8	48.4
Average loan size (£m)	0.7	0.6
Value of security held (£m)	3,213.0	3,018.6
Balance of loans >100% LTV (£m)	21.9	6.2
Largest exposure to a single counterparty (£m)	20.0	18.0

At the year end 0.54% (2022: 0.03%) of commercial balances (including repossessions) were more than three months in

arrears.

‘Watch list’ loans include those where there are circumstances which could impact on the quality and recoverability of the

loan. Examples include borrowers requesting forbearance or reporting trading losses. Loans on the watch list total increased

to £46.9 million in 2023 (2022: £31.4 million).

Corporate buy‑to‑let loans increased to £1,207.3 million (2022: £884.1 million) and these loans are mainly interest only. They

are continuously monitored to ensure that full repayment is made on the expiry of the loan term.

Notes to the Financial Statements (continued)

214 | Financial Statements 215

31. Credit risk on loans and advances to customers (continued)

Commercial lending

Group and Society	2023	2022
Commercial mortgage balances by geographical region	%	%
Scotland	–	–
North East	0.5	0.4
Yorkshire & Humberside	2.5	2.8
North West	4.2	4.8
Midlands	5.8	6.6
East	3.1	3.5
South West	7.1	6.6
Greater London	49.8	49.0
South East	25.8	25.3
Wales & Northern Ireland	1.2	1.0
	100.0	100.0

Group and Society	2023	2022
Commercial mortgage balances by lending type	%	%
Commercial owner occupied	2.6	3.9
Commercial investment property*	29.7	32.4
Corporate buy‑to‑ let*	59.0	51.6
Social Housing	8.7	12.1
	100.0	100.0

The Group has an active business lending to housing associations in England and Wales, via the Yorkshire Building

Society brand. This sector has particularly robust credit characteristics and the lending is low risk albeit at low margins. At

31 December 2023 this loan book was £177.9 million (2022: £202.0 million). The Group has written further undrawn Term

Loan/Revolving Credit facilities in the region of £136.1 million (2022: £164.2 million) and these are expected to draw down

over the next 5 years.

* Please note prior year figures for Commercial mortgage balances split by lending type have been restated due to transitioning to an alternative

data source.

Notes to the Financial Statements (continued)

Risk assessment

The following tables are included to give an overview of the Group’s credit risk. This includes analysis of exposures by

12 month probability of default (PD) bands and origination year.

The risk models cover the majority of loans underwritten by the Group, with exceptions for portfolios subject to bespoke

modelling requirements including Accord buy‑to‑let, commercial lending and POCI accounts. The Accord BTL population

currently has very strict underwriting criteria and limited behavioural history, with only a single possession to date.

Commercial lending has significantly different behavioural characteristics to the retail mortgages.

Lending by risk grade

Group			2023				2022
	Stage 1	Stage 2	Stage 3	POCI	Total	ECL	Total	ECL
					exposure		exposure
PD Band	£m	£m	£m	£m	£m	£m	£m	£m
0.00%–<0.15%	26,735.6	1,936.1	–	–	28,671.7	1.0	32,792.6	1.7
0.15%–<0.25%	3,581.6	338.1	–	–	3,919.7	0.5	1,888.6	0.7
0.25%–<0.50%	1,114.8	172.1	–	–	1,286.9	0.4	484.6	0.3
0.50%–<0.75%	692.3	199.2	–	–	891.5	0.3	583.6	0.7
0.75%–<1.00%	559.9	308.4	–	–	868.3	0.6	334.1	0.8
1.00%–<2.50%	327.5	910.0	–	–	1,237.5	3.2	698.2	3.4
2.50%–<10.0%	25.4	288.3	–	–	313.7	2.8	205.1	2.5
10.0%–<100%	14.5	161.0	–	–	175.5	2.5	116.4	2.3
Default	–	–	390.7	39.3	430.0	14.8	366.6	11.1
Accord buy‑to‑let	6,606.8	101.1	7.5	–	6,715.4	3.6	5,905.6	6.3
Commercial	1,771.5	74.4	11.2	10.2	1,867.3	9.3	1,510.6	4.5
Other	167.8	33.1	–	290.2	491.1	9.0	366.1	10.3
PMAs	–	–	–	–	–	12.0	–	13.8
Total	41,597.7	4,521.8	409.4	339.7	46,868.6	60.0	45,252.1	58.4

Society			2023				2022
	Stage 1	Stage 2	Stage 3	POCI	Total	ECL	Total	ECL
					exposure		exposure
PD Band	£m	£m	£m	£m	£m	£m	£m	£m
0.00%–<0.15%	5,987.8	563.2	–	–	6,551.0	0.2	7,455.4	0.2
0.15%–<0.25%	674.3	98.3	–	–	772.6	0.2	710.1	0.2
0.25%–<0.50%	200.0	54.8	–	–	254.8	0.2	172.4	0.1
0.50%–<0.75%	144.3	58.7	–	–	203.0	0.1	264.1	0.4
0.75%–<1.00%	127.7	84.4	–	–	212.1	0.2	193.0	0.6
1.00%–<2.50%	131.9	203.8	–	–	335.7	0.9	362.1	2.5
2.50%–<10.0%	20.8	66.8	–	–	87.6	0.8	98.6	1.5
10.0%–<100%	9.0	55.7	–	–	64.7	0.9	52.9	1.2
Default	–	–	122.6	39.2	161.8	6.8	143.6	7.2
Commercial	1,771.0	74.4	11.2	10.2	1,866.8	9.3	1,509.7	4.5
Other	166.6	34.2	–	290.2	491.0	8.9	365.9	9.1
PMAs	–	–	–	–	–	2.3	–	5.6
Total	9,233.4	1,294.3	133.8	339.6	11,001.1	30.8	11,327.8	33.1

216 | Financial Statements 217

31. Credit risk on loans and advances to customers (continued)

Risk assessment (continued)

Lending by origination year

The table below shows exposures and expected credit losses by origination year for retail loans. The table shows that the

credit quality of newly written business is of significantly higher quality than that written before 2009 or acquired as part of

business combinations.

Group			2023				2022
	Stage 1	Stage 2	Stage 3	POCI	Total	ECL	Total	ECL
					exposure		exposure
Origination Year	£m	£m	£m	£m	£m	£m	£m	£m
2023	8,625.6	555.4	18.2	–	9,199.2	6.5	–	–
2022	8,873.1	673.9	23.7	–	9,570.7	8.2	10,184.5	7.6
2021	6,337.0	632.2	41.4	–	7,010.6	6.3	9,260.3	6.3
2020	3,930.3	409.6	29.0	–	4,368.9	3.0	4,914.3	3.6
2013 – 2019	11,620.1	1,245.8	113.7	–	12,979.6	11.2	16,452.8	11.9
2009 – 2012	781.7	94.3	8.1	–	884.1	0.4	1,056.3	0.6
Pre‑2009	650.9	580.0	104.7	–	1,335.6	5.8	1,560.7	6.4
Acquired loans	779.0	330.6	70.6	339.7	1,519.9	18.6	1,823.2	22.0
Total	41,597.7	4,521.8	409.4	339.7	46,868.6	60.0	45,252.1	58.4

For 2009 and post lending, the average indexed LTV is 53.0% and the 90 days plus arrears rate is 0.2%. For lending prior to

2009 the average indexed LTV is 25.6% and the 90 days arrears rate is 3.1%.

Movement analysis

The tables on pages 219 to 222 detail the movement in the gross exposures and ECL from the beginning to the end of the

reporting period split by stage. The Society has updated the definition of default and the probability of default rating scale

on the back of a comprehensive review as part of the transition to the fourth generation internal ratings based (Gen 4 IRB)

method of calculating regulatory capital. These model updates were approved for use in the core underlying models in the

first half of this year and all ECL outputs have been updated to reflect these changes.

There was a known misalignment between the initial recognition PDs and the current PDs compared within staging transfer

criteria for accounts that originated prior to the implementation of the third generation model recalibration which took place

in 2018. Enhancements have been made within the fourth generation developments to alleviate the impact of this, resulting

in a large reduction of stage 2 volumes and associated ECLs. This can be seen on the Transfers from stage 2 to 1 line of the

gross exposures movement table.

The level of PD underprediction, that was observed within the third generation models, is still present to an extent in the new

fourth generation models. A PMA has been established to account for this which adjusts the PD estimates used to establish

ECLs. Accounts are then re‑staged if their revised PD estimate exceeds the SICR threshold for the risk grade. This can be seen

on the Transfers from stage 1 to 2 line of the gross exposures movement table.

Separate to the fourth generation model update, we have reassessed the affordability PMA throughout the year. At half year

all balances in relation to the affordability PMA were recognised in stage 1 due to the accounts identified through the PMA

not moving into arrears or meeting any of the quantitative (i.e. SICR thresholds) or qualitative criteria for being assigned to

stage 2. The ECL related to the PMA had previously been recognised in stage 2, the movement from stage 2 to stage 1 to align

with balances can be seen on the PMA line of the ECL movement table below.

Following ongoing monitoring of actuals and the Gen 4 model the affordability PMA was re‑evaluated with a focus on the

most vulnerable accounts. Those accounts identified by the criteria disclosed on page 207 had their PD estimates uplifted to

the equivalent of what they would need to be for the model to assign them to stage 2 as a result of meeting the SICR criteria

allowing re‑staging from stage 1 to stage 2 to occur. This can be seen on the transfers from stage 1 to 2 line of the gross

exposures movement table.

Notes to the Financial Statements (continued)

The following tables detail the movement in the gross exposures and ECL from the beginning to the end of the reporting

period split by class of financial instrument.

Group	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m
Gross exposure at 31 December 2022	40,251.1	4,277.3	338.3	385.4	45,252.1
Transfers from stage 1 to 2	(3,200.5)	3,200.5	–	–	–
Transfers from stage 1 to 3	(77.4)	–	77.4	–	–
Transfers from stage 2 to 1	2,428.8	(2,428.8)	–	–	–
Transfers from stage 2 to 3	–	(111.8)	111.8	–	–
Transfers from stage 3 to 1	26.9	–	(26.9)	–	–
Transfers from stage 3 to 2	–	57.7	(57.7)	–	–
Changes to carrying value	(1,397.6)	(45.7)	10.9	(9.1)	(1,441.5)
New financial assets originated or purchased	9,020.6	–	–	–	9,020.6
Financial assets derecognised during the year	(5,454.2)	(427.4)	(40.4)	(35.5)	(5,957.5)
Write‑offs	–	–	(4.0)	(1.1)	(5.1)
Gross exposure at 31 December 2023	41,597.7	4,521.8	409.4	339.7	46,868.6
ECL at 31 December 2022	7.5	26.3	11.3	13.3	58.4
Transfers from stage 1 to 2	(0.2)	6.0	–	–	5.8
Transfers from stage 1 to 3	–	–	2.6	–	2.6
Transfers from stage 2 to 1	0.9	(4.7)	–	–	(3.8)
Transfers from stage 2 to 3	–	(1.1)	3.4	–	2.3
Transfers from stage 3 to 1	–	–	(0.6)	–	(0.6)
Transfers from stage 3 to 2	–	0.3	(0.8)	–	(0.5)
Changes in PDs/LGDs/EADs	(1.8)	8.0	3.7	0.1	10.0
New financial assets originated or purchased	3.6	–	–	–	3.6
Changes to model assumptions and methodologies	(1.3)	(1.9)	(0.1)	(0.6)	(3.9)
Unwind of discount	–	–	0.4	0.3	0.7
Financial assets derecognised during the year	(0.2)	(1.5)	(1.2)	(1.4)	(4.3)
Write‑offs	–	–	(1.0)	(0.5)	(1.5)
PMA	–	(4.9)	(3.9)	–	(8.8)
ECL at 31 December 2023	8.5	26.5	13.8	11.2	60.0

218 | Financial Statements 219

31. Credit risk on loans and advances to customers (continued)

Movement analysis (continued)

Group	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m
Gross exposure at 31 December 2021	37,614.0	3,791.2	366.2	440.1	42,211.5
Transfers from stage 1 to 2	(1,562.2)	1,562.2	–	–	–
Transfers from stage 1 to 3	(59.0)	–	59.0	–	–
Transfers from stage 2 to 1	830.1	(830.1)	–	–	–
Transfers from stage 2 to 3	–	(69.4)	69.4	–	–
Transfers from stage 3 to 1	25.2	–	(25.2)	–	–
Transfers from stage 3 to 2	–	71.1	(71.1)	–	–
Changes to carrying value	(1,850.4)	227.4	6.9	(8.7)	(1,624.8)
New financial assets originated or purchased	10,588.7	–	–	–	10,588.7
Financial assets derecognised during the year	(5,335.3)	(475.1)	(62.0)	(45.5)	(5,917.9)
Write‑offs	–	–	(4.9)	(0.5)	(5.4)
Gross exposure at 31 December 2022	40,251.1	4,277.3	338.3	385.4	45,252.1
ECL at 31 December 2021	5.6	17.5	15.4	16.0	54.5
Transfers from stage 1 to 2	(0.1)	3.1	–	–	3.0
Transfers from stage 1 to 3	–	–	1.4	–	1.4
Transfers from stage 2 to 1	0.3	(2.2)	–	–	(1.9)
Transfers from stage 2 to 3	–	(0.9)	1.7	–	0.8
Transfers from stage 3 to 1	–	–	(0.6)	–	(0.6)
Transfers from stage 3 to 2	–	0.8	(1.5)	–	(0.7)
Changes in PDs/LGDs/EADs	(1.0)	3.7	1.9	(0.9)	3.7
New financial assets originated or purchased	3.4	–	–	–	3.4
Changes to model assumptions and methodologies	(1.5)	(3.3)	(3.1)	(0.6)	(8.5)
Unwind of discount	–	–	0.5	0.6	1.1
Financial assets derecognised during the year	(0.2)	(2.2)	(2.2)	(1.7)	(6.3)
Write‑offs	–	–	(1.0)	(0.1)	(1.1)
PMA	1.0	9.8	(1.2)	–	9.6
ECL at 31 December 2022	7.5	26.3	11.3	13.3	58.4

Society	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m
Gross exposure at 31 December 2022	8,942.6	1,889.1	111.0	385.1	11,327.8
Transfers from stage 1 to 2	(835.5)	835.5	–	–	–
Transfers from stage 1 to 3	(18.0)	–	18.0	–	–
Transfers from stage 2 to 1	1,102.8	(1,102.8)	–	–	–
Transfers from stage 2 to 3	–	(46.5)	46.5	–	–
Transfers from stage 3 to 1	9.4	–	(9.4)	–	–
Transfers from stage 3 to 2	–	13.6	(13.6)	–	–
Changes to carrying value	(495.5)	(87.5)	(1.2)	(9.2)	(593.4)
New financial assets originated or purchased	1,377.4	–	–	–	1,377.4
Financial assets derecognised during the year	(849.8)	(207.1)	(15.8)	(35.2)	(1,107.9)
Write‑offs	–	–	(1.7)	(1.1)	(2.8)
Gross exposure at 31 December 2023	9,233.4	1,294.3	133.8	339.6	11,001.1
ECL at 31 December 2022	4.0	12.3	3.6	13.2	33.1
Transfers from stage 1 to 2	(0.1)	2.5	–	–	2.4
Transfers from stage 1 to 3	–	–	0.7	–	0.7
Transfers from stage 2 to 1	0.3	(2.7)	–	–	(2.4)
Transfers from stage 2 to 3	–	(0.6)	1.7	–	1.1
Transfers from stage 3 to 1	–	–	(0.2)	–	(0.2)
Transfers from stage 3 to 2	–	0.1	(0.2)	–	(0.1)
Changes in PDs/LGDs/EADs	(0.6)	5.2	2.8	(0.2)	7.2
New financial assets originated or purchased	1.2	–	–	–	1.2
Changes to model assumptions and methodologies	(0.4)	(0.8)	–	(0.6)	(1.8)
Unwind of discount	–	–	0.3	0.7	1.0
Financial assets derecognised during the year	(0.1)	(1.1)	(0.5)	(1.4)	(3.1)
Write‑offs	–	–	(0.3)	(0.5)	(0.8)
PMA	(1.5)	(3.5)	(2.5)	–	(7.5)
ECL at 31 December 2023	2.8	11.4	5.4	11.2	30.8

Notes to the Financial Statements (continued)

220 | Financial Statements 221

31. Credit risk on loans and advances to customers (continued)

Movement analysis (continued)

Society	Stage 1	Stage 2	Stage 3	POCI	Total
	£m	£m	£m	£m	£m
Gross exposure at 31 December 2021	9,395.6	1,816.8	140.9	439.5	11,792.8
Transfers from stage 1 to 2	(566.9)	566.9	–	–	–
Transfers from stage 1 to 3	(13.4)	–	13.4	–	–
Transfers from stage 2 to 1	209.0	(209.0)	–	–	–
Transfers from stage 2 to 3	–	(26.6)	26.6	–	–
Transfers from stage 3 to 1	9.3	–	(9.3)	–	–
Transfers from stage 3 to 2	–	28.0	(28.0)	–	–
Changes to carrying value	(480.6)	(45.6)	(1.9)	(8.6)	(536.7)
New financial assets originated or purchased	1,529.3	–	–	–	1,529.3
Financial assets derecognised during the year	(1,139.7)	(241.4)	(28.5)	(45.3)	(1,454.9)
Write‑offs	–	–	(2.2)	(0.5)	(2.7)
Gross exposure at 31 December 2022	8,942.6	1,889.1	111.0	385.1	11,327.8
ECL at 31 December 2021	2.6	11.4	5.7	16.0	35.7
Transfers from stage 1 to 2	–	1.6	–	–	1.6
Transfers from stage 1 to 3	–	–	0.2	–	0.2
Transfers from stage 2 to 1	0.2	(1.0)	–	–	(0.8)
Transfers from stage 2 to 3	–	(0.5)	0.8	–	0.3
Transfers from stage 3 to 1	–	–	(0.2)	–	(0.2)
Transfers from stage 3 to 2	–	0.4	(0.7)	–	(0.3)
Changes in PDs/LGDs/EADs	1.0	–	(0.2)	(1.0)	(0.2)
New financial assets originated or purchased	0.9	–	–	–	0.9
Changes to model assumptions and methodologies	(0.8)	(1.5)	(1.0)	(0.6)	(3.9)
Unwind of discount	–	–	0.2	0.6	0.8
Financial assets derecognised during the year	(0.1)	(1.8)	(1.2)	(1.7)	(4.8)
Write‑offs	–	–	(0.6)	(0.1)	(0.7)
PMA	0.2	3.7	0.6	–	4.5
ECL at 31 December 2022	4.0	12.3	3.6	13.2	33.1

Notes to the Financial Statements (continued)

Forbearance

Forbearance tools are used, in line with industry guidance, where they are deemed appropriate for an individual customer’s

circumstances. These include capitalisation, interest only concessions, arrears arrangements and term extensions. Forbearance

measures are incorporated into the calculation of ECLs.

The table below shows the retail accounts that are forborne. These accounts have been further classified as follows:

•

non‑performing – where an account meets the definition of default at the point it is granted a forbearance measure; and

•

probationary – for accounts that have exited forbearance measures and been re‑classed from non‑performing in the last

2 years.

The definition of non‑performing and stage 3 are aligned such that no accounts in stage 2 are classed as non‑performing.

Any accounts that were previously in default have a cure period of 12 months, after which they are able to move back into

stage 2 or 1.

Group	Arrangements		Other concessions		Term extension		Interest only
	Exposure	ECL	Exposure	ECL	Exposure	ECL	Exposure	ECL
	£m	£m	£m	£m	£m	£m	£m	£m
2023
Probation	47.2	0.3	5.9	–	39.3	–	9.7	–
Stage 1	8.8	–	2.9	–	25.3	–	4.0	–
Stage 2	38.4	0.3	3.0	–	14.0	–	5.7	–
Non-performing	193.1	6.6	13.3	1.0	52.5	0.7	11.4	0.7
Stage 3	167.9	5.3	10.8	0.7	42.5	0.7	9.0	0.1
POCI	25.2	1.3	2.5	0.3	10.0	–	2.4	0.6
Total	240.3	6.9	19.2	1.0	91.8	0.7	21.1	0.7
2022
Probation	46.0	0.4	2.5	–	1.8	–	2.5	–
Stage 1	12.5	–	–	–	0.5	–	0.3	–
Stage 2	33.5	0.4	2.5	–	1.3	–	2.2	–
Non-performing	157.1	5.1	8.3	0.7	7.5	0.1	4.5	–
Stage 3	130.8	3.7	5.3	0.3	5.1	0.1	4.2	–
POCI	26.3	1.4	3.0	0.4	2.4	–	0.3	–
Total	203.1	5.5	10.8	0.7	9.3	0.1	7.0	–

All requests for forbearance on commercial loans are subject to full credit risk appraisal and are predominantly for a period of

interest only, which allows the borrower to improve income from trading or rent receipts, pending the sale of the property. The

appraisal process considers the likelihood of a loss being substantiated from any borrower granted a concession and ensures

that the concession is in the interests of both the borrower and the Group. In 2023 there were 3 accounts (2022: 13) in the

commercial loans portfolio subject to forbearance with a total balance of £1.6 million (2022: £4.1 million). There has been no

underlying increase in the risk of the portfolio.

222 | Financial Statements 223

31. Credit risk on loans and advances to customers (continued)

Loans Purchased or Originated Credit Impaired (POCI)

The table below shows the status of the Group’s POCI loans and how they are distributed across loan‑to‑value (LTV) bands.

A substantial proportion of POCI balances, were they not required to be classified as stage 3 by accounting standards, would

transfer to other stages. The table below shows that 69.4% (2022: 71.9%) of balances have been fully up to date for the last

24 months and only 14.6% (2022: 12.0%) of balances would be classified as in default.

Group and Society		Up to date	Some arrears	Meets	Total
		for the last	in the last	definition of
		24 months	24 months	default
		£m	£m	£m	£m
2023
Gross exposure		235.9	54.3	49.5	339.7
ECL		6.1	2.7	2.4	11.2
2022
Gross exposure		277.1	61.9	46.4	385.4
ECL		7.6	3.3	2.4	13.3
2023	LTV Split
Less than 60%		211.6	46.0	37.3	294.9
From 60 to 70%		16.6	5.0	9.3	30.9
From 70 to 80%		3.8	2.2	2.0	8.0
From 80 to 90%		1.0	0.8	0.2	2.0
90% or greater		2.9	0.3	0.7	3.9
Total		235.9	54.3	49.5	339.7
2022	LTV Split
Less than 60%		238.4	50.6	33.6	322.6
From 60 to 70%		25.8	6.9	10.6	43.3
From 70 to 80%		6.9	2.6	1.4	10.9
From 80 to 90%		2.1	0.7	0.2	3.0
90% or greater		3.9	1.1	0.6	5.6
Total		277.1	61.9	46.4	385.4

Notes to the Financial Statements (continued)

32. Fair values

Fair value is the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

Where external market prices are available they have been used to determine fair value. Otherwise, internal pricing models

using external market data have been used. The Group measures fair value using the following fair value hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The table below summarises the carrying value and fair value of financial assets and liabilities measured at amortised cost as

at the balance sheet date.

2023	Notes	Carrying		Fair values		Total fair
		value	Level 1	Level 2	Level 3	value
		£m	£m	£m	£m	£m
Group
Assets
Loans and advances to credit institutions	1	397.4	–	397.4	–	397.4
Loans and advances to customers	2	46,815.9	–	–	45,298.5	45,298.5
Debt securities – amortised cost		2,339.0	2,332.2	–	–	2,332.2
Liabilities
Shares	3	47,056.7	–	46,976.7	–	46,976.7
Amounts due to credit institutions		1,886.3	–	1,886.3	–	1,886.3
Other deposits		983.6	–	983.6	–	983.6
Debt securities in issue		4,919.4	4,222.9	693.4	–	4,916.3
Subordinated liabilities	4	1,621.7	1,566.8	32.4	–	1,599.2
Society
Assets
Loans and advances to credit institutions	1	208.6	–	208.6	–	208.6
Loans and advances to customers	2	10,920.6	–	–	10,502.6	10,502.6
Debt securities – amortised cost		14,131.4	14,116.2	–	–	14,116.2
Liabilities
Shares	3	47,056.7	–	46,976.7	–	46,976.7
Amounts due to credit institutions		1,886.3	–	1,886.3	–	1,886.3
Other deposits		14,080.2	–	14,080.2	–	14,080.2
Debt securities in issue		5,517.6	5,435.0	–	–	5,435.0
Subordinated liabilities	4	1,621.7	1,566.8	32.4	–	1,599.2

224 | Financial Statements 225

32. Fair values (continued)

2022	Notes	Carrying		Fair values		Total fair
		value	Level 1	Level 2	Level 3	value
		£m	£m	£m	£m	£m
Group
Assets
Loans and advances to credit institutions	1	814.7	–	814.7	–	814.7
Loans and advances to customers	2	45,203.7	–	–	43,002.8	43,002.8
Debt securities – amortised cost		1,366.6	1,352.3	–	–	1,352.3
Liabilities
Shares	3	42,008.2	–	41,835.3	–	41,835.3
Amounts due to credit institutions		5,160.9	–	5,160.9	–	5,160.9
Other deposits		1,138.1	–	1,138.1	–	1,138.1
Debt securities in issue		5,259.3	4,807.9	453.8	–	5,261.7
Subordinated liabilities	4	1,035.1	975.7	34.0	–	1,009.7
Society
Assets
Loans and advances to credit institutions	1	568.8	–	568.8	–	568.8
Loans and advances to customers	2	11,238.9	–	–	10,678.9	10,678.9
Debt securities – amortised cost		14,914.8	14,798.4	–	–	14,798.4
Liabilities
Shares	3	42,008.2	–	41,835.3	–	41,835.3
Amounts due to credit institutions		5,160.9	–	5,160.9	–	5,160.9
Other deposits		15,836.3	–	15,836.3	–	15,836.3
Debt securities in issue		6,153.4	6,013.6	–	–	6,013.6
Subordinated liabilities	4	1,035.1	975.7	34.0	–	1,009.7

1. The fair values of all cash in hand, balances with the Bank of England and loans and advances to credit institutions have been

measured at par as they are all due in under one year.

2. The fair value of loans and advances to customers is assessed as the value of the expected future cash flows. Future cash flows

are projected using contractual interest payments, contractual repayments and the expected prepayment behaviour of borrowers.

The resulting expected future cash flows are discounted at current market rates to determine fair value.

For standard variable rate mortgage products, the interest rate on such products is equivalent to a current market product rate

and as such the Group considers the fair value of these mortgages to be equal to their carrying value. Fixed rate mortgages have

been discounted using current market product rates. The difference between book value and fair value results from market rate

volatility relative to the fixed rate at inception of the loan; in addition to assumptions applied in relation to redemption profiles,

which are regularly reviewed and updated where necessary.

As these redemption profiles are not considered to be observable by the market, then the fair value of loans and advances

to customers continues to be a Level 3 valuation technique. Overall the fair value is lower than the carrying value by

£1,517.4 million (2022: £2,200.9 million lower), which arises primarily due to the fair value losses being calculated on a lifetime

basis for all mortgage accounts.

3. All of the Group’s non‑derivative financial liabilities are initially recorded at fair value less directly attributable costs and are

subsequently measured at amortised cost, except where an adjustment is made to certain fixed rate shares balances that are in

hedging relationships. The fair value of shares and deposits that are available on demand approximates to the carrying value. The

fair value of fixed term shares and deposits is determined from the projected future cash flows from those deposits, discounted

at the current market rates. In 2023, the estimated fair value of share balances, using a Level 2 method, is lower than the carrying

value by £80.0 million (2022: £172.9 million lower).

4. The Society accounts include some subordinated liabilities classified as Level 2 as fair values are calculated using a method

based on observable market prices. The fair value of subordinated liabilities, which is a fixed rate product, is lower than the

carrying value due to the significant increases in market rates over the course of the year.

Notes to the Financial Statements (continued)

The table below classifies all financial instruments held at fair value on the face of the Group’s balance sheet according to the

method used to establish the fair value.

Group		Fair values		Total fair
	Level 1	Level 2	Level 3	value
	£m	£m	£m	£m
2023
Assets
Debt securities	27.3	–	–	27.3
Debt securities – fair value through OCI	5,195.7	–	–	5,195.7
Derivative financial instruments	–	1,751.9	3.1	1,755.0
Investments	–	–	3.3	3.3
Liabilities
Derivative financial instruments	–	697.4	–	697.4
2022
Assets
Debt securities	25.5	–	–	25.5
Debt securities – fair value through OCI	4,292.7	–	–	4,292.7
Derivative financial instruments	–	2,344.0	12.5	2,356.5
Investments	–	–	2.8	2.8
Liabilities
Derivative financial instruments	–	666.3	–	666.3

The Group’s Level 1 portfolio of available for sale debt securities comprises liquid securities for which traded prices are

readily available.

Some derivative financial instruments are also included within Level 2 as fair values are derived from discounted cash flow

models using yield curves based on observable market data.

Level 3 instruments

Derivative financial instruments within Level 3 are interest rate swaps held in the SPVs. These are valued using similar

valuation technique as Level 2 derivatives, namely present value calculations using interest rate curves, but these are not

based on market observable data.

The interest rate swaps are balance tracking and the swap notional is projected, and changes over time to match the

balance of the underlying mortgage portfolio. The changes in the fair value of these instruments from movements in Level 3

parameters related to prepayment risk will largely offset across the interest rate swaps as the Group is hedged across these

positions. Sensitivity analysis to the individual Level 3 parameters has not been disclosed on the basis that the Group does

not have a significant exposure to these.

Investments classified in Level 3 relate to the Group’s holding in equity preference shares. These shares are convertible into

common equity shares at various intervals during the life of the instrument, based on a conversion factor set by the issuer.

The valuation method therefore uses the quoted share price of the unrestricted stock as a base, applies the current estimated

conversion factor as advised by the issuer and applies a discount.

This discount reflects the current illiquidity of the instrument and the risks to changes in the conversion factor between the

balance sheet date and the next conversion date. Whilst the valuation is primarily based on an observable market price, the

level and significance of the unobservable input relating to the calculation of the discount moves this asset into Level 3.

Changes in the carrying value of Level 3 financial instruments in the period relate to the redemption of a derivative financial

instrument and changes in fair value. There have been no changes in methodology, additions or transfers in or out of Level 3

in the year.

Fair value through other comprehensive income and hedging reserve

Amounts within the fair value through other comprehensive income reserve are transferred to the income statement upon the

disposal of debt securities. During the year a gain of £1.2 million (2022: £1.9 million loss) was recognised in net realised losses.

226 | Financial Statements 227

33. Offsetting

In accordance with IAS 32

‘Financial Instruments: Presentation’

the Society must offset in the financial statements financial

assets and liabilities where there is a legally enforceable right to offset the recognised amounts and there is the intention to

settle these amounts on a net basis.

The Group enters into derivative contracts to mitigate various risks, see note 26 for further details. These derivatives are

governed by International Swaps and Derivatives Association (ISDA) master agreements, an agreement is in place with each

counterparty the Group transacts derivatives with. These agreements define the terms of how the Group will enter derivative

contracts with the counterparty, including any netting arrangements.

In addition to these ISDA agreements the Group has various Credit Support Annexes (CSAs) with counterparties which defines

how collateral will be exchanged with a counterparty to mitigate market risk.

The following table shows the impact on the financial statements of these arrangements:

		2023				2022
	Gross	Master netting	Financial	Net	Gross	Master netting	Financial	Net
	amounts*	arrangements	collateral**	amount	amounts*	arrangements	collateral**	amount
	£m	£m	£m	£m	£m	£m	£m	£m
Group
Financial assets
Derivative financial	1,755.0	(479.7)	(1,254.5)	20.8	2,356.5	(393.5)	(1,928.5)	34.5
instruments
Total financial assets	1,755.0	(479.7)	(1,254.5)	20.8	2,356.5	(393.5)	(1,928.5)	34.5
Financial liabilities
Derivative financial	697.4	(479.7)	(103.5)	114.2	666.3	(393.5)	(113.0)	159.8
instruments
Total financial liabilities	697.4	(479.7)	(103.5)	114.2	666.3	(393.5)	(113.0)	159.8
Society
Financial assets
Derivative financial	1,751.9	(479.7)	(1,254.5)	17.7	2,323.7	(393.5)	(1,928.5)	1.7
instruments
Total financial assets	1,751.9	(479.7)	(1,254.5)	17.7	2,323.7	(393.5)	(1,928.5)	1.7
Financial liabilities
Derivative financial	584.3	(479.7)	(103.5)	1.1	507.0	(393.5)	(112.8)	0.7
instruments
Total financial liabilities	584.3	(479.7)	(103.5)	1.1	507.0	(393.5)	(112.8)	0.7

Collateral is received and paid in the form of cash. Where cash is received from counterparties it is included as a liability

in amounts owed to credit institutions. Where cash is paid to a counterparty it is recorded as loans and advances to credit

institutions. Cash collateral paid and received is not restricted and is returned at the end of the contract.

* As recognised in the balance sheet

** Collateral is restricted by the value of the related financial asset or liability

Notes to the Financial Statements (continued)

34. Related parties

Identity of related parties

The Society has related party relationships with its controlled entities, a joint venture, the pension schemes and key

management personnel. The Society considers its key management personnel to be its directors.

Contributions to the pension schemes

The Society paid contributions of £19.3 million to the pension schemes (2022: £16.3 million).

Remuneration of and transactions with directors

Full details of directors’ remuneration, including the highest paid director, bonuses and pensions are given in the

Directors’

Remuneration Report

. In addition, past directors’ pensions in respect of services as directors from the closed scheme

amounted to £24,345 (2022: £23,176).

None of the directors of the Society had any equity interest in, or loans to or from, any subsidiary of the Society at any time

during the financial year.

A register containing details of loans, transactions and arrangements between the Society and its directors and connected

persons is maintained at the head office of the Society. A statement containing the details of this register for 2023 will be

available for inspection at the head office by members for a period of 15 days up to and including the date of the annual

general meeting.

Key management personnel compensation

The directors of the Society are considered to be the key management personnel as defined by IAS 24

Related Party

Disclosures

. Total key management personnel compensations was as follows:

	2023	2022
	£000	£000
Short‑term employee benefits	6,286.5	2,667.6
Post‑employment benefits	162.0	118.0
Total key management personnel compensation	6,448.5	2,785.6

Key management compensation in 2023 includes amounts paid to key management personnel who both retired and joined the

Society during 2023. The number of key management personnel at 31 December 2023 totalled 12 (31 December 2022: 9).

228 | Financial Statements 229

34. Related parties (continued)

Transactions with key management personnel

Key management personnel and their close family members have undertaken the following transactions with the Society

under normal business terms.

		2023	2022
	No. of key	Amounts in	No. of key	Amounts in
	management	respect of key	management	respect of key
	personnel	management	personnel	management
		personnel		personnel
		and their		and their
		close family		close family
		£000		£000
Deposit accounts and investments
At 1 January	9	1,462.5	11	1,067.7
Net movements in the year	3	(325.9)	(2)	394.8*
At 31 December	12	1,136.6	9	1,462.5*

There were no mortgage loan transactions or balances key management personnel and their close family members in 2023

(2022: nil).

Amounts relating to directors who joined or left during the year are included in net movement in the year.

Mortgage loans made to key management personnel and their close family members were granted in the ordinary course of

business and are subject to repayment under normal lending terms. The maximum outstanding balances during the year were

£nil (2022: £nil).

Amounts deposited by key management personnel and their close family members earn interest at the same rates offered to

the public.

Key management personnel and their close family members paid interest totalling £nil (2022: £nil), received interest totalling

£27,054 (2022: £6,639), and paid no fees and commissions during the year. Interest paid includes amounts relating to ‘offset’

mortgages where savings balances are used to reduce the interest‑bearing balance of mortgage loans.

Notes to the Financial Statements (continued)

Transactions with controlled entities

The Society transacts with its controlled entities in the form of intra‑group loans and equity shareholdings in the normal

course of business. The value of related party transactions and outstanding balances at the year end for the financial year are

as follows:

	Shares in	Loans to	Deposits from
	subsidiaries	controlled	controlled
		entities	entities
	£m	£m	£m
At 1 January 2023	104.9	35,632.1	(15,137.3)
Net movements	–	1,722.3	1,465.0
At 31 December 2023	104.9	37,354.4	(13,672.3)
At 1 January 2022	104.9	32,129.2	(15,075.2)
Net movements	–	3,502.9	(62.1)
At 31 December 2022	104.9	35,632.1	(15,137.3)
The value of related party transactions income and expense for the financial year is as follows:		2023	2022
		£m	£m
Interest revenue on loans		1,349.0	475.8
Interest expense on deposits		(1,182.1)	(231.4)
Fees and expenses revenue		87.6	79.9
Fees and expenses expense		–	–
Dividends received		50.0	100.0

Other

The Society has a joint‑venture investment in Arkose Funding Limited. In 2014, a loan of £4.0 million to Arkose Funding

Limited was fully impaired.

* The 2022 deposit account and investment amounts in respect of key management personnel and their close family have been updated in these

financial statements.

230 | Financial Statements 231

35. Notes to the cash flow statements

	Group		Society
	2023	Restated*	2023	Restated*
		2022		2022
	£m	£m	£m	£m
Depreciation and amortisation	20.4	21.8	20.4	21.8
Loss/(profit) on sale of assets	0.3	(2.4)	0.3	(2.4)
Interest on subordinated liabilities	51.5	33.7	51.5	33.7
Impairment charge/(release) for the year	4.0	6.0	–	(0.6)
Provision (release)/charge for the year	(0.6)	4.2	(0.6)	4.2
Non‑cash movements on subordinated liabilities	73.0	(122.6)	73.0	(122.6)
Gain on realisation of debt securities	(1.6)	(2.9)	(1.6)	(2.9)
Non-cash items included in profit before tax	147.0	(62.2)	143.0	(68.8)
(Increase)/decrease in operating assets:
Change in loans and advances to customers and related fair value	(2,509.0)	(1,779.0)	(574.5)	1,726.6
adjustments for hedged risk, excluding impairment
Investments	(0.5)	2.6	(1,722.8)	(2,603.8)
Derivative financial assets	588.3	(1,867.6)	558.6	(1,906.2)
Other assets	(16.0)	(3.2)*	(42.6)	(39.6)*
Net increase in operating assets	(1,937.2)	(3,647.2)	(1,781.3)	(2,823.0)
Increase/(decrease) in operating liabilities:
Shares	5,048.5	6,501.8	5,048.5	6,501.8
Amounts owed to credit institutions	(3,274.6)	(928.9)	(3,274.6)	(928.9)
Non cash movements on debt securities	84.6	(117.9)	23.1	21.6
Other deposits	(154.5)	264.6	(1,756.1)	274.2
Derivative financial liabilities	31.1	393.6	77.3	326.1
Other liabilities and provisions	9.6	(18.5)*	25.2	2.3*
Net increase in operating liabilities	1,744.7	6,094.7	143.4	6,197.1

* The classification of these two lines have been corrected in 2023, moving them to their current position. Both line items

were previously reported within the “Non‑cash items included in profit before tax” section.

This has had the following impacts on the sub‑totals in Note 35 and, accordingly, on the Statement of Cashflows. Both have

been restated as a result.

Group

•

Reduced the “Non‑cash items included in profit before tax” by £21.7 million, from (£83.9 million) to (£62.2 million)

•

Increased the “Net increase in operating assets” by £3.2 million, from (£3,644.0 million) to (£3,647.2 million)

•

Reduced the “Net increase in operating liabilities” by £18.5 million, from £6,113.2 million to £6,094.7 million

Society

•

Reduced the “Non‑cash items included in profit before tax” by £37.3 million, from (£106.1 million) to (£68.8 million)

•

Increased the “Net increase in operating assets” by £39.6 million, from (£2,783.4 million) to (£2,823.0 million)

•

Increased the “Net increase in operating liabilities” by £2.3 million, from £6,194.8 million to £6,197.1 million

In all cases, there is no impact on the “Net cash from operating activities” line in the Statement of Cashflows as the impacted

lines all form part of that sub‑total.

Notes to the Financial Statements (continued)

The following table reconciles liabilities arising from financing activities.

Liabilities from	Brought	Cash flows		Non-cash changes caused by:			Carried
financing activities	forward	Redemption	Issue	Foreign	Accrued	Fair value	forward
				exchange	interest	and other
						movements
	£m	£m	£m	£m	£m	£m	£m
2023 – Group
Debt securities in issue	5,259.3	(1,423.7)	999.2	(58.6)	3.4	139.8	4,919.4
Subordinated liabilities	1,035.1	(136.4)	650.0	–	6.6	66.4	1,621.7
Total	6,294.4	(1,560.1)	1,649.2	(58.6)	10.0	206.2	6,541.1
2022 – Group
Debt securities in issue	5,890.9	(1,225.2)	711.5	198.6	6.9	(323.4)	5,259.3
Subordinated liabilities	857.7	–	300.0	–	2.3	(124.9)	1,035.1
Total	6,748.6	(1,225.2)	1,011.5	198.6	9.2	(448.3)	6,294.4
2023 – Society
Debt securities in issue	6,153.4	(1,165.4)	506.5	(52.1)	1.7	73.5	5,517.6
Subordinated liabilities	1,035.1	(136.4)	650.0	–	6.6	66.4	1,621.7
Total	7,188.5	(1,301.8)	1,156.5	(52.1)	8.3	139.9	7,139.3
2022 – Society
Debt securities in issue	4,993.7	(773.4)	1,911.5	168.8	8.0	(155.2)	6,153.4
Subordinated liabilities	857.7	–	300.0	–	2.3	(124.9)	1,035.1
Total	5,851.4	(773.4)	2,211.5	168.8	10.3	(280.1)	7,188.5

232 | Financial Statements 233

Other Information

Annual Business Statement 235

Country‑by‑Country Report 237

Glossary 240

1. Statutory percentages

2023 2022 Statutory

limit

% % %

Lending limit 6.4 5.3* 25.0

Funding limit 14.2 21.6 50.0

The above percentages have been calculated in accordance with the provisions of the

Building Societies Act 1986

The Lending limit measures the proportion of business assets not in the form of loans fully secured on residential property.

The Funding limit measures the proportion of shares and borrowings not in the form of shares.

The statutory limits are as laid down under the

Building Societies Act 198

6 and ensure that the principal purpose of a building

society is that of making loans which are secured on residential property and are funded substantially by its members.

2. Other percentages

2023 2022

% %

As a percentage of shares and borrowings:

Gross capital 9.70 8.27

Free capital 9.46 8.05

Liquid assets 23.34 23.30

Profit after taxation for the financial year as a percentage of mean total assets 0.55 0.68

Management expenses as a percentage of mean total assets 0.56 0.54

The above percentages have been prepared from the Group financial statements and further details on the above percentages

can be found in the

Glossary

Annual Business Statement

* The 2022 lending limit has been updated in these financial statements.

234 | Other Information 235

3. Information relating to the directors at 31December 2023

Director name and

date of birth

Business

occupation

Date of appointment Other

Directorships

J R Heaps, LLB

8 July 1953

Chair of the Board 20 November 2014 None

A V F Durbin, BComm LLB MSc

9 October 1963

Chair of the Board Designate 18 December 2023 Persimmon PLC

Petershill Partners plc

S M Allen, OBE, BA Hons (Econ)

ACIB ACT

1 September 1966

Chief Executive 2 March 2023 Alzheimer’s Society

G L T Bainbridge,

MA (Cantab), ACA

13 September 1960

Non‑Executive Director 1 January 2019 ICE Clear Europe Limited

Manulife Financial Corporation

The Manufacturers Life Insurance Company

A J Darlington, BSC FIA

7 May 1968

Non‑Executive Director 26 April 2022 Rothesay Life Plc

Rothesay Limited

D J Davies, BA (Hons)

8 February 1963

Non‑Executive Director 26 July 2023 AXA UK Plc

AXA PPP Healthcare Limited

AXA Insurance UK Plc

Intrum AB (Sweden)

A E Hutchinson, CBE, BSc

5 February 1967

Charity Chief Executive 4 February 2015 DFS Furniture plc

Foresight Group Holdings Limited

Your Penny Limited

A B Lenman, MA, ACMA

25 December 1969

Chief Finance Officer and

Executive Director

4 December 2017 YBS Pension Trustees Limited

Arkose Funding Limited

D Matta, BSc, BA

15 May 1962

Non‑Executive Director 27 April 2021 Fat Fractal Inc

D E T Morris, BA (Hons), MA

26 September 1983

Chief Commercial Officer and

Executive Director

1 January 2022 Accord Mortgages Limited

BCS Loans & Mortgages Limited

Chelsea Mortgage Services Limited

Norwich and Peterborough Insurance Brokers

Limited

M A Parsons, BA, FCMA

24 October 1961

Non‑Executive Director 20 October 2020 Fairstone Capital Group Limited

Fairstone Private Wealth Limited

J L Tilling, BBus, BA

19 June 1969

Non‑Executive Director 1 November 2021 Marketing with Insight Limited

Camelot UK Lotteries Limited

Shaftesbury Plc

Guide Dogs for the Blind Association (The)

Mr A.B. Lenman entered into a contract on 28 September 2017 and was appointed to the Board on 4 December 2017 – his

mutual contractual notice period is six months.

Mr Morris entered into a contract on 25 June 2018 and was appointed to the Board on 1 January 2022 – his mutual

contractual notice period is twelve months.

Ms Allen entered into a contract on 5 August 2022 and was appointed to the Board on 2 March 2023 – her mutual contractual

notice period is twelve months.

Documents may be served on the above named directors: Ref. ‘Yorkshire Building Society’ c/o PricewaterhouseCoopers LLP at

the following address: Central Square, 29 Wellington Street, Leeds, LS1 4DL.

4. Registered office

Yorkshire Building Society is a building society incorporated and domiciled in the United Kingdom. The address of the

principal office is Yorkshire House, Yorkshire Drive, Bradford, BD5 8LJ.

Disclosure requirements under CRD IV country-by-country reporting

We are required to disclose the following information in our Annual Report and Accounts to comply with the Regulations of

Article 89 of the Capital Requirements Directive IV (CRD IV) country‑by‑country reporting (CBCR).

This regulation requires us to disclose financial information by country. Yorkshire Building Society has a number of

subsidiaries; these can be found in note 8 to these financial statements.

All the activities of Yorkshire Building Society and its subsidiaries (together, ‘the Group’) are conducted in the United Kingdom.

Country Nature of activities Number of

employees

Turnover (note i) Profit before tax Corporation tax

paid

(average

full time

equivalent)

£m £m £m

United Kingdom Provision of financial services 3,058 786.0 450.3 101.0

i) Turnover represents ‘total income’ on the Group’s income statement as disclosed in the Group’s Annual Report and

Accounts.

No public subsidies were received by the Group in 2023.

Basis of preparation

The Group’s CBCR disclosure has been prepared to comply with the Regulations. The requirements place certain reporting

obligations on financial institutions that are within the scope of CRD IV. CBCR requires annual publication of certain statutory

information on a consolidated basis, by country, where an institution has a subsidiary or branch.

The CBCR disclosure has been prepared solely to comply with the requirements of the Regulations and may not be relied on

for any other purpose.

Full-time equivalent employees

The figures disclosed above represent the average number of FTE’s all of which were employed in the UK.

Turnover and Profit before tax

Turnover and profit before tax are compiled from the Yorkshire Building Society Group consolidated financial statements for

the year ended 31 December 2023, which are prepared in accordance with IFRS.

Corporation tax paid

Corporation tax paid represents the net cash taxes paid during 2023. Corporation tax paid is reported on a cash basis and will

normally differ from the tax expenses recorded for accounting purposes due to:

•

Timing differences in the accrual of the tax charge

•

Brought forward losses from previous years

•

Other differences between when income and expenses are accounted for under IFRS and when they become taxable.

Country-by-Country ReportAnnual Business Statement (continued)

236 | Other Information 237

Report on the audit of the country-by-country information

Opinion

In our opinion, Yorkshire Building

Society’s country‑by‑country

information for the year ended

31December 2023 has been properly

prepared, in all material respects, in

accordance with the requirements of

the Capital Requirements (Country‑by‑

Country Reporting) Regulations 2013.

We have audited the country‑by‑

country information for the year ended

31 December 2023 in the Country‑by‑

Country Report.

Basis for opinion

We conducted our audit in accordance

with International Standards on

Auditing (UK) (“ISAs (UK)”), including

ISA (UK) 800 and ISA (UK) 805, and

applicable law. Our responsibilities

under ISAs (UK) are further described

in the Auditors’ responsibilities for

the audit of the country‑by‑country

information section of our report.

We believe that the audit evidence

we have obtained is sufficient and

appropriate to provide a basis for our

opinion.

Independence

We remained independent of the

company in accordance with the

ethical requirements that are relevant

to our audit of the country‑by‑country

information in the UK, which includes

the FRC’s Ethical Standard, and

we have fulfilled our other ethical

responsibilities in accordance with

these requirements.

Emphasis of matter –

Basis of preparation

In forming our opinion on the country‑

by‑country information, which is

not modified, we draw attention to

the basis of preparation note of the

country‑by‑country information which

describes the basis of preparation.

The country‑by‑country information

is prepared for the directors for

the purpose of complying with

the requirements of the Capital

Requirements (Country‑by‑Country

Reporting) Regulations 2013. The

country‑by‑country information has

therefore been prepared in accordance

with a special purpose framework and,

as a result, the country‑by‑country

information may not be suitable for

another purpose.

Conclusions relating to

going concern

Our evaluation of the directors’

assessment of the company’s ability to

continue to adopt the going concern

basis of accounting included:

•

A risk assessment to identify

factors that could impact the

going concern basis of accounting,

including the current and forecast

financial performance;

•

Evaluation of management’s going

concern assessment;

•

Review of regulatory

correspondence and reports

provided to governance forums;

and

•

Evaluation of the appropriateness

of the relevant disclosures in the

financial statement.

Based on the work we have performed,

we have not identified any material

uncertainties relating to events

or conditions that, individually or

collectively, may cast significant doubt

on the company’s ability to continue as

a going concern for a period of at least

twelve months from the date on which

the country‑by‑country information is

authorised for issue.

In auditing the country‑by‑country

information, we have concluded that

the directors’ use of the going concern

basis of accounting in the preparation

of the country‑by‑country information

is appropriate.

However, because not all future events

or conditions can be predicted, this

conclusion is not a guarantee as to

the company’s ability to continue as a

going concern.

Our responsibilities and the

responsibilities of the directors with

respect to going concern are described

in the relevant sections of this report.

Responsibilities for

the country-by-country

information and the audit

Responsibilities of the directors

for the country-by-country

information

The directors are responsible for

the preparation of the country‑by‑

country information in accordance

with the requirements of the Capital

Requirements (Country‑by‑Country

Reporting) Regulations 2013 as

explained in the basis of preparation

in the basis of preparation note to

the country‑by‑country information

and accounting policies in the Group

and Society financial statements,

and for determining that the basis of

preparation and accounting policies

are acceptable in the circumstances.

The directors are also responsible for

such internal control as they determine

is necessary to enable the preparation

of country‑by‑country information that

is free from material misstatement,

whether due to fraud or error.

In preparing the country‑by‑

country information, the directors

are responsible for assessing the

company’s ability to continue as a

going concern, disclosing as applicable,

matters related to going concern

and using the going concern basis of

accounting unless the directors either

intend to liquidate the company or to

cease operations, or have no realistic

alternative but to do so.

Auditors’ responsibilities for the

audit of the country-by-country

information

It is our responsibility to report on

whether the country‑by‑country

information has been properly

prepared in accordance with the

relevant requirements of the Capital

Requirements (Country‑by‑Country

Reporting) Regulations 2013.

Our objectives are to obtain reasonable

assurance about whether the country‑

by‑country information as a whole

is free from material misstatement,

whether due to fraud or error, and to

issue an auditors’ report that includes

Independent auditors’ report

to the directors of Yorkshire Building Society

our opinion. Reasonable assurance is

a high level of assurance, but is not a

guarantee that an audit conducted in

accordance with ISAs (UK) will always

detect a material misstatement when

it exists. Misstatements can arise from

fraud or error and are considered

material if, individually or in the

aggregate, they could reasonably be

expected to influence the economic

decisions of users taken on the basis

of this country‑by‑country information.

Irregularities, including fraud, are

instances of non‑compliance with laws

and regulations. We design procedures

in line with our responsibilities,

outlined above, to detect material

misstatements in respect of

irregularities, including fraud. The

extent to which our procedures are

capable of detecting irregularities,

including fraud, is detailed below.

Based on our understanding of the

company/industry, we identified that

the principal risks of non‑compliance

with laws and regulations related to

breaches of UK regulatory principles,

such as those governed by the

Prudential Regulation Authority, and

we considered the extent to which

non‑compliance might have a material

effect on the country‑by‑country

information. We also considered

those laws and regulations that have

a direct impact on the country‑by‑

country information such as applicable

tax legislation and the Capital

Requirements (Country‑by‑Country

Reporting) Regulations 2013. We

evaluated management’s incentives

and opportunities for fraudulent

manipulation of the country‑by‑

country information (including the

risk of override of controls), and

determined that the principal risks

were related to determined that

the principal risks were related to

posting manual journal entries to

manipulate financial performance

and the application of management

bias in the assumptions underpinning

significant accounting estimates. Audit

procedures performed included:

•

Enquiries of management,

those charged with governance

and the Group’s in‑house legal

counsel throughout the year,

including consideration of

known or suspected instances of

non‑compliance with laws and

regulations;

•

Assessment of matters reported

on the Group’s whistleblowing

helpline and the results of

management’s investigation of

such matters;

•

Review of internal audit reports

throughout the year, in so far

as these related to the financial

statements;

•

Review of correspondence with,

and reports to, the PRA and FCA;

•

Incorporation of an element of

unpredictability in our testing

through altering the nature, timing

and/or extent of work performed;

•

Challenging estimates and

judgements made by management

in forming significant accounting

estimates in particular those

relevant to the key audit matters

below; and

•

Identifying and testing any higher

risk manual journal entries.

There are inherent limitations in the

audit procedures described above.

We are less likely to become aware of

instances of non‑compliance with laws

and regulations that are not closely

related to events and transactions

reflected in the country‑by‑country

information. Also, the risk of not

detecting a material misstatement

due to fraud is higher than the risk

of not detecting one resulting from

error, as fraud may involve deliberate

concealment by, for example, forgery

or intentional misrepresentations, or

through collusion.

A further description of our

responsibilities for the audit of the

country‑by‑country information is

located on the FRC’s website at:

www.frc.org.uk/

auditorsresponsibilities.

This description forms part of our

auditors’ report.

Use of this report

This report, including the opinion, has

been prepared for and only for the

company’s directors in accordance with

the Capital Requirements (Country‑by‑

Country Reporting) Regulations 2013

and for no other purpose. We do not, in

giving this opinion, accept or assume

responsibility for any other purpose or

to any other person to whom this report

is shown or into whose hands it may

come, save where expressly agreed by

our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants and Statutory

Auditors

Leeds

28 February 2024

238 | Other Information 239

The following glossary defines terminology used within the Annual Report and Accounts:

Additional Tier 1 (AT1) capital Capital that meets certain criteria set out in CRD IV. In particular, the criteria require that upon

the occurrence of a trigger event, the AT1 capital instrument converts to a form of Common

Equity Tier 1 capital or the principal is written down on a permanent basis.

Arrears Amounts unpaid at their contractual date. A customer is in arrears when they fall behind in

meeting their obligations to pay their mortgage.

Buy-to-let (BTL) mortgages Lending on property that is rented out to individuals.

Capital Requirements Directive (CRD) &

Capital Requirements Regulation

European legislation that defines the regulatory capital framework in the UK. The latest

legislation – the Capital Requirements Regulation (CRR) and the Capital Requirements Directive

(CRD) (together commonly referred to as CRD IV) came into effect from 1 January 2014.

Collateral (for loans and advances to

customers)

Security (property) pledged for the repayment of a loan. Collateral is valued as the lower of the

value of the property or the outstanding loan amount.

Commercial lending Secured loans to a commercial borrower.

Common Equity Tier 1 (CET1) capital The highest quality regulatory capital resources, comprising retained earnings less regulatory

adjustments, as defined under CRD IV. Equivalent to Core Tier 1 defined under previous CRD

legislation.

Contractual maturity The final payment date of a loan or financial instrument, at which all the outstanding loan and

interest is repayable.

Council of Mortgage Lenders (CML) A not‑for‑profit organisation and trade association for the mortgage lending industry.

Covered bonds A type of wholesale funding backed by cash flows from mortgages that are segregated from the

issuer’s other assets to be solely for the benefit of the holders of the covered bonds.

Credit Valuation Adjustment (CVA) The risk of financial loss arising from a failure of a customer or counterparty to settle their

financial and contractual obligations as they fall due.

These are adjustments applied to the fair values of derivatives to reflect the creditworthiness of

the counterparty.

Cross currency interest rate swap An arrangement in which two parties exchange equivalent principal amounts of different

currencies at inception and subsequently exchange interest payments on the principal amounts.

At the maturity of the swap, the principal amounts are re‑exchanged at the original rates.

Currency risk The exposure to risk from assets and liabilities denominated in currencies other than Sterling.

Debt securities in issue Transferable certificates of indebtedness including certificates of deposits and fixed and floating

rate notes.

Debit Valuation Adjustment (DVA) These are adjustments applied to the fair values of derivatives to reflect the entity’s own credit

risk.

Defined Benefit Obligation The present value of expected future benefit payments resulting from past service of employees

in the defined benefit pension plan.

Derivative financial instruments Contracts or agreements whose value is derived from one or more underlying prices, rates or

indices inherent in the contract or agreement, such as interest rates, exchange rates or stock

market indices. Examples of derivatives include interest rate swaps, forward rate agreements and

futures.

Effective interest rate The method used to calculate the amortised cost of financial instruments and to recognise

interest receivable or payable over the relevant period. The effective interest rate is the rate that

exactly discounts estimated cash flows (excluding credit losses) to zero, through the expected

life of the instrument.

Encumbered assets Assets on the balance sheet which are pledged in order to secure, collateralise or credit‑enhance

a financial transaction from which they cannot be freely withdrawn.

Glossary

Expected credit losses An estimate of the potential losses on current exposures due to potential defaults.

Exposure The maximum loss that a financial institution might suffer if a borrower or counterparty fails to

meet its obligations to the Group.

Exposure at default (EAD) An estimation of the amount of exposure that will be outstanding at the time of default.

Fair value The price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date in the principal or, in its

absence, the most advantageous market to which the Group has access at that date.

Financial Conduct Authority (FCA) The UK conduct regulator which is responsible for regulation of conduct in retail, as well as

wholesale, financial markets and the infrastructure that supports those markets. The FCA’s

objective is to protect consumers, promote competition and enhance market integrity.

Financial Ombudsman Service (FOS) An independent service which provides a service for settling disputes between financial services

providers and their customers.

Forbearance The Group grants concessions to assist borrowers who experience difficulties in meeting their

obligations to pay their mortgage. Examples of forbearance tools are described in note 31.

Free capital The aggregate of gross capital and collective impairment provision less property, plant and

equipment, intangible assets and investment properties.

Gross capital The aggregate of general reserve, hedging reserve, available for sale reserve, subordinated

liabilities and subscribed capital.

Impaired loans Loans which have been assessed and there is evidence to suggest a measurable decrease in the

present value of cash flows expected from the loans that have occurred after initial recognition

of the asset, but before the balance sheet date.

Internal Liquidity Adequacy Assessment

Process (ILAAP)

The Group's internal assessment of the levels of liquidity that need to be held by the Society to

meet its regulatory liquidity requirements.

Interest rate swap An arrangement under which two counterparties agree to exchange periodic interest payments

based on a predetermined notional principal amount.

Internal Capital Adequacy Assessment

Process (ICAAP)

The Group's internal assessment of the levels of capital that need to be held by the Society to

meet its regulatory capital requirements.

International Financial Reporting Standards

(IFRS)

International Financial Reporting Standards issued by the International Accounting Standards

Board (IASB).

Level 1 High Quality Liquid Assets (HQLA) Assets which can be easily and immediately converted into cash at little or no loss of value.

Liquidity Coverage Ratio (LCR) A liquidity metric which aims to ensure that a firm maintains an adequate level of liquidity to

meet its needs for a 30 calendar day time horizon under a severe stress scenario.

LIBOR (London Interbank Offered Rate) A benchmark interest rate which banks can borrow funds from other banks in the London

interbank market. Due to the IBOR reform this has been phased out during 2021, with the

exception of USD LIBOR that will be phased out by cessation date of June 2023.

Liquid assets The total of cash in hand and balances with the Bank of England, loans and advances to credit

institutions, debt securities and other liquid assets.

Liquidity risk The risk that the Group does not hold sufficient liquidity, in terms of quantity and quality, to

meet its liabilities as they fall due.

Loan-to-value (LTV) A ratio showing outstanding loan balance as a percentage of the value of the security.

Loss given default (LGD) An estimate of the difference between exposure at default (EAD) and the net amount of the

expected recovery expressed as a percentage of EAD.

Loss given possession The loss that is expected to crystallise when a repossessed property is sold.

240 | Other Information 241

Management expenses The aggregate of administrative expenses, depreciation and amortisation.

Market Risk The risk that the value of, or income derived from, the Group’s assets and liabilities changes

unfavourably due to movements in interest rates or foreign currency rates.

Mean total assets The amount produced by halving the aggregate of total assets at the beginning and end of the

financial year.

Medium-term notes (MTN) Corporate notes continuously offered by a company to investors through a dealer. Investors can

choose from differing maturities.

Member A person who has a share account or a mortgage loan with the Society.

Minimum Requirement for Eligible Liabilities

(MREL)

The minimum requirements a financial institution must hold to meet the loss absorption and

recapitalisation components if an institution were to fail.

Net interest income The difference between the interest received on assets and the interest paid on liabilities.

Net interest margin The ratio of net interest income as a percentage of mean total assets.

Operational risk The risk of direct and indirect loss resulting from inadequate or failed internal processes, people

and systems or from external events.

Other income The income received from selling non‑mortgage and savings products (e.g. home and contents

insurance, investment products and other insurances).

PRA Remuneration Code Guidance provided by the PRA on directors’ remuneration.

Probability of default (PD) An estimate of the probability that a borrower will default on their credit obligations.

Probability of possession The likelihood of an account moving into possession. This is used when calculating loan loss

provisions.

Prudential Regulation Authority (PRA) The UK prudential regulator, which is a part of the Bank of England and alongside the FCA has

responsibility for the oversight of building societies, banks and insurers. The PRA’s objective is to

promote the safety and soundness of regulated firms.

Repossessions Property taken into ownership by the Society as a result of the borrower’s failure to make

contractual loan repayments.

Residential Mortgage Backed Securities

(RMBS)

An asset backed security that represents a claim on the cash flows from residential mortgage

loans through a process known as securitisation.

Risk appetite The level of risk that the Group is willing to take (or not take) in order to safeguard the interests

of members whilst achieving business objectives.

Risk weighted assets A regulatory measure that adjusts the value of assets to reflect their level of risk when

calculating capital requirements.

Securitisation A process by which a group of assets, usually loans, are aggregated into a pool which is used

to back the issuance of debt securities in issue. A firm transfers these assets to a special

purpose vehicle which then issues securities backed by the assets. The Group has established

securitisation structures as part of its funding activities and uses residential mortgages as the

asset pool.

Shares Money deposited by members in a retail savings account with the Society and held as a liability

in the balance sheet.

Shares and borrowings The total of shares, amounts owed to credit institutions, amounts owed to other customers and

debt securities in issue.

SONIA (Sterling Overnight Interbank

Average)

An index that tracks actual market overnight funding rates calculated as a weighted average

overnight deposit rate for each business day.

Subordinated liabilities Tier 2 capital that is subordinated to the claims of all depositors, creditors and members holding

shares in the Society (other than holders of PIBS).

Term Funding Scheme with additional

incentives for small and medium sized

entities (TFSME)

A scheme launched by the Bank of England designed to boost lending to households and

businesses by providing term funding to banks and building societies participating in the

scheme at rates close to Bank Rate.

Tier 1 (T1) capital The sum total of Common Equity Tier 1 and Additional Tier 1 capital.

Tier 1 capital ratio The ratio of Tier 1 capital to risk weighted assets.

Tier 2 (T2) capital A measure of regulatory capital that includes subordinated liabilities and provisions for

collective impairment, less regulatory adjustments.

Total capital The total capital resources, including retained earnings, PIBS and subordinated liabilities, less

regulatory adjustments.

Total capital ratio The ratio of total capital to risk weighted assets.

UK Corporate Governance Code The UK code on corporate governance, published by the Financial Reporting Council in October

2012 which sets out standards of good practice in relation to Board leadership and effectiveness,

accountability and remuneration. Reporting in relation to these accounts is based on the version

of the Code published in July 2018 (with the most recent Code published in January 2024

beginning to apply from accounting years after 1 January 2025).

Value at Risk (VaR) A risk management tool which evaluates the potential losses that may be incurred as a result

of movements in market conditions over a specified holding period and to a given level of

confidence.

Watch list The watch list is used by the commercial lending team to flag those loans where there are

circumstances which could impact on the quality and safety of the loan.

Wholesale funding The funding that is available between banks and other financial or commercial institutions.

Examples of wholesale funding include covered bonds, deposits and government guarantees.

Glossary (continued)

242 | Other Information 243

The following glossary defines Alternative Performance Measures (APM) used within the Annual Report and Accounts:

APM Calculation of Measure Reconciling items to statutory measure Definition and purpose

Income Statement measures

Core operating profit Profit before tax adjusted

for one‑off items.

A full reconciliation between profit

before tax as shown in the income

statement and core operating profit is

shown in the

Strategic Report

Core operating profit excludes items such as fair

value volatility and material one‑time charges that

do not reflect the Group’s day‑to‑day activities. Our

Board considers core operating profit to be a more

appropriate measure of the underlying performance

of the business and this is how financial performance

is reported to and assessed by the Board.

Cost to core income

ratio

Management expenses

as a percentage of core

income.

Management expenses = administrative

expenses plus depreciation and

amortisation per the income statement.

Core income = total income less gains/

(losses) from financial instruments held

at fair value per the income statement.

This is a measure of the Group’s costs in relation to

its income excluding fair value volatility. This is used

by the Group to monitor and manage its overall cost

position and understand how efficient the Group is at

generating income on an underlying basis.

Cost to income ratio Management expenses

as a percentage of total

income.

Management expenses = administrative

expenses plus depreciation and

amortisation per the income statement.

Total income as per the income

statement.

This is an industry‑standard measure of the Group’s

costs in relation to its income. This is used by

the Group to monitor and manage its overall cost

position and understand how efficient the Group is at

generating income.

Management

expense ratio

Management expenses

(the aggregate of

administrative expenses,

depreciation and

amortisation) as a

percentage of mean total

assets.

Administrative expenses and

depreciation and amortisation

(management expenses) are as shown

in the income statements. Mean total

assets are calculated by taking the

average of the value of the opening

balance for the year and the value of

the closing balance, as shown in the

Statements of Financial Position.

This is an industry‑standard ratio of the Group’s costs

as a proportion of its mean assets during the year,

and is used to measure how efficient the Group is at

maintaining its asset base.

Net interest margin Net interest income as a

percentage of mean total

assets.

Net interest income is as shown in the

income statements. Mean total assets

are calculated by taking the average of

the value of the opening balance for

the year and the value of the closing

balance, as shown in the Statements of

Financial Position.

This is an industry‑standard measure of the

relationship between net interest income (the

difference between the interest received on assets

and the interest paid on liabilities) and assets. This is

a key measure used by the Board to monitor how the

Group manages income from its assets and interest

paid on funding.

Balance Sheet items

Asset growth Total assets at the end of

the year less total assets

at the start of the year.

Total assets are as shown in the

Statements of Financial Position.

Movement in total asset over the period.

Average savings rate

differential

None Not applicable Calculates the average savings rate applied to the

Group’s savings accounts during the period versus

the average UK savings interest rates for the rest

of the market, based on savings stock from CACI’s

Current Account and Savings Database (CSDB), based

on stock value. This is used to assess how much the

Group is paying out in interest in comparison to

peers.

Gross lending None Not applicable The total value of mortgage loans advanced by

the Group in the period, including loans for house

purchase, further advances, re‑mortgages etc.

Lending to first time

buyers

None Not applicable The total value of mortgage loans advanced by the

Group in the period to first time home buyers. This

measure displays how the Group is helping people

overcome the challenge of buying their first property.

APM Calculation of Measure Reconciling items to statutory measure Definition and purpose

Liquidity ratio Cash in hand and balances

with the Bank of England,

loans and advances to

credit institutions and

debt securities as a

percentage of shares and

borrowings.

Cash in hand, balances with the Bank of

England, loans and advances to credit

institutions, debt securities, and shares

are as shown in the Statements of

Financial Position. Borrowings comprise

amounts owed to credit institutions,

other deposits and debt securities in

issue, also as shown in the Statements

of Financial Position.

The liquidity ratio measures those assets available

to meet requests by savers to withdraw their money,

to fund mortgage advances and to fund general

business activities. It expresses cash and assets easily

converted into cash as a percentage of the Group’s

liabilities to investors.

Loan to deposit ratio Loans and advances to

customers as a percentage

of shares and other retail

customer deposits.

Not applicable This is an industry‑standard measure of the

relationship between Loans and advances to

customers and retail customer deposits.

Mortgages funded

by retail savings and

retained profits

Shares and total reserves

as a percentage of

loans and advances to

customers.

Shares, total reserves and loans and

advances to customers are as shown in

the Statements of Financial Position.

The retail savings and reserves to mortgages ratio

shows the extent to which the Group is dependent on

financing from the wholesale markets.

Mortgage balance

growth

Loans and advances to

customers at the end of

the year less loans and

advances to customers at

the start of the year.

Loans and advances to customers are

as shown in the Statements of Financial

Position.

Movement in mortgage balances including

impairment provisions and fair value accounting

adjustments over the period.

Net lending Loans and advances to

customers at the end of

the year less loans and

advances to customers

at the start of the year,

excluding movements in

provisions and accounting

adjustments detailed in

note 12.

Mortgage growth less movements in

provisions and accounting adjustments

detailed in note 12.

Net lending represents gross lending less repayment

of principal and redemptions and is a key measure to

monitor the Group’s overall lending performance. This

measures our effectiveness in both new mortgage

lending and in retaining borrowers.

Number of accounts

more than three

months in arrears

None Not applicable The number of mortgage accounts where the amount

of arrears is greater than three monthly payments, or

the account is in possession, as a proportion of the

total number of mortgage accounts.

The industry average for mortgage arrears is

measured as the number of accounts more than

three months in arrears (including possessions). We

produce this KPI to assess how our level of mortgage

arrears compares to the market.

Percentage of

outstanding retail

mortgage balances

in arrears by three

months or more

None Not applicable The percentage of mortgage account balances where

the amount of arrears is equal to or greater than three

monthly payments, or the account is in possession, as

a proportion of the entire mortgage book.

This measures the overall quality of our mortgage

book.

Retail Savings

balance growth

Shares at the end of the

year less shares at the

start of the year.

Shares are as shown in the Statements

of Financial Position.

Movement in overall savings balances over the

period, including capitalised interest and accounting

adjustments.

Savings inflow/

outflow

None Not applicable Displays the cash in/out of savings accounts held,

excluding capitalised interest. The Group uses this to

monitor its main funding source throughout the year.

Share of the gross

mortgage market

None Not applicable Displays the Group’s total gross lending as a

percentage of the gross lending in the UK housing

market by banks, building societies and other lenders

as measured by the Council of Mortgage Lenders

(CML), which represents 97% of the UK mortgage

market. From 1 July 2017 the Council of Mortgage

Lenders integrated into a new trade association, UK

Finance.

Glossary (continued)

244 | Other Information 245

APM Calculation of Measure Reconciling items to statutory measure Definition and purpose

Regulatory Measures

Common Equity Tier

1 (CET1) capital ratio

None Common equity tier 1 capital ratio

is defined as a percentage of risk

weighted assets.

This ratio represents the relationship between the

strongest form of capital (primarily accumulated profits

that have built up over time) and assets, weighted by

the level of risk they carry. It is a regulatory‑defined

ratio whose purpose is to ensure that institutions are

able to absorb unexpected losses. It is a key measure

of financial sustainability.

Leverage ratio Reserves as a percentage

of total assets.

Leverage ratio measures the Society’s

Tier 1 capital as a percentage of total

assets adjusted for certain off‑balance

sheet exposures. The CRR leverage

ratio is defined by the EU’s Capital

Requirements Regulation, while the

UK leverage ratio modifies this ratio to

exclude Central Bank reserves.

The leverage ratio is also a regulatory‑defined ratio

used to assess capital adequacy, but removes the

risk‑weighting element of assets. It is therefore a

more simplified measure of financial sustainability.

Total capital ratio None Total capital ratio is defined as a

percentage of risk weighted assets.

This measure is used to assess the total amount

of capital the Group retains compared to its risk

weighted assets, hence it includes externally

issued capital. It is also defined by the regulatory

authorities.

Non-financial measures

Absenteeism None Not applicable This indicator is for measuring the average

absenteeism rate, as a % of the total working days.

This KPI can be an indicator of colleague motivation

as a high absence rate may indicate poor motivation

and engagement.

Colleague

engagement score

None Not applicable Our annual colleague engagement survey is used

to calculate an engagement score which helps to

understand our people’s needs and what will lead to

their enjoyment and commitment in work.

Net Promoter Score

(NPS)

None Not applicable NPS is a measure of how willing customers are to

recommend the Group to others. It measures the

difference between the percentage of ‘promoters’

(those willing to recommend the Group to others)

and ‘detractors’ (those unwilling to recommend

the Group). The score can range from ‑100 if all

customers are ‘detractors’ to +100 if all customers are

‘promoters’. The Group uses this as a key measure of

customer satisfaction with our products and service.

Peakon survey result None Not applicable This is an external benchmarking exercise conducted

by Peakon, involving an employee survey and

a culture audit. The Group uses this measure to

understand how successful we are at delivering our

vision as a workplace where our people can give

their best and thrive. This is monitored annually and

reported to the Board as a colleague engagement

measure.

Forward-looking statements

This document contains certain forward‑looking statements, which are made in good faith based on the information

available up to the time of the approval of this report. Such statements should be treated with caution due to the inherent

uncertainties, including both economic and business risk factors, underlying any such forward‑looking information.

Glossary (continued)

246 | Other Information 247

References to ‘YBS Group’ or ‘Yorkshire Group’ refer to Yorkshire Building Society, the trading names under which it operates (Barnsley Building Society, Barnsley, Chelsea Building Society,

Chelsea, Norwich & Peterborough Building Society, N&P and Egg) and its subsidiary companies.

Accord Mortgages Limited is authorised and regulated by the Financial Conduct Authority. Accord Mortgages Limited is entered in the Financial Services Register under registration number

305936. Buy to Let mortgages for business purposes are not regulated by the Financial Conduct Authority. Accord Mortgages Limited is registered in England No: 02139881. Registered

Office: Yorkshire Drive, Bradford BD5 8LJ. Accord Mortgages is a registered Trade Mark of Accord Mortgages Limited.

YBS Share Plans is part of Yorkshire Building Society. Yorkshire Building Society provides share plan trustee and administration services, including deposit taking, all of which are subject to

English law, with deposit taking being regulated by the Financial Conduct Authority. The provision of share plan trustee and administration services is not regulated by the Financial Conduct

Authority. We are not responsible for share plan deposits held by local savings carriers outside the UK. Head Office: YBS Share Plans, Yorkshire House, Yorkshire Drive, Bradford, BD5 8LJ.

ybsshareplans.co.uk

Yorkshire Building Society Charitable Foundation is a Registered Charity (No: 1069082) and a Registered Company (No: 03545437). It is an independent registered charity governed by a

board of trustees and its results are not included in the annual report and accounts of Yorkshire Building Society. Registered Office: Yorkshire House, Yorkshire Drive, Bradford, BD5 8LJ.

Age UK is a charitable company limited by guarantee and registered in England and Wales (registered charity number 1128267). Registered address: 7th Floor, One America Square, 17

Crosswall, London EC3N 2LB.

FareShare is a registered charity in England & Wales (1100051) and Scotland (SC052672).

Citizens Advice is an operating name of The National Association of Citizens Advice Bureaux. Registered charity number 279057.

Yorkshire Building Society is a member of the Building Societies Association and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and

the Prudential Regulation Authority. Yorkshire Building Society is entered in the Financial Services Register and its registration number is 106085. Head Office: Yorkshire House, Yorkshire

Drive, Bradford, BD5 8LJ.

ybs.co.uk

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