WXD0EHQRPI7HKN3I5T572024-01-012024-12-31iso4217:GBPWXD0EHQRPI7HKN3I5T572023-01-012023-12-31WXD0EHQRPI7HKN3I5T572024-12-31WXD0EHQRPI7HKN3I5T572023-12-31WXD0EHQRPI7HKN3I5T572023-12-31ybs:GeneralReserveMemberWXD0EHQRPI7HKN3I5T572023-12-31ifrs-full:ReserveOfCashFlowHedgesMemberWXD0EHQRPI7HKN3I5T572023-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberWXD0EHQRPI7HKN3I5T572024-01-012024-12-31ybs:GeneralReserveMemberWXD0EHQRPI7HKN3I5T572024-01-012024-12-31ifrs-full:ReserveOfCashFlowHedgesMemberWXD0EHQRPI7HKN3I5T572024-01-012024-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberWXD0EHQRPI7HKN3I5T572024-12-31ybs:GeneralReserveMemberWXD0EHQRPI7HKN3I5T572024-12-31ifrs-full:ReserveOfCashFlowHedgesMemberWXD0EHQRPI7HKN3I5T572024-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberWXD0EHQRPI7HKN3I5T572023-01-01ybs:GeneralReserveMemberWXD0EHQRPI7HKN3I5T572023-01-01ifrs-full:ReserveOfCashFlowHedgesMemberWXD0EHQRPI7HKN3I5T572023-01-01ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberWXD0EHQRPI7HKN3I5T572023-01-01WXD0EHQRPI7HKN3I5T572023-01-012023-12-31ybs:GeneralReserveMemberWXD0EHQRPI7HKN3I5T572023-01-012023-12-31ifrs-full:ReserveOfCashFlowHedgesMemberWXD0EHQRPI7HKN3I5T572023-01-012023-12-31ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMemberWXD0EHQRPI7HKN3I5T572022-12-31WXD0EHQRPI7HKN3I5T57bus:Director12024-01-012024-12-31WXD0EHQRPI7HKN3I5T57bus:Chairmanbus:Consolidated2024-01-012024-12-31WXD0EHQRPI7HKN3I5T57bus:Consolidated2024-12-31WXD0EHQRPI7HKN3I5T57bus:Consolidated2024-01-012024-12-31WXD0EHQRPI7HKN3I5T57bus:Audited2024-01-012024-12-31WXD0EHQRPI7HKN3I5T57bus:FullIFRS2024-01-012024-12-31xbrli:pureWXD0EHQRPI7HKN3I5T57bus:FullAccounts2024-01-012024-12-31WXD0EHQRPI7HKN3I5T57bus:Chairman2024-01-012024-12-31
proud of
our past.
here for
your future.
Side-by-side with our borrowers
and savers for over 160 years.
Yorkshire Building Society
Annual Report and Accounts 2024
Contents
Introduction 2
Performance at a glance 2
Welcome from the Chair of the Board 4
Introduction from the Chief Executive 6
Strategic report 8
The external environment 8
Our purpose and strategy 11
Our ESG priorities 19
Engaging with our stakeholders 37
Our financial review 40
Risk overview 47
Governance 49
Our Board and Executive team 49
Corporate Governance report 57
Board Governance and Nominations
Committee report
74
Audit Committee report 79
Risk Management report 88
Directors’ Remuneration report 100
Directors’ report 114
Independent auditors’ report to the
members of Yorkshire Building Society
120
Financial statements 129
Income statements 130
Statements of comprehensive income 131
Balance sheets 132
Statements of changes in members’ interest
and equity
133
Statements of cash flows 135
Notes to the financial statements 136
Other information 217
Annual business statement 218
Country-by-country report 220
Glossary 223
Gross
lending
Growth in
mortgage balances6
Gross mortgage
lending market
share5
New residential
mortgages provided
£
9.7
bn
£9.2bn in 2023
6.2
%
3.6% in 2023
3.8
%
3.9% in 2023
41,000
44,000 in 2023
Place to call home
1 SeetheGlossarydefinitionsforalternativeperformancemeasures.
2 TheLCRmetricquotedrepresentsthetotalfortheGroupasat31December2024.TheDecember2023comparativehasbeenupdatedsoastobeonalike-for-likebasis.
3 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2024
–December2024.
4 NetPromoterScoreandNPSaretrademarksofBain&Company,Inc.,FredReichheldandSatmetrixSystems,Inc.DataperiodJanuary–December2024,basedon22,873
responses.FollowingachangeinthecalculationmethodologyforGroupNPS,thecomparativeperiodhasbeenrestatedonaconsistentbasis.
5 BasedonBankofEnglandtotalindustrygrosslending.DataperiodJanuary–December2024.
6 Growthinmortgagebalancesexcludesfairvalueadjustmentsforhedgedriskonloansand
advancestocustomers.
7 Source:YBSanalysisofBSAHouseholdsavings.DataperiodJanuary–October2024.
8 Source:CACI’sCurrentAccountandSavingsDatabase(CSDB),Stock.DataperiodJanuary
2024–December2024.
9 Thechangeincarbonfootprintcompares2024to2023emissionscategorieswhere
dataisavailableforbothyearsandiscalculatedonamarket-basis.YBShaschanged
itsapproachtoreportingemissionsfromgasbackedbyrenewablecertificatesto
alignwithcurrentbestpractice,meaningmarket-basedemissionsfromgasusage
arenolongerreportedaszero.Thecarbonfootprinthasincreasedduetoan
increaseinemissionsfromemployeecommutingandworkingfromhome.Thisis
duetoanincreaseinthetotalnumberofcolleaguesemployedbytheSociety.
10 LandfilldiversionraterepresentstheproportionofwastegeneratedbytheSociety
thatisrecycledorrecoveredforenergy.Thedecreaseisduetoareductioninthe
totalvolumeofwastegeneratedbytheSociety.
Financial wellbeing
Savings accounts
opened
Savings balance
market share7
Growth in shares
balances
Average savings
rate paid8
537,000
693,000 in 2023
2.5
%
2.3% in 2023
10.6
%
12.0% in 2023
4.21
%
over 2024
3.43% over 2023
Carbon
footprint9
+4%
-6% in 2023
Climate-related disclosures
Statutory profit
before tax
Cost to core
income ratio1
Leverage
ratio
Average savings rate
differential3
Core operating
profit1
Common Equity
Tier 1 ratio
Liquidity coverage
ratio2
Net Promoter
Score (NPS
®
)4
£
383.7
m
£450.3m in 2023
51
%
42% in 2023
6.6
%
6.2% in 2023
0.90
pp
higher than market average
1.01pp higher in 2023
£
345.7
m
£449.9m in 2023
18.1
%
16.7% in 2023
202.7%
158.2% in 2023
+64
+63 in 2023
Member value
performance
at a glance
Landfill
diversion10
97.0
%
of waste
98.7% in 2023
3
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
2
Itismypleasureto
welcomeyoutothe
2024AnnualReportand
AccountsforYorkshire
BuildingSociety.
Asamember-ownedorganisation,theBoard
playsanimportantroleinensuringthatthe
Societyisoperatedwithyourinterestsatthe
heartofourdecisionmaking.
Inour160thyear,itwasaprivilegetosucceedasthe
Society’slatestChair.Iamfollowingtherichheritageof
formerBoardChairsandDirectorswhohavebeengood
stewardsfortheSocietyoveritslonghistory.
Iamdelightedtobepartofanorganisationthatcontinues
tofulfilourpurposetoprovidegenuinehelpforthereal-life
issuesourmembersface.
A strong sense of purpose providing
value for members and customers
Onthe5thofSeptember,wecommemoratedthe160th
anniversaryofYorkshireBuildingSociety(YBS).For160
yearsourpurposehasbeentodeliverforourmembersand
makearealdifference.
YorkshireBuildingSocietywasfoundedin1864in
Huddersfieldbyadentist,ashoemakerandaplumber.At
theendofourfirstyear,£2,143wassavedwithusandwe
lent£3,953tosixborrowingmembers.In2024,ourassets
reached£65.5billion,oursavingsbalancesgrewto£52.0
billionandweprovided41,000newresidentialmortgages.
Althoughalothaschangedintermsofthesizeandscaleof
ouractivities,inthewaysthatmatterweremainthesame.
Theprinciplesonwhichwewerefoundedremainastrue
todayastheydidin1864.
We’reheretohelppeoplehaveaplacetocallhome,
supportfinancialwellbeinganddelivervalueforour
members.Inrecentyears,withtheeconomicenvironment
bringingmorechallengesformany,ourpurposehasbeen
evenmorerelevanttomembersandcustomers.
Welcome from
the Chair of
the Board
AsIgottoknowtheSociety,it
becameclearthisisanorganisation
withmembersandcustomersatits
heart.Duringtheyear,Ihavevisited
ourcallcentresandbranchesand
spokentocustomers,members
andcolleagues,aswellasbrokers
whohelppeopleaccessour
mortgageproducts.
OnevisitwastoourTenbybranch
whereImetRozOak,acustomer
consultantwhohasworkedatthe
branchsinceitopened45yearsago.
Asshesays,it’sthepeople,both
colleaguesandcustomers,thatmake
Tenbysospecial.Thisappliestoall
ofourbranchesandagenciesupand
downthecountry.Ourbranchesand
agenciesplayanimportantroleat
theheartofthelocalcommunitiesin
whichweoperate.
OnbehalfoftheBoard,Iwantto
thankourdedicatedcolleagueswho
embodytheSociety’svaluesevery
day.Ihaveseenfirst-handhowmuch
theycareaboutservingourmembers
andcustomers.
Whileweknowmanycustomerslike
tovisitabranch,orspeaktouson
thephone,wearealsomakingsure
digitaloptionsareavailableforallour
products.Forexample,during2024,
youmayhavenoticedthatitismuch
easiertoopenandfundaccountsvia
ourmobileappandtoengagewith
usonline.Wewantyoutobeableto
contactusinthewayyouchoose.
A commitment
to our customers
and communities
Ourcommitmenttohavingapositive
impactgoesbeyondourcustomers,
productsandservices,andintoour
charitypartnerships.
ThisyearIhavespenttimewith
FareShare,apartnerwhoamplifies
ourpurposethroughtheirwork
onimprovinglifeskills,resilience
andemployability.Iamveryproud
oftheworktheyaredoingwith
oursupport.TheSocietyisraising
£1milliontoenableFareShare
tosupport2,500peoplethrough
theirBuildingSkillsfortheFuture
employabilityprogramme.
Inaddition,IampleasedthatCitizens
Adviceadvisorsarelocatedin40%of
ourbranchesandhavehelped5,600
peoplein2024,whotogethercould
receiveover£3.1millioninadditional
incomeiftheyactonadvice.
A focus on strength and
sustainability
TheBoardplaysanimportantrole
inrepresentingmembers’interests
andoverseeingtheSociety’ssuccess.
Asyouwouldexpect,theSociety’s
financialstrengthandresilienceis
ourpriority.Wetakeseriouslythe
trustmembersplaceinusastheir
savingsand/ormortgageprovider,
andourresponsibilitytooperateas
asustainable,resilientorganisation.
InthiscontextIampleasedto
reportthattheSocietyhasaCore
EquityTierOneratioof18.1%anda
LiquidityCoverageRatioof202.7%.
AlongwiththeSociety’scontinued
strongprofitabilitythesearekey
indicatorsoftheongoingfinancial
strength,stabilityandsustainability
ofyourSociety.
Lastyear,inOurStrategy,the
managementteamsetoutsome
clearambitionsfortheSocietyover
thenextfiveyears,andanother
keyresponsibilityfortheBoard
isoverseeingtheirdelivery.Our
ambitiousplanswillseeusbuild
onourcustomer-centredculture
andprovideourservicesthrough
morechannels.Wewillcontinue
tooffergoodvaluesavingsand
mortgageproducts,supportingour
loyalmembersandcustomersand
peoplewhomaystruggletoget
supportelsewhere.
Our Board
During2024JohnHeaps,theformer
Chair,steppeddownfromthe
BoardinApril,followedbyAlison
Hutchinson,theViceChairandSenior
IndependentDirector,inDecember,
bothhavingservedovernineyears
ontheBoard.JennelleTillingalso
steppeddownasaNon-Executive
Directorattheendoftheyear.We
thankeachofthemfortheirvalued
contributionstotheSociety.
Duringtheyearwealsowelcomed
PeterBoleandJanetPopeasNon-
ExecutiveDirectorstotheBoard.
Tom RangerjoinedtheBoardasour
ChiefFinancialOfficer,followingthe
retirementofAlasdairLenman.
DavidMorris,ourformerChief
CommercialOfficeralsostepped
downfromtheBoard.Wethankboth
AlasdairandDavidforalltheyhave
doneovertheyears.
A solid performance and
an ambitious future
TheSociety’sperformancein2024is
inlinewithexpectation,strengthens
ourfinancialpositionandwillsupport
ourgrowthaspirations.Asmentioned,
allourcapitalandliquidityratios
remainveryhealthy.
Althougheventsbeyondourcontrol
havethepotentialtoimpactour
abilitytodeliveronourpurpose,we
monitortheexternalenvironment
closelyandtakeactionwhen
necessary.OneoftheprioritiesofOur
Strategyistocontinuetoinvestinour
riskmanagementcapabilitiesandthe
controlenvironmentaswegrow.
Uncertainty,bothnationallyand
internationally,hasbeenafeature
oftheexternalenvironmentover
thelastfewyears.Thereductionin
interestrates,asinflationfell,toward
theendof2024easedpressures
slightly.However,thereisstilltherisk
ofexternalshocksthatcouldimpact
howconsumersfeelabouttheir
financialresilienceandwellbeing.
TheSociety’smortgageandsavings
balanceshavegrownstronglyin
thepastfewyearsandweintend
tocontinueonasimilartrajectory.
Aswegrow,wewillbecomemore
efficientandbeabletoreach,and
support,morepeople.
Wewillcontinuetolookfornewways
toprovidevaluetoourmembers,
alongsideabove-marketaverage
savingsratesandpurpose-led
mortgageandsavingsproducts.We
willchampionourmembers’long-
terminterestsand,aswehavein
2024withour
HomeImprovements
report
11-whichidentifiedarangeof
solutionstoenablemorepeopleto
buyahome–useourvoicetohelp
shapeafuturewherepeoplefindit
easiertoachievetheirgoals.
Iverymuchlookforwardtoworking
alongsideourBoard,andour
dedicatedcolleagues,todelivereven
greatervalueforourmembersand
customersformanyyearstocome.
Annemarie Durbin
ChairoftheBoard
Annemarie Durbin
11 https://www.ybs.co.uk/w/home-improvements-report-2024
5
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
4
It is my pleasure to
present the 2024
Annual Report and
Accounts for Yorkshire
Building Society.
For over 160 years, the Society
has focused on providing Real
Help with Real Life, for generation
after generation, and this purpose
continues to guide our activity today.
As a building society, we’re
different. All the profits we make
are reinvested for the benefit of our
members, into our organisation, the
products and services we offer, and
our communities.
Introduction
from the Chief
Executive
Here to support our members and customers
Since we last reported, there are welcome signs that the UK economy
is starting to recover. Interest rates have fallen from their peak and
inflation is stabilising, but we know that many of our members and
customers still face financial challenges.
Our research shows owning a home is becoming harder for people
to achieve12 a and, it is estimated that more than 18% of UK adults
have less than £100 in savings13.
This all reinforces the importance of the support we provide for our
members and customers. We are committed to finding new ways to
respond directly to evolving customer needs.
In 2024, we offered several innovative products that really make a
difference, helping people find a place to call home and build their
financial wellbeing.
Our £5k Deposit Mortgage helped more than 350 people buy their
first home. It has been heartwarming to hear from customers what a
difference this has made.
Recognising the importance of saving regularly, we created a £50
Regular Saving account and supported 17,600 people to keep saving
or even more importantly establish a savings habit. Our research
shows that having a regular savings habit, no matter how small,
improves life satisfaction14. The benefits of saving are far more
than financial.
We will continue to innovate with unique solutions that provide
Real Help with Real Life.
The first year of
Our Strategy
Our Strategy is all about providing
Real Help with Real Life. Our
continued growth allows us to help
more people and provide even more
support each year.
In 2024, we focused on simplifying
processes, investing in digital
capabilities, and further enhancing
our governance and controls. We have
made good progress but we know
there is still more to do. Investment
in these critical areas is key to our
long-term success.
A common root cause of customer
complaints are manual processes
which are complex for our colleagues
to navigate. A priority in 2025 is to
improve our processes and make
things easier and more efficient for
members, customers, and colleagues.
The Society’s overall Net Promoter
Score (NPS), which is a measure
of how willing our customers and
brokers are to recommend us to
others, continues to be strong,
+64 in 2024 (2023: +63). Within
the feedback, the great customer
service provided by colleagues in
our branches and contact centres is
one of the most common themes,
alongside continual improvement in
our digital services. I am pleased with
the progress we have made, powered
by our brilliant people. Our diverse
workforce, enabled by our ambitious
culture, will drive the success of our
customer-focused strategy. I am
grateful to all our colleagues for their
hard work and commitment.
Strong links to
our communities
As a building society, we’ve been
making a difference to the people
in our communities for 160 years.
It’s what we were created to do. Our
community programme is focused on
supporting people with their financial
wellbeing, and there is a lot to be
proud of in 2024.
Our partnership with FareShare has
helped 657 people to build skills for
the future to support them to find
work, with 66 participants already
securing paid employment.
Our
Money Minds
sessions have
delivered financial education
to 20,000 people across
various age ranges.
Our award-winning partnership
with Citizens Advice provided 5,600
people with free, impartial advice,
covering anything from financial
to legal issues, to help them find
a way forward.
Minimising our impact
We remain committed to supporting
the UK’s transition to a low carbon
economy by minimising our climate-
related impact. We have taken
action to improve our financed and
operational emissions reporting
however we have seen an increase
in our overall operational carbon
footprint due to an increase in our
colleague numbers.
We are working on reducing our
impact and a particular highlight
for me in 2024 was starting the
installation of solar panels at our
head office car park. We expect this
will reduce our operational carbon
emissions by over 100 tonnes a
year which will help us reach our
target of Net Zero across our own
operations by 2035.
We also recognise the importance
of supporting our members and
customers to reduce their carbon
footprint. In 2024 we were pleased
to launch our partnership with
Snugg15 who offer tools and solutions
designed to help homeowners
reduce their energy consumption and
carbon footprint.
Our performance
remains solid
In our 160th year, our solid
performance continued. We achieved
strong levels of growth in both
mortgages and savings. Mortgage
balances increased by £2.9 billion and
retail savings balances by £5.2 billion.
We continue to help people find
a place to call home and are
pleased to have increased our gross
and net lending.
The successful growth in our retail
savings business over recent years
has not only supported our mortgage
growth but also allowed us to
accelerate our repayment of TFSME16
funding reducing the refinancing
risk on our balance sheet. We repaid
the final portion in Q3 2024, well in
advance of its maturity next year.
The stable, and more recently falling,
interest rate environment led to an
anticipated reduction in net interest
margin, to 1.16% (2023: 1.31%).
On an underlying basis, operating
costs have increased by 10.2%
compared to last year. This reflects
increased investment in our change
programme, the impact of inflationary
pressures, and the costs associated
with our growing operational scale.
We also continue to invest in our
branch network for the benefit of
our members and are committed to
ensuring our colleagues are fairly
rewarded. As we deliver Our Strategy,
it is important that we invest in the
capabilities we will need, but also
maintain tight control over our costs
to enable continued investment in
transformation.
Our profits help further strengthen
our reserves and support our growth
ambitions. Our strong capital and
liquidity position allows us to
continue investing to make a real
difference for our members and
customers. Core operating profit
for 2024 was £345.7 million, a
decrease of £104.2 million on the
previous year, and statutory profit
before tax was £383.7 million (2023:
£450.3 million).
Delivering for our
members, together
This year, I welcomed new
colleagues to my Executive team
(see Our Board and Executive
team on page 49).
I am confident that the combined
skills and experience of the whole
team will benefit the Society greatly.
We are united behind Our Strategy
and committed to our enduring
purpose of providing Real Help
with Real Life.
Everything we achieved in 2024,
combined with our ambitious plans,
positions us well to transform the
Society to deliver even more value
for our members and customers for
generations to come.
Thank you for your continued support.
Susan Allen, OBE
Chief Executive
Susan Allen, OBE
12 Based on data collected with Opinium Research – surveying 1,000 UK First Time Buyers (looking to purchase in the next 3 Years). Completed 18 July 2024 - 26 July 2024
13 Based on data collected with Opinium Research – surveying 2,000 UK adults nationally representative of the UK population. Completed 3 – 12 May 2024.
14 Understanding the role of savings in promoting positive wellbeing” – a research report from the Personal Finance Research Centre (PFRC), University of Bristol
commissioned by the Building Societies Association and sponsored by Yorkshire Building Society, July 2024.
15 https://www.ybs.co.uk/building-a-greener-society
16 TFSME, Term Funding Scheme with additional incentives for Small- and Medium-sized Enterprises.
7
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
6
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
TheeconomiclandscapeintheUK
hasshownsignsofstabilisingin
2024.Pressuresonenergycostsand
globalsupplychainissuesarenotas
strongasinpreviousyears,andthe
economyhasreturnedtomodest
growth.TherateofConsumerPrice
Index(CPI)inflationhasreduced
fromtheelevatedlevelswitnessed
in2022and2023andfellbelow
theGovernment’s2.0%targetin
Q32024,althoughinQ42024CPI
increasedbackabove2%to2.5%
inDecember2024.Incontrasttothe
significantratehikesin2022and
2023,theMonetaryPolicyCommittee
(MPC)electedtomaintainBankRate
at5.25%formostoftheyear.As
inflationarypressureseased,theMPC
reducedtheBankRateby0.25%in
bothAugustandNovember,closing
theyearat4.75%.
TheChancelloroftheExchequer
deliveredthebudgetinOctober
2024whichfocusedonaligningday-
to-dayspendingwithGovernment
revenue,allowingforborrowingtobe
spentonfuturecapitalinvestment.
Taxincreasesof£40billionwere
announcedtosupportincreased
spendingonpublicservices,which
willbeachievedmainlythrough
higherpropensitytoremainwith
theirexistinglenderlikelydueto
affordabilityconstraints,resultingin
areducedrangeofoptionsforthose
reachingtheendoftheirfixedrate
term.Thesizeoftheremortgage
marketreducedasaresultofthis
dynamic.Inaddition,thehistorical
popularityoffive-yearfixedrate
mortgagesmeansthatthereremainsa
segmentofthemarketwhichhasyet
torepriceontohigherrateproducts,
giventhesharpincreaseincustomer
ratessinceearly2022.
August2024sawthefirstBank
RatecutasUKinflationreached
theUKGovernmenttargetof2%,
whichactedasastimulustomarket
activity.Annualhousepricegrowth
of3.4%contrastedwiththeprior
yearwhichsawafallinprices17.As
wemoveinto2025,withfurther
reductionsbeingmadetoBankRate
appearinglikely,therearereasons
forcautiousoptimismintermsof
buyeractivityandoverallmarketsize.
Thismaybeparticularlyevidentin
thefirstquarteroftheyeardueto
therecentlyannouncedstampduty
changeswhichwilllikelytemporarily
elevatelendingvolumesinQ12025
aspurchasersareincentivisedto
completetransactionsaheadofthe
deadlineinApril2025.
The UK savings market
WithBankRatehavingremained
stablethroughoutthefirsthalf
of2024,thedynamicsofthe
retailsavingsmarkethaveshifted
comparedtothepreviousyear.A
stablebenchmarkrateledtoan
observedeasingincompetitive
intensity,withmarket-leadingrates
graduallydecreasingsincetheir
peakinlate2023.Thecurrent
marketexpectationisthatBank
Ratewillbereducedfurtherover
2025asinflationarypressures
continuetoease.
Whilstcost-of-livingpressures
continuetoweighonthepersonal
financesofmany,thesavings
markethascontinuedtogrow,with
inflationarypressureshavingeased
andrealincomeshavingincreased
slightly.Theconvergencebetween
theinterestratesofferedforfixed-
termandinstantaccessproducts
anincreaseinemployernational
insurancecontributions.Thebudget
hasthepotentialtoimpactthefuture
pathofinflation,althoughcurrently
thereisalackofconsensusas
towhatextent.
Overall,thebroadconsensusisthat
theUKeconomicenvironmentwill
berelativelybenigninthenearterm
andsteadygrowthinGrossDomestic
Product(GDP)isexpected.TheUK
labourmarkethasshowedsignsof
cooling,thoughearningsgrowthis
stillanticipatedtoexceedinflation.
Themarketexpectationisthatthe
BankofEnglandwillcontinueto
reducetheBankRategradually
throughout2025.
Thebroaderoutlookremains
uncertain,thepotentialimpacts
onthepoliticalandeconomic
landscapeoftheresultoftheUS
electionandthepoliciesofthenew
LabourGovernmentintheUK,will
continuetobemonitored.Broader
considerationsincludetheongoing
conflictinUkraine,theresolution
ofthesituationintheMiddleEast
andtheimpactofpotentialUStariff
increasesoninternationaltrade.
Thesedevelopmentscanhave
significantimpactsoninflationary
pressures,supplychainsandthe
cybersecuritythreatenvironment.
mayhavebeguntoshiftcustomer
preferencesasthepremiumavailable
forlockingfundsawayhasbeen
erodedovertime.
ForIndividualSavingsAccounts(ISAs),
therewereimportantdevelopments
throughout2024.Newguidance
andmandatorychangestotax-free
savingsbroughtseveralbenefitsto
consumers.Althoughthefirstpart
oftheISAseasonsawlowerflows
comparedtothepreviousyear,
customeractivitypickeduprapidly
withthestartofthe2024/25taxyear.
Theheightenedlevelsofactivitycan
beattributedtoincreasedawareness
ofthetaximplicationsofsavingina
higherrateenvironment,withmany
optingtotop-uptheirISAsearlyto
avoidtaxableearnings.
Forsavingsproviders,theupcoming
maturitiesoftheBankofEngland’s
fundingscheme,TFSME,couldplaya
roleinthedegreeofcompetitiveness
intheretailsavingsmarket.Large
repaymentsweremadebybanksand
buildingsocietiesacross2024.
Overall,thesavingsmarketin2024
remainedcompetitivethoughless
intenselythan2023.Customer
behaviourandthecompetitive
environmentlookingforwardare
likelytobeheavilyinfluencedbythe
speedandscaleofanticipatedBank
Ratedecreasesandtheactionstaken
bysavingsprovidersinresponse.
Regulatory overview
Relevant updates from the
regulatory environment:
Advice Guidance
Boundary review
AtYBS,webelieveimproving
financialwellbeingisineveryone’s
interestsandthatiswhywewere
proudtohaveplayedaleadingpart
inUKSavingsWeekinSeptember
2024andsponsoringareportinto
understandingtheroleofsavingsin
promotingpositivewellbeing.
TheFinancialConductAuthority
(FCA)andHMTreasury(HMT)are
jointlycarryingoutaholisticreview
oftheboundarybetweenfinancial
adviceandguidance.TheReview
seekstobuildaclearer‘adviceand
guidanceframework’byexamining
The UK mortgages
market
Theyearopenedwithadegreeof
optimismreturningtothemarket,
followingamoresubduedlast
coupleofyears,whichhadbeen
characterisedbyhighlevelsof
inflationandrisinginterestrates
creatingaffordabilitybarriers
forexistingandprospective
borrowersalike.
Animprovementinheadlineinflation
ratesbegantodriveanincreased
expectationofinterestratecuts,with
swapcostsreducingandcustomer
ratesbeginningtofollowthepath
downwards.Activitypickedup
markedlyatthebeginningoftheyear
inboththeresidentialandbuyto
letmarkets,althoughthisreversed
somewhatastheyearprogressed.In
thesecondquarter,customerrates
increasedagaininlinewithswap
costsasfinancialmarketsreduced
theirexpectationsaroundthespeed
offutureBankRatecuts.
Theprevailinghighinterestrate
environmentremainedabarrier
forprospectivebuyersalongwith
existinghomeownersseekingto
remortgage.Homeownerswithan
existingmortgagedemonstrateda
theregulatoryboundarybetween
regulatedfinancialadviceandother
formsofsupport,therebypotentially
closingtheexistingso-called‘advice
gap’underthecurrentregime.
Byconductingthereview,theFCA
andHMTintendtoprovidemore
claritytofirmstoensuretheycan
provideconsumerswithbetter
supportwhilstmanagingtherisk
ofinadvertentlystrayingintothe
regulated‘holisticadvice’orpersonal
recommendationspace.Thereviewis
akeyopportunitytorethinktheway
thatadviceisprovidedtofinancial
servicesconsumers.WhilstYBSdoes
notofferinvestmentadvice,the
review’sintentionisforconsumers
tohavetimelyandaffordablehelp
whenmakingimportantfinancial
decisionsinordertomakethemost
oftheirmoney;thiscouldpromptan
increaseduseofsavingsaccounts.
FCA Multi-Firm Review
of the treatment of
customers in vulnerable
circumstances
TheFCAareconductingareview
intohowfirmsareactingto
understandandrespondtothe
needsofcustomersinvulnerable
circumstances.Thereviewwilllook
atfirms’understandingofconsumer
needs,theskillsandcapabilityof
staff,productandservicedesign,
communications,andcustomer
service,andwhetherthesesupport
thefairtreatmentofcustomers
invulnerablecircumstances.
TheFCAwillalsolookatthe
outcomesconsumersinvulnerable
circumstancesreceiveandwhether
theyareasgoodastheoutcomesof
otherconsumers.
TheFCAwillconductconsumer
researchandgatherinformationfrom
firms,includingYBS,tomakethe
assessment.Thereviewfollowsthe
introductionoftheConsumerDuty
in2023,whichsetshighstandards
ofconsumerprotectionacross
financialservicesandrequiresfirms
toputtheircustomers'needsfirst.
Thefindingsfromtherevieware
expectedin2025.
the external
environment
17 https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/privaterentandhousepricesuk/december2024
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
98
Rental Rights Bill
TheRenters'RightsBillwilltransformtheexperienceof
privaterenting,byendingSection21'nofault'evictions.
TheBillwillgiverentersgreatersecurityandstabilityso
theycanstayintheirhomesforlongerandavoidtherisk
ofhomelessness.TheBillwillalsoempowertenantsto
challengerentincreasesandwillapplyaDecentHomes
Standardtotheprivaterentedsectortoensurehomes
aresafe,secureandhazardfree.However,newclearand
expandedpossessiongroundswillbeintroducedsothat
landlordscanreclaimtheirpropertieswhentheyneedto.
TheexpectationisthattheBillwillbecomelawduringthe
firsthalfof2025.YBSismonitoringtheprogressoftheBill
duetotheimpactonourBuyToLetMortgagecustomers.
Basel 3.1
TheBasel3.1frameworkwasdevelopedbytheBasel
CommitteeonBankingSupervisioninthewakeofthe
2007-2009GlobalFinancialCrisistostrengthenthe
regulation,supervision,andriskmanagementofBanks.
Severaloftheproposedreformswillhaveasignificant
impactonbanksandbuildingsocieties,includingaffecting
theamountofcapitaltheyarerequiredtohold.On17
January2025,itwasannouncedbytheBankofEngland,
inconsultationwithHMTreasury,thattheimplementation
ofthestandardswillbedelayeduntil1January2027.The
delayistoallowformoreclaritytoemergeabouttheplans
foritsimplementationintheUS.
Separately,thePrudentialRegulationAuthority(PRA)
revieweditsapproachtoBankingsupervisionandare
consideringwhatchangestheycanmaketosupport
theGovernment’scallforeconomicgrowth,whilst
maintainingtheirprimaryobjectiveofpromotingsafetyand
soundnessoffirms.
Payment Contract Termination Changes
InJuly2023,theUKGovernmentcommittedtochanging
therequirementsonpaymentservicesproviderssuch
asbanksandbuildingsocieties,whenclosingcustomer
accounts.HMTreasurysubsequentlyissuedapolicy
statementupdatingtheGovernment’splanstoreformthe
rulesrelatingtotheclosureofcustomeraccounts.The
proposedchangesfollowthepublicationofanin-depth
investigationbytheFCAwhichhighlightedissuesof
potentialpolitical‘de-banking’i.e.closingabankaccount
duetoacustomer’spoliticalbeliefsorviews.Theplanned
reformswillincreasethenoticeperiodthatfirmsmustgive
tocustomerswhenclosingtheiraccountfromthecurrent
periodoftwomonthsto90days.Alongsidetheincreased
noticeperiod,firmswillalsoberequiredtogivecustomers
asufficientlydetailedandspecificexplanationsothatthey
canunderstandwhytheiraccounthasbeenclosed.The
passingofthefinalregulationsisstillawaitedasitwas
delayedbythegeneralelection.Whilstitissometimes
necessarytoclosecustomeraccounts,YBSdoesnottake
thesedecisionslightlyandtheyarecertainlynotbasedona
customers’politicalbeliefsorviews.
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the
primarysourceoffundingfor
themortgageswelend,enabling
customerstosecureaproperty
that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.
Our purpose
and strategy
StrategicReport>The External Environment
TheRenters'Rights
Billwilltransformthe
experienceofprivate
renting,byending
Section21'nofault'
evictions.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
1110
How our
business is
funded
•
Savingsbalancesfrommembers
andcustomersareheld,afterbeing
depositedthroughourbranchesor
online(c.81%).
•
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%).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.74%)
andprovidingcommercialmortgages
throughourspecialisedlendingchannel
(c.3%).
•
TheSocietyholdscashandTreasury
Investments(c.23%).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.
•
Ourlendingstrategyistobalanceour
lendingacrosssegmentswhichservea
largeproportionofthemarket,aswell
asspecificallytargetingsegmentsofthe
marketwhereborrowersarecurrently
underservedorfacedifficultiesfinding
aplacetocallhome.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.
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theskilled
workforceweneedtoachievetheSociety’s
goals.
•
Toremaincompetitive,disciplinedcost
managementisessential.Overthe
longtermweaimtoimproveourcost
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.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 purpose
Yorkshire Building Society exists
to provide our members and
customers with Real Help with Real
Life. This purpose is supported by
our priorities:
•
Delivering Member Value
•
Providing a Place to Call Home
•
Improving Financial Wellbeing
We do this by Helping First
Homes Happen, Standing with our
Savers, and providing financial
education, whilst ensuring our
mutual ethos always delivers value
for our members.
Having these core elements directs
our focus to the areas we can make
the greatest difference.
Delivering member value
Ourmembersareourpriority,anditis
ourdutytoensurethatthedecisions
wemakesetuptherightfoundations
forthefuturetoallowsustainable
valuetobereturnedyearafteryear.
Wecontinuetoreceiveexternal
recognitionfortheproductsand
servicesthatweprovide,andin
2024wewerenamedaWhich?
RecommendedProviderforsavings;
anindependentaccreditationbased
onmarketresearch,detailedcustomer
surveysandarobustanalysisofour
policies.Weareamongstthehighest
scoringUKfinancialservicesbrands
onTrustpilot,andouroverallNet
PromoterScorehasagainimproved
yearonyear,from+63to+64.
Aswetransformourbusinessto
providetheproductsandservices
ourcustomersandmembersneed,
itisessentialthatweprotectthe
strengthofourfinancialposition.The
decisionswemakestrikeacareful
balancebetweentheconsiderations
ofrewardingourmembersandour
overallorganisationalsustainability.
Our business model
Wealwaysstrivetoimprovethe
standardsofourservice,andwe
recognisethatthereareopportunities
toimprove.We,therefore,actively
seekoutfeedbackonhowwecan
continuetochangeforthebetter.
Providing a place to
call home
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purchasetheirfirstproperty
andnexttimebuyers.TheSociety
alsolendstothebuy-to-letsector,
allowinglandlordstoproviderental
accommodation.
Wehavemanagedtoincreaseour
grosslendingin2024,including
providing41,000newresidential
mortgages(2023:44,000).Through
ourcommon-senselendingdecisions
andtargetedproductdevelopment,
westrivetosupporthomeownersand
buyersfacingchallengesgettingonto,
ormovingup,thepropertyladder.
InsupportofHelpingFirstHomes
Happen,welaunchedourinnovative
£5kDepositMortgagewhichallows
first-timeborrowerstobeconsidered
withadepositof£5,000(uptoaloan
valueof99%).Atthesametime,we
launchedournewFirstHomeSaver–
asavingsaccounttohelpborrowers
buildthedeposittheyneed.These
twoproductsworkhand-in-handto
helppeoplemoveclosertoachieving
theirambitionstoownahome.
Wealsointroducedadigital
home-buyingeducationtoolfor
first-timebuyersthroughournew
partnershipwithDoshi.Thisfree
onlinelearningprogrammesupports
easyunderstandingofthemortgage
processthroughengaging,bite-size
guidanceandaimstobuildthe
knowledgeofthosetakingthatfirst
stepontothepropertyladder.
Asidefromthenewmortgage
propositionsthatwelaunchedin
2024,wewidenedourlending
criteriafornewbuildstohelpmore
borrowerssecuretheirfirsthome.
OurambitionsunderOurPlaceto
CallHomepriorityaremetthrough
thedevelopmentofinnovative
products,informedbyresearch,
whichhighlightsthemostsignificant
challengesthatfirst-timebuyersface.
OurHomeTruthsreport,published
in2023,highlightedthatfirst-time
buyersarewaitinglongerthaneverto
buytheirownhome,oftenbecause
oftheneedtoraiseincreasingly
largerdeposits.Thecurrenteconomic
climateandcost-of-livingchallenges
meanthatmany,particularlythose
unabletoaccessfinancialsupport
fromfamily,havehadtopostpone
theirpropertybuyingaspirations.
Housepricesandhigherinterest
rateshavenotonlymadeborrowing
moreexpensivebuthavecreated
additionalbarriersforthosesavingfor
theirfirsthome.Thepurposeofour
£5kDepositMortgageistoprovide
targetedsupportforthischallenge
andithasalreadybroughthome-
buyingwithinthereachofmore
people,someofwhommayhave
previouslyfeltitwasunattainable.
In2024,wecommissionedastudyto
generateawarenessthatanincreasing
numberofprospectivefirst-time
buyersareconsideringabandoning
theirhomeownershipaspirations,
despitethepotentialsignificant
long-termfinancialbenefits.We
hopethatfindingsfromourresearch
willinfluenceindustry-widereform
andsupportborrowerswhohave
historicallybeenunderserved,andwe
welcometheUKGovernment’spledge
tobuild1.5millionnewhomesover
theirtimeinoffice.
StrategicReport>Our Purpose and Strategy
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
1312
2. Create joyful
experiences
Thesecondpillarseesusaspire
to 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.
Thisincludesanumberofchanges
in2024tosignificantlyimprove
theexperiencesofcustomers.We
completelyredesignedthesavings
sectionofourwebsite,basedona
surveyofmorethan600people,
improvingthereadabilityofthe
contenttomakeitmucheasierfor
customerstounderstandthechoices
availabletothem.
Werecognisetheimportanceof
providingchannelchoiceandhave
movedfurthertowardourcustomers
beingabletodoeverythingthey
needontheirmobile,suchasadding
theabilitytodownloadandsave
statementsonourapp,streamlining
onlineaccountopeningandmaking
iteasierandclearertomakeone-off
depositstosavingsaccounts.Wehave
alsointroducedtheoptionforexisting
customerstosubmittheirIDdigitally
whenopeninganewaccount.
Wehavemetmoremortgage
borrowersservicingneedsby
extendinglivechattoYBSmembers
andaddingchatbottopicsthatdo
notneedidentityverification,such
asredemptions,payments,and
onlineaccessrequests.Wehavealso
successfullydeliveredourVideo
MortgageAdvicepilot,providingus
withanopportunitytounderstand
howwecouldpotentiallyusevideo
customercallsinotherareasofthe
business,tocreateevenmorejoyful
experiencesforourcustomers.
3. Cultivate an
ambitious culture
Thethirdpillarensureswemakea
realefforttopromoteanambitious
culturewithintheSocietythat
enablesustomovetogetheratpace.
Ourfourexistingbehaviourssitwithin
thispillar,toguideouractionsona
day-to-daybasis.Theyremainakey
componentofhowwewillunlockour
culturalpotential.
4. Building a future-ready
Society
Lastly,thefourthpillarfocuses
onbuilding an organisation that
is ready for what is to come.This
includesimprovingourabilityto
scaleaswellassimplifysomeofour
processesandproceduresthatwe
havenotyetoptimised.Italsoseesus
focusingonimprovingthematurity
ofourgovernance,risk,andcontrols
procedures.Ourrefreshedstrategy
willseeusgrowevenfurtherand
ensuringthatwearewellpreparedfor
thefutureandevenbetteratserving
thegenerationstocomewillsupport
ourgrowthambitions.
In2024thispillarfocusedongrowth-
readyfoundations.Wereshapedhow
wemanagechangetohelpusdeliver
atpace,improvedourprocessesso
colleaguesarebetterabletosolve
customerproblemsandmadegood
progressonsomeofourlarge-scale
projects,suchasthereplacementof
ourTreasuryManagementSystem,to
betterservetheneedsoftheSociety
inthefuture.
Weknowittakestimetobuild
whatweareaimingto,butwealso
wanttopreservewhatmakesour
existingculturesospecial.Beyond
ourexistingbehaviours,wehave
introducedsomesignificantchanges
toenableustomakefurtherprogress.
Toensurewehavetheskillswe
need,nowandinthefuture,we
launchednew‘FutureSkills’learning
onRelationshipManagement,
Adaptability,DataAnalyticsand
Insights,andDigitalLiteracy.We
alsoonboarded36newapprentices,
createdCEOAwardstorecognise
outstandingrolemodelsofour
Behavioursandhavehelped
colleaguestomakereal
connectionstoOurStrategywith
theintroductionofnewevents
andcommunications.
Improving financial wellbeing
Asabuildingsociety,werecognisetherole
weplayinhelpingpeoplebuildfinancial
wellbeingbothnowandforthefuture.We
continuetodevelopnewwaystosupportthe
financialhealthofourcustomers,whether
througheducation,raisingawareness
ordeliveringcommunityprogrammes
thatgiveback.
In2024,webecameoneofthefirstsavings
providerstosignuptotheMoneyand
PensionsService(MaPS)SavingsCharter,
publiclydemonstratingourongoing
commitmenttohelpingpeoplebuild
greaterfinancialresilienceandwellbeing
throughsaving.
Wehaveensuredmorecustomers’needs
aremet,howevertheychoosetointeract
withusbygivingourfrontlinecolleaguesall
theyneedtoprovideessentialsupport.We
alsointroducedonlinebookingforsavings
appointmentstomakeiteveneasierforour
customerstoopenanaccountwithus.
WecontinuetoStandwithSavers.In2024,
wepaid0.90percentagepointsmorethanthe
restofthemarketonoursavingsaccounts;
equivalentto£430.2madditionalinterest
foroursavers18.Wealsolauncheda£50
regularsavertohelpfirst-timesaversand
encouragegoodsavingshabits.Thiswaspart
ofouractivityandcommitmenttoUKSavings
WeekinSeptember,whichactivelypromotes
thebenefitsofregularsavingandbuilding
financialresilience.
Wedevelopedacampaignthatsoughtto
highlightthefactthattheUKhasover£360
billionsittingincurrentaccountsorlowpaying
savingsaccountsearning1%orless.Thiswork
aimedtoencouragepeopletoswitchaccounts
tomaketheirmoneyworkharder.
Theneedforfinancialliteracyhasbecome
moreimportantthanever,andestablishing
strongfoundationsisintegraltothe
developmentofhealthysavingshabits.We
publishedareportdrawingattentiontothe
savingsandspendingchallengesfacedby
youngpeople,andwhyitisimportantthey
receiveaqualityfinancialeducation.
Webelievethatinvestinginourcommunities
iskeyinimprovingfinancialwellbeing.
More information on our community
activities can be found in the Our ESG
priorities section.
Our strategy
Todeliverourpurpose,in2023welaunchedanewstrategywithfour
distinctpillarsthatwillsetusupforgreatersuccessby2030.They
reflecttheexternalenvironment,ourcurrentcapabilitiesandwhatwe
feelweneedtofocusontobettersupportbothourexistingmembers,
customersandcolleagues,andtoattractnewpeoplewecanhelpwith
theirsavingsandmortgageneeds.
1. Double reach and deepen our impact
Establishingthispillarhashelpedustosupportmorepeoplethrough
ourFinancialWellbeingandPlacetoCallHomepriorities,examplesof
whichcanbeseeninthePurposesectionabove.Theintroductionofnew
savingsandmortgageaccounts,combinedwithcampaignstoeducate,
andcommunityprogrammesthathaveapositiveimpactoncommunities,
supportedthispillartoextendourreachanddeepenourimpact.
Asaresult,weareproudtohavebeenabletoincreasethesavings
balanceswelookafterby£5.2billion(vs.2023)andincreasedour
lendingby£2.9billion.
Akeyfocusofthispillarfor2025relatestoborrowers.Weareaimingto
furtherdeepenrelationswithourmortgagecustomers,byimprovingour
customerretentionofferings,demonstratingthebenefitsofremaininga
customerwithusandfindingnewwaystorewardborrowerloyalty.
We care about people
We say it straight
We reach for better
We make it happen
Double reach
and deepen
impact
Create
joyful
experiences
Cultivate an
ambitious
culture
Build a
future ready
Society
StrategicReport>Our Purpose and Strategy
18 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2024
–December2024.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
1514
In2024theBoardapprovedanewBoard-level
EnvironmentalandSocialPurposeCommittee,effective
fromthe1January2025
ChairedbynewlyappointedboardmemberJanetPope,theCommitteewilloverseethe
Society’ssustainabilityagenda,strengtheningourESGgovernanceandthesustainability
expertiseoftheBoard.
Our ESG
Priorities
WealsoappointedanewLead
StrategyandSustainabilityOfficer,
FionaCannonOBE,whowillleada
StrategyandSustainabilityfunction,
bringingtogetherOurStrategy,
EnvironmentalSustainabilityand
SocialPurposeteams.Theexisting
executive-levelEnvironmental,
SocialandGovernancecommittee
alsoexpandeditsmembershipto
includeallExComembers.Following
thesechanges,we’llbetakingthe
opportunitytoreviewandenhance
ourcurrentapproachtoESG.
In2024,wecontinuedtodeliver
againstourexistingpriorities.
Workingalongsidetwoofourpurpose
prioritiesofprovidingaPlaceto
CallHomeandImprovingFinancial
Wellbeing,wehaveafurthertwo
responsiblebusinesspriorities:
InvestinginourPeopleandBuilding
aGreenerSociety.Collectively,
thesefourpriorities,underpinned
byOperatingResponsibly,form
ourEnvironmental,Socialand
Governance(ESG)strategy.The
prioritiesrepresentthetopicsof
themostmaterialrelevancetothe
Societyandourstakeholders.
Place to Call Home and
Financial Wellbeing
– supporting our
Communities
Ourcommunityprogrammeis
designedtosupportpeopletowards
greaterFinancialWellbeing,inturn
helpingthemhaveaPlacetoCall
Home.Thissectionexpandsuponthe
rolethatourcommunityinvestment
playsinfulfillingthiselementofour
purpose.Theprogrammecoversthose
infinancialhardship,supporting
peopleintoemploymentand
upskillingallonfinancialeducation.
Ourcolleaguesplayanimportant
roleinthedeliveryofourcommunity
programme.In2024,35%of
colleaguesusedsomeoralloftheir
31hoursvolunteeringallowanceto
collectivelycontribute11,700hours
totheircommunities,up80%and
5,200hourson2023.
Financial hardship
Overthelastthreeyears,our
CitizensAdvicepartnershiphas
helped10,700peopleunlockover
£5.5millionpotentialadditional
incomethrough45ofourbranch
locations.WewontheGold‘Customer
ServiceImprovementAward’forour
partnershipatthe2024Collaboration
NetworkAwards.
TheSocietyfundstheYorkshire
BuildingSocietyCharitable
Foundationwhichisanindependent,
registeredcharitywithitsownBoard
ofTrustees19.TheFoundation’s
SmallChangeBigDifference
®
Fund
isfundedbySocietymembersand
customersoptingtodonatethe
annualpenceofinterestfromtheir
savingsaccountsortorounduptheir
mortgagepaymentstothenearest
poundonceayear.In2024,theFund
supportedmemberandcolleague
nominatedcharitiesfocusedon
alleviatingpovertyorsavinglives,
donating£385,000to388charities
(2023:£285,000,257charities).The
Foundationsurpassedamilestone
£10millionindonationssince1999.
Employability
In2024,weraised£364,000
towardsFareShare’sBuildingSkills
fortheFutureprogramme,thanks
tocolleaguefundraising,member
donationsandacontributionfrom
theSociety.Allfundswillgotowards
supporting,preparingandequipping
peopleforemployment,with660
peoplealreadybenefittingfromthe
programmein7locationsduring
2024,with66goingontosecurefull
timeemployment.
Followinga£1millioninvestment
overthreeyearsfromtheSociety,
theYorkshireBuildingSociety
CharitableFoundationlaunchedthe
BuildingBradfordSkillsFundin2024
tosupportcharitiesinsomeofthe
city’smostdeprivedareastoaddress
specificskillsandemployment
challengesBradfordfaces.
During2024wescaledupour
supporttoyoungpeoplein
Bradford,establishinganewwork
immersionprogrammeinourre-
designedBradfordoffices.In2024
wesupported113pupilsandare
scalingthistosupport1,000year10
studentsin2025.
Wewerealsopleasedtoannounce
in2024thatwearechampioningthe
citybysupportingBradfordCityof
Culture2025.Wehopetousethis
platformtocelebratethecityand
helppeoplegrowtheirskillsand
careerswhilegivingthemconfidence
intheirfinances.
Financial education
Theneedforfinancialliteracyhas
becomemoreimportantthanever
andestablishingstrongfoundations
isintegraltothedevelopmentof
healthysavingshabits.Wepublished
areportdrawingattentiontothe
savingsandspendingchallenges
facedbyyoungpeopleandwhyit
isimportanttheyreceiveaquality
financialeducation.Wehavealso
contributedtotheGovernment’s
reviewoftheCurriculumand
Assessment,tocallforfinancial
educationtobemademandatoryin
primaryschoolsinEngland.
Ourfinancialeducationprogramme,
MoneyMinds,teacheschildren,young
peopleandadultsaboutmoney
andreached20,000people(2023:
16,000)withface-to-facesessions
in2024.We’vecontinuedtorefresh
ourmaterialsforadultstocoincide
withUKSavingsWeek,tohelppeople
tounderstandtheimportanceof
budgetingandourextendedsupport
toyoungpeoplewithouronline
MoneyMindsoffering,had2,500
downloadsin2024.Webelieve
investinginourcommunitiesiskeyto
improvingfinancialwellbeing.
More information on all
our community activities
can be found in our
upcoming ESG Report.
Investing in our People
Ourpeopleareourgreatestasset
inprovidingthebrilliantlevelof
servicevaluedbyourcustomersand
members.Itisvitallyimportanttous
thatallourcolleaguesfeelvalued,
listenedto,andfairlyrewardedfor
theircontributiontotheSociety.
Followinganinvestmentofover
£3millionintoYorkshireDrive,our
headofficeinBradford,weofficially
openedournewlyredesigned
internalspacesattheendofApril.
Thenewspacesnowboastadditional
collaboration,meetingandevent
spaces,aswellasaccessibility
improvementssuchasinstalling
accessiblecompliantdesks,lowering
refreshmentstations,andincreasing
thenumberofmulti-faith,ablution,
wellbeingandsocialfacilities
forcolleagues.
Colleague engagement
Itisimportantallourcolleagueshave
theopportunitytohavetheirvoice
heard.WeThereareanumberof
waysweengagewithandlistento
colleaguesatalllevelsoftheSociety.
Ouroverallcolleagueengagementis
measuredthroughanannualsurvey.
Thisallowsustobenchmarkagainst
otherfinancialorganisations,but,
moreimportantly,thecomments
receivedinformactionplanning
conversationsatbothalocal,and
Society-widelevel.
87%ofcolleaguescompletedthe
annualsurveyin2024andthe
Society’soverallengagementscore
was8.6(2023:8.6).Thismaintained
ourpositioninthetopquartile
forengagementamongstfinancial
organisations20.Lookingatcolleague
engagementthroughanemployeenet
promoterscore(eNPS)lens,wescored
65(2023:68),whichplacesusinthe
top5%offinancialorganisations.
Additionally,wehaveregular
engagementwithcolleaguesthrough
shortersurveys,andhostavarietyof
forums,events,masterclasses,team
discussionsandmoretomakesure
ourcolleagues’voicesareheard.This
includestwiceyearlyBoardlistening
sessionsandregularworkinglunches
and‘AskMeAnything’sessionswith
ourExecutiveCommittee.AllBoard
andCommitteepapersensurethey
includedetailsofhowcolleague
viewshavebeenconsideredtoinform
anyrecommendations,together
withanypotentialimplications
forcolleagues.
19 AlltrusteesareindependentlyappointedbytheYorkshireBuildingSocietyCharitableFoundation’sexistingboardwithexternaltrusteesservinganinitialtermof
3years.Thiscanthenbeextendedforasecondterm,withamaximumtenureof7years.Internaltrusteeshaveanunlimitedtermbutmustremainanemployeeof
YorkshireBuildingSocietywhileontheboard.TheirdetailscanbefoundontheFoundation’spageontheCharityCommissionwebsite. 20 BenchmarksourcedfromPeakonandonlyincludesfinancialorganisationsthatusetheirplatform.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
1716
Learning and development
Tomakeourorganisationassuccessfuland
futurereadyaswecanandtoensureweachieve
everythingweknowwearecapableofachieving
–forourcustomers,communities,andour
colleagues–weprideourselvesondeveloping
colleagues.WeencourageeveryoneintheSociety
tobeopentoongoinglearninganddevelopment,
andweenablecolleaguestogrowintheirroles
andseekprogression.
Weaimtoconnectourcolleagueswiththewide
varietyofopportunitieswehaveintheSociety,
andin202432%ofvacancieswerefilledwith
internalcandidates,with45%forhighergrade
roles(GradeDandabove).
In2024weprioritisedfocusonfourskills;
dataanalytics,digitalliteracy,relationship
managementandadaptability,andacrossallour
learningopportunitiespermanentcolleagues
spentanaverage62hourslearningintheyear
(2023:33hours).
Wealsosupported90colleaguestoactivelystudy
foranapprenticeship(including50onDataand
Digitalprogrammes,and10ontheSeniorLeader
master’spathway),continuedtopromoteour
mentoringschemewithPushfar,andlaunched
ourevolvedleadershipdevelopmentprogramme
LeadershipEssentialstofurtherembedourPeople
LeaderResponsibilities.
Prioritising health and wellbeing
Theimportanceofourcolleagues’wellbeingis
reflectedinourbenefitsoffering,whichincludes
discountedaccesstocriticalillnesscover,private
medicalinsurance,andhealthanddentalcash
plans,whichcanbepurchasedviamonthlysalary
deductionsovera12-monthperiod.
WehavealsomadeenhancementstoourFamily
Leavepolicytosupportcolleagues,suchas
introducingpaidcarers’leave.
Wecloselymonitorkeywellbeingmetrics,
includinglevelsofsicknessandabsenceto
identifytrendsandensurethatourcolleagues
haveaccesstotherightlevelofsupport.Our
colleaguesicknessratein2024was4.26%
(2023:4.23%).
Promoting Diversity, Equity and
Inclusion (DE&I)
Inclusive workplace
Weaimtobealeadingorganisationthatembraces
diversity,championsequityandcreatesan
inclusiveenvironmentwhereallindividuals
regardlessoftheirbackgroundoridentityfeel
valued,empoweredandsupported.
Wewanttoberepresentativeofthecommunitiesinwhichwe
liveandserve,withDE&Iambitionsthatsupportthisfroman
ethnicity,genderandsocio-economicperspective.Agreedbythe
ESGCommittee,ourDE&Istrategysupportstheseambitionsandis
monitoredthroughourDE&IForum,withJamesHeslip,ChiefAudit
OfficerasourExecutiveSponsorforDE&I.
Our Board Diversity Statement can be found in the Board
Governance and Nominations Committee report.
In2024weintroducedarefreshedrecruitmentprocessandbalanced
shortlists,mutualmentoringandcareershowcaseeventstosupport
colleaguedevelopment,aswellaslaunchedtheAccessibility
Passportwhichsupportsnewstartersandcolleagueswith
workplaceadjustments.
Ourfiveestablishedcolleaguenetworks(Accessibility,Ethnicity,
Parents&Carers,ProudandWomen’s)andtwogroups(Family
FoundationsandManKind),haveacombinedmembershipofover
760fromacrosstheSociety,providingasafeplacefortheirmembers
todiscussissuesthatdirectlyimpactthem.
Monitoring our DE&I progress
OurGenderPayGaphassteadilydeclinedsince2020andover
thelast12monthswe’vemaintainedthemeanpaygapat23.4%
(2023:23.4%)andseenaslightincreaseinourmedianpaygap
to24.7%(2023:23.8%).WhilstourGenderPayGapfor2024has
remainedrelativelystatic,wemaintainourcommitmenttohiring
andpromotingwomenintoourseniorroles.Womennowaccountfor
47%ofourseniorroles,achievingourWomeninFinancetargetof
50/50gendersplit(+/-5%).
AtYBSwehaveaflexibleworkingculture,withmanyofour
colleagueschoosingtoworkparttime,andthisisespeciallytrue
ofwomeninourbranchandcustomerserviceroles.We’reproudto
supportourcolleaguestoachievebalancebetweentheirworkand
personallivesandbecauseofthiswe’relikelytoalwayshavealarger
numberofwomenworkingparttimeinourfrontlineroles.We’re
committedtoreducingourgenderpaygapbutwerecognisethat
we’realwayslikelytohavesomedifferences.
In2024weretainedourplacewithintheTop30employersfor
WorkingFamilies,werere-accreditedDisabilityConfidentLeader
Level2andcontinuedourworkinconnectionwiththeRaceatWork
Chartercommitments.
Empowering high performing diverse talent
WearepleasedtobeamemberofProgressTogether,anot-for-profit
organisationworkingtoimprovesocialmobilityacrossfinancial
services.In2024,wewereoneoffourorganisationstopilota
developmentprogrammespecificallyaimedatleadersfromlower
socio-economicgrounds.
Participants,includingthreeofourcolleagues,startedaleadership
programmesupportedbyanexternalmentor,andwillhavethe
opportunitytocompleteasix-monthsecondmentatoneoftheother
organisationsthroughoutthe12-monthprogramme.
StrategicReport>Our ESG Priorities
Building a greener society
TheSocietyrecognisesthevitalrolethefinancialservicessectorplaysinsupportingthetransitiontoalowcarbon
economy.ThisreportdemonstratestheSociety’scommitmenttoeffectivelygovern,manage,andmonitortherisks
andopportunitiesarisingfromclimatechangeinlinewithitsobligationsunderthePrudentialRegulationAuthority’s
SupervisoryStatement3/19(SS3/19).ThereportstructurefollowstherequirementsoftheTaskforceforClimate-
relatedFinancialDisclosure(TCFD).
Additionally,thisreportprovidesinformationinlinewiththeSociety’sobligationsunder:
•
TheCompanies(Strategicreport)(Climate-relatedFinancialDisclosure)Regulations2022.
•
TheCompanies(Directors’report)(EnergyandCarbonreport)Regulations2018.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
1918
StrategicReport>Our ESG Priorities
YBS Board
Role: Ultimateaccountabilityoffinancialrisksforclimatechangeandassociatedresponsibilities.
TheBoarddelegatestothefollowingCommittees.
YBS Executive Committee
Role: DelegatesauthoritytoEnvironmental,Socialand
GovernanceCommittee.
Key 2024 activities: Investedincapacityinthe
EnvironmentalSustainabilityteam.
ReceivedclimatechangetrainingfromCambridgeInstitute
forSustainabilityLeadership.
Board Risk Committee (formerly Group Risk Committee)
Board-levelcommittee
Executive Risk Committee
Executive-levelcommittee
Role: Providesclimaterisk
oversightandsetsGroup
riskappetite.
Key 2024 activities:
Receivessix-monthlyformal
updatesonclimate-related
workandprogress.
Role: Managementofthe
governanceframeworkfor
climaterisk.
Key 2024 activities:
Approvedupdateto
EnvironmentandClimate
ChangeRiskPolicyand
receiveda‘deepdive’
sessiononclimate
changerisk.
Audit Committee
Board-levelcommittee
Asset and Liability Committee
Executive-levelcommittee
Role: Non-financial
disclosureinrelationto
environment,socialand
governanceagenda.
Key 2024 activities:
Approvedfirstpublication
offinancedemissions
fromresidentialmortgages
alongsideclimate
disclosures.
Approvedannual
ESGReport.
Role: Focusonfinancial
risksarisingfrom
climatechange.
Key 2024 activities:
Reviewedupdateson
theSociety’sprogresson
financialriskmanagement
ofclimatechange.
Retail and Commercial Credit Risk Committee
Executive-levelcommittee
Environment, Social and Governance (ESG) Committee
Executive-levelcommittee
Role: Managementofthe
creditrisksassociatedwith
climateriskwithinthe
YBSGroup.
Key 2024 activities:
Monthlymonitoringand
annualreviewofCreditRisk
Appetite,whichincludes
climateriskmeasures
acrossRetail,Buy-to-letand
CommercialLending.
Role: Delegatedauthority
fromExecutiveCommittee
tosupporttheBoard
inoverseeingthe
environmentalstrategy.
Key 2024 activities:
Receivedregularupdates
onprogressandapproved
publicationoffinanced
emissionsandsupplychain
emissionsforthefirsttime.
Receivedupdateonthe
Society’sNetZeroplanfor
Scope1and2emissions.
ApprovednewannualESG
targets.
ApprovedtheSociety’snew
environmentalandclimate
changeambitionplan.
UpdatedTermsof
Reference.
Throughout2024,theChiefPeopleOfficerwasExecutiveCommitteesponsorforoverarchingESGReporting.InDecember
2024,thiswaspassedtotheChiefFinancialOfficeraspartoftheestablishmentofanewStrategyandSustainability
function.ThenewfunctionfollowstheestablishmentoftheEnvironmentalandSocialPurposeCommittee,anewBoardlevel
sub-committee.Thesechangestoourstructurewillallowustorefreshourapproachandtakeappropriateactiontofurther
integrateenvironmentalsustainabilitywithinOurStrategyandbusinessmodel.
Senior management accountability
TheaccountabilityfortheseniormanagementfunctionremainssharedbetweenourChiefFinancialOfficer(CFO)andour
ChiefRiskOfficer(CRO)asdefinedundertheiradditionalresponsibilities.
Chief Financial Officer
TheCFOisresponsibleformanagingthephysicalandtransitional
financialrisksstemmingfromclimatechange.Thisincludes
accountabilityforleadingthedevelopmentandimplementationof:
•
Identification,measurement,monitoringandreportingofthe
financialrisksofclimatechange,inlinewithourriskappetite
includingourriskexposurelimitsandthresholds.
•
Scenarioanalysis(includingacatastrophemodellingapproach)to
determinelong-termfinancialrisksandassesstheimpactsonour
balancesheet.
•
DisclosingthefinancialrisksofclimatechangetothePRA.
Chief Risk Officer
TheCROhasaccountabilityfor
ensuringthedevelopmentand
implementationof:
Agovernanceframeworktoensure
thattheBoardunderstandandassess
thefinancialrisksfromclimate
changewhichaffecttheSociety,
andaddressandoverseetheserisks
withinouroverallbusinessstrategy
andriskappetite.
Steering group and working groups
Followingonfrom2023’simprovementstotheSociety’sclimategovernancestructure,theSteeringGroupand
WorkingGroupshaveevolvedtomeetcurrentneed.2025willbringfurtherevolutionsofthegovernancestructure
tosupporttheSociety’sstrategy.
ESG Committee
Environmental Sustainability Steering Group
The Steering Group brings together directors from across the Society to challenge and review
the approach taken in delivering the climate strategy.
Climate Risk Working Group
Property &
Environmental Sustainability
Supply Chain &
Environmental Sustainability
Utilisessubjectmatter
expertstodelivertactical
andstrategicchangewith
regardstounderstanding
andreducingourFinanced
Emissionsandexposureto
climate-relatedrisks,witha
focusonlendingpoliciesand
newproducts.
Monthly,dedicatedbilateral
betweenthePropertyand
EnvironmentalSustainability
teamsdrivesactionsthathelp
reducetheenvironmental
impactoftheSociety’sestate,
energyusageandfacilities.
Focussedbilateralsessions
betweentheSupply
ChainandEnvironmental
Sustainabilityteamshas
strengthenedsupplychain
dataavailabilityandquality.
Setting ESG strategy and direction
Delivering updates on progress and metrics
Climate governance
YBS’workonBuildingagreenersocietyissupportedbythebelowgovernance
structure.InOctober2024JanetPopewasappointedtotheBoardasaNon-Executive
Directorandfrom2025willbechairofthenewEnvironmentalandSocialPurpose
Boardsub-committee.
Further information on
this appointment can be
found in the Corporate
Governance report.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
2120
Strategy
Ourworkonenvironmentalsustainabilityisinitsearlystages.Through2024,theSociety’sclimatecommitmentshelped
driveprogressacrosstheorganisation.Werecognisethatmoreactionisrequiredtosupportourambitionsandourcurrent
commitmentsarelikelytoevolveasaresult.
Climate commitment Update
1
Achieve Net Zero Scope 1 and Scope 2
emissions by 2035, and Net Zero Scope 3
operational emissions by 2050.
YBShasmadeprogressagainstitsNetZerotargets.
See Metrics and targets for further information.
2
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.
YBSprocuredrenewableenergyandhaslauncheda
changeprojecttounderstandandactioninstallationof
heatpumpheatingsystems(orsimilar);theprojectis
currentlybeingscoped.
3
Add only hybrid or electric vehicles to our fleet
from 2025, working towards a full electric
fleet as soon as operationally possible.
TheSocietychangedapproachformanagingfleetvehicles
foremployees,andassuchwillnolongerhaveanybythe
endof2025.Futuremaintenancevancontractswillbe
assessedinlightofthiscommitment.
4
Improve climate change resilience
across all areas.
TheSocietyhasstrengtheneditsgovernancestructure,
incorporatedclimateriskintopoliciesanddeliveredclimate
changetraining.
For further details on YBS’ risk management approach,
see Risk management.
5
Target and maintain a minimum annual landfill
diversion rate of 97%.
YBSmaintaineditsminimumlandfilldiversionrate,
andin2025theSocietywillinterrogateitswastedata
furthertoassesswhatimprovementstoourwaste
streamscanbemade.
6
Implement further policies to prevent
lending or investing in economic sectors that
have a heightened climate risk and/or are
environmentally damaging.
YBSavoidslendingtohigh-risksectorsfroman
environmentalperspective.In2024,theRetail
&CommercialLendingPolicywasupdatedto
strengthenthisposition.
7
Launch a customer Net Zero transition plan,
increase understanding of our financed
emissions, and support our customers with
their Net Zero transition.
TheSocietyhasmadegoodprogressonunderstandingits
financedemissions,disclosingresidentialandcommercial
lendingemissionsforthefirsttime.
8
Support customers to make better
environmental choices by helping them
understand climate change and how it
impacts housing.
Improvementshavebeenmadetotheenvironmental
informationonYBS’website,andtheSocietyhas
continuedtohosttheEnergySavingTrusttoolthroughout
2024.Attheendof2024anewtrialpartnershipwith
Snuggwaslaunched.
9
Launch a member-focused Net Zero transition
plan, which will include green savings
product initiatives.
TheSocietywillundertakeaformalreviewofthe‘green’
savingsmarketin2025.
10
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.
YBScontinuestoaimforTCFDbestpracticeandplans
toenhanceactivitiesduring2025.YBSwillalsoremain
flexibleastoadapttonewregulatoryobligationsasthey
arebroughtintoforce.In2024,theSociety’senvironment
webpagewasrefreshed,includinganewreferencetoour
trialpartnershipwithSnugg.
StrategicReport>Our ESG Priorities
YBS’ climate-related financial risks
Thetablebelowdisclosestheclimate-relatedrisksexpectedtoimpacttheSocietyovertheshort,mediumandlong-term21.
‘Physical’ risksarisefromchangestotheenvironmentthatmaydamage
theintegrityofaproperty,includingacuteweatherevents(e.g.,flooding)
andchronicchangestolocalenvironments(e.g.,coastalerosion).The
Societyistakingstepstounderstandthepotentialimpactsofphysical
risksonthemortgageportfolio,andforthefirsttimepublishesaflood
riskheatmapoftheresidentialmortgagebook.
See Metrics and targets.
‘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.
Risk Nature Risk description Time horizon Strategy
Credit risk Physical Increasedseverityandfrequency
ofextremeweathereventscan
impactcollateralvalueandpressure
householdswithhighercosts,
increasingtheprobabilityofdefaultand
thelossgivendefault.
Long-term Physicalrisk(floodrisk,
subsidence&coastal
erosiondata)and
transitionrisk(EPC)data
iscollectedquarterly
onthebackbook.
Physicalriskdatais
collectedandprojected
acrossfutureclimate
scenariosofdiffering
levelsofgreenhousegas
concentrations.
Buildinginsuranceis
requiredundermortgage
terms.
Transition Governmentpolicytofacilitatea
transitiontoalow-carboneconomy,
suchasminimumenergyefficiency
requirements,mayimpactcollateral
value,impactingthelossgivendefault.
Macroeconomicdownturnfroma
disorderlytransitionwillplacepressure
onborroweraffordability,increasingthe
probabilityofdefault.
Short to
medium-term
Operational
risk
Physical Extremeweathermaycausedamageto
ouroffices,branches,orsupplychain,
preventingusfromoperatingasusual.
Employees’homesmaybeimpacted,
reducingproductivity,andcustomers’
homesmaybeimpacted,drivingcall
volumes.
Long-term Thetransitionrisks
associatedwith
OperationalRiskare
capturedintheSociety’s
ICAAP,andfurtherwork
isneededtoaddressthe
physicalrisksassociated
withOperationalRisk
Transition AstheUKtransitionstoalow-carbon
economy,someofoursuppliersmay
ceasetradingorhavetomaterially
changetheservicetheyprovideus,
impactingourabilitytooperateas
usual.
Short to
medium-term
Capital risk Physical
and
Transition
Extremeweathereventsandtransitional
policiesmaygeneratecreditdefaults
andoperationallossesrequiredtobe
absorbedbytheSociety’scapital.
Increasedexposuretohigherclimate
relatedassetsmayrequireadditional
capitalbuffers.
Medium to
long-term
Climatechangeriskforms
partoftheSociety’s
annualPillar2arisk
assessmentwithinthe
ICAAP.
21 Short-term:0–5years;Medium-term:5–15years;Long-term:15+years.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
2322
StrategicReport>Our ESG Priorities
Risk Nature Risk description Time horizon Strategy
Regulatory risk Transition UKcentralanddevolvedgovernments
continuetoalterthecourseofthe
climatepolicylandscape,impacting
obligationsonlenders,landlordsand
homeowners.
Short to
long-term
YBSundertakesregular
horizonscanning
activitiestomitigate
againstthisrisk.
Market risk Physical
and
Transition
Marketsreacttophysicalandtransition
events,suchasextremeweather
orGovernmentpolicy,resultingin
repricingoffinancialassetsand
liabilities.Thisrepricingmayalsooccur
duetomacroeconomicreactionsfroma
transitiontoalow-carboneconomy.
Medium to
long-term
TheSocietyisembedding
climateconsiderations
acrosstheserisk
categories,including
increasingreferenceto
climateconsiderationin
policies.Furtherworkis
requiredtoquantifythe
impactofclimatechange
onthesecategories.
Funding and
Liquidity risk
Physical
and
Transition
Physicalandtransitionriskfactorshave
theabilitytoreducesavingbalances
heldontheSociety’sBalanceSheet,
theeligibilityofloansforsecuritisation
andcostsofissuanceofregulated
mortgage-backedsecurities.
Medium to
long-term
Opportunity Description Time horizon Impact to YBS
Supporting
our customers,
members, and
colleagues
Raisingawarenessandsupport
onhowmembersandcustomers
canreducetheirowncarbon
footprint.Educatingourcustomers,
members,andcolleaguesabout
climatechangeandhowhomes
areimpactedcanimproveclimate
resilienceofthemortgageportfolio
andYBS-ownedproperty.
Short to
medium-term
ReducedenergyusefromYBS’officesand
branches,helpingtheSocietyreachNet
ZeroinScope1and2.Improvedclimate
resilienceinthemortgagebookcould
mitigateclimate-relatedfinancialrisksand/
orreducefinancedemissions.
New
products and
propositions
Developingproductsand
propositionsthatarealignedtoa
NetZeroeconomy,forexample,
byprovidingsolutionstosupport
energyefficienthomes.
Medium to
long-term
Inthefuture,asuiteofnewproductsand
propositionscouldhelpYBSattracta
customerbaseinalowercarboneconomy.
Productsthatencouragelow-carbonhomes
couldhelpreducefinancedemissions.
Engaging our
supply chain
Improvedrelationships,dataand
resilienceofYBS’supplychainin
thefaceofclimatechange.
Short to
medium-term
ImproveddatafromYBS’supplychainwill
improvereportingofScope3emissionsand
ensurereadinessforanyimpactstoservice
duetoclimatechange.
Reputation for
social purpose
Beingpreparedforclimatechange
anditsimpactstocustomers,
membersandcolleagueshasa
strongconnectiontoYBS’purpose
ofprovidingRealHelpwithRealLife.
Short to
medium-term
MaintainingYBS’reputationforhavinga
strongsocialpurposewillcontinuetodrive
consumerandcolleagueinterestandtrustin
thebrand.
Collaboration Workingwithothersprovides
greaterinsightintothesolutions
requiredtoadaptandmitigate
climatechange.
Short to
medium-term
Deliversinsightandfruitfulworking
relationshipsthatcanbringbenefits
tomembersandcustomers.Working
withotherscandeliverinsightintonew
technologicalandpublicpolicychange.
Improvements
to data quality
Thoroughclimatereportingrequires
accesstogoodqualitydata,which
canenablegooddecision-making
forthebenefitofmembersand
customers.
Short to
medium-term
Accesstogoodqualitydataenables
assessmentofYBS’currentpositionand
developmentofacleartransitionplanto
meetclimateaims.
YBS’ climate-related financial opportunities
Thetablebelowdisclosestheclimate-relatedfinancialopportunitiesthatcouldimpacttheSocietyovertheshort,medium,
andlong-term.TheSocietyrecognisesthatprogressisdependentontechnologicalandpublicpolicychanges,withoutwhich
theeffectivenessoftheseopportunitiesmaybelimited.
Collaborating with others
YBSrecognisesthatclimatechange
presentsachallengethatrequires
collaborationacrossmultiple
stakeholders.TheSocietyhas
continueditspartnershipswith
theYorkshireandHumberClimate
Commission,theBuildingSocieties
AssociationGreenFinanceTaskforce,
andtheGreenFinanceInstitute.
Throughthese,theSocietyhas
beenabletosupportavarietyof
workstreamsandlobbyingactivities
thatpromoteeffectivehome
decarbonisation.Thisincludedthe
Societypublishingawhitepaperon
homeimprovements22whichwas
presentedatWestminsterinOctober.
TheSocietyiskeentoshare
knowledgewithothersandwas
pleasedtosupporttheAssetand
LiabilityManagementAssociation
inupskillingothersintheindustry
aroundclimaterisk.Internallywe
havecreatedclimatechangetraining
forallcolleaguesandestablished
aClimateChampionNetworkwho
supportthedeliveryofOurStrategy.
Further information on
these collaborations will be
provided in the Society’s
2024 ESG Report.
22 www.ybs.co.uk/w/home-improvements-report-2024
23 Short-term:0-5years,medium-term5-15years,long-term15+years.
24 RepresentativeConcentrationPathways(RCP)arearecognisedseriesofgreenhousegasconcentrationtrajectories.ThehighertheRCP,withinagivenscenario,
thegreatertheconcentrationofgreenhousegasesintheatmosphere.RCPprovidethebasisfortheextentoftheseverityofphysicalrisksthroughoutthe
scenariotimelines.
The resilience of YBS’ strategy – scenario analysis
Toquantifytherisksassociatedwithclimatechange,theSocietyconductsclimate
scenariomodellingonitsretailandcommerciallendingportfolios.Followingthe
requirementsofthe2021ClimateBiennialExploratoryScenarios(CBES)fromthe
BankofEngland,modellinglongerterm23outto2050.Theclimatechangemodel
isbuiltupontheSociety’scurrentcreditstresstestingmodels,addingtheimpact
ofphysicalandtransitionrisksassociatedwithclimatechangewhileretainingthe
coremethodologyforcalculatinglosses.
Scenario Overview
Early Policy Action Thetransitiontoacarbon-neutraleconomystartsearly
andisgradualandmoderate.Carbonpricesandother
policiesareintroducedslowlyandtheincreasein
globalwarmingstaysbelow2
O
C,inlinewiththeParis
Agreement.(RCP2.624).
Late Policy Action Theglobalclimategoalismetbutthetransition
isdelayeduntil2031andismoresuddenand
substantial.Thisresultsinamaterialshort-term
macrodisruption,withaneconomicrecession,falls
inpropertyandequityprices,andchangesininterest
rates.(RCP6.0).
No Additional
Policy Action
Nopolicyactionbeyondthatwhichhasalreadybeen
enactedisdelivered.Thetransitionisinsufficientfor
theworldtomeetitsclimategoal,leadingtosevere
physicalrisks,materiallylowertrendgrowthrates,and
impactonassetprices.(RCP8.5).
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
2524
StrategicReport>Our ESG Priorities
The Society’s climate model
Theclimatechangemodeloperatesbyadjustingthe
probabilityofdefaultandthelossesgivendefaultwithin
theexistingYBSstresstestingmodel,inresponsetoboth
physicalandtransitionrisk.
Climate-relatedriskshavethefollowingimpact:
Themodelshowsthatoverthelong-term,physicalrisks
havethelargestpotentialforlossesversustransition
impacts.Transitionimpactsarethemoreimmediateriskfor
theSocietyasphysicalrisksdonotmanifestfullyuntilclose
to2050.Thenatureofthetransitionimpactsthevolume
oflosseswiththemodelshowingadisjointedorrushed
transitiontobethemostdetrimental.
TheSocietyiscautiousofthelimitationswithinclimate
modelling,whichcouldimpacttheoutputs.Themodelling
approach,datainputsandassumptionsvarysignificantly
totransitionalfinancialmodelling.However,theSociety
iscontinuouslyreviewingitsoutputandcapabilitiesand
in2024enhancedthemodeltoaligntotheSociety’s4th
GenerationStressTestingmodel,andthiswillinfluence
2025’sclimatescenarioanalysis.Modellingofclimate
changeimpactscontinuestobecomplexwithahighdegree
ofuncertainty.Despitethis,theSocietyiswellpositioned
tofacethechallengesposedbyclimatechange,duetoits
geographicallydiverselendingportfolios,andprudentLTV
profile.TheSocietywill,asappropriate,continuetofeed
climateriskexposuresintoitsstrategicdecisionmaking.
Physical risks impact:
•
Thevaluationofproperty,andthereforetheloss
givendefault,basedonassessmentofindirect,
long-termriskofphysicaldamageasthemarket
pricechangesandconsumersfacecostsof
additionalinsuranceandtoresolvephysical
damage.
•
Thevaluationofthepropertyduetodirect
physicaldamageifthepropertygetsflooded,
impacting:Thelossgivendefault;theloan-to-
value,andthereforeindirectlytheprobabilityof
default.
•
Theprobabilityofdefaultdirectlydueto
additionalfinancialstrainontheborrowerfrom
thecostofrepairs.
Transition risks impact:
•
Theaffordabilityofthemortgageandbyextension
theprobabilityofdefault.
•
Thevaluationofthepropertyduetorising
requirementsandconsumerexpectationson
energyefficiency.
•
Throughmacroeconomictransitionimpactingthe
probabilityofdefaultontheportfolio.
Risk management
How YBS identifies and assesses climate-
related risks
Climatescenarioanalysesareafoundationalstepinthe
Society’sprocessforidentifyingandassessingclimate-
relatedrisks.ThethreescenariosdiscussedinStrategyare
usedtosimulatepotentialfuturestatesdependentonthe
scaleofactionintacklingclimatechange.Theconclusions
ofthescenarioanalysisareusedtofacilitatediscussionin
selectedforaacrosstheSociety.Whileclimate-relatedrisks
areincorporatedintotheSociety’sICAAP,furtheractions
arerequiredtoembedthescenarioanalysiswithinOur
Strategy.Inparticular,in2024thefollowingworkinggroups
andcommitteesassessedthefollowing:
How YBS manages climate-related risks
TheSocietydefinesclimateasacross-cuttingriskwithin
theEnterpriseRiskManagementFrameworkandrequiresall
Tier1RiskPolicyOwners25toembedappropriateclimate-
relatedconsiderationswithintheirriskpolicies.In2024,
theEnvironmentalSustainabilityteamhasworkedclosely
withtheseRiskPolicyOwnerstoconsiderhowclimateis
addressedwithinpolicies,guides,orbusinessstandards.
Additionally,theEnvironmentalandClimateChangeRisk
Policy26includestheSociety’sapproachtomanaging
climateriskwithregardstogovernance,andresponsibilities
relatingtoidentification,assessment,andmanagementof
climaterisks.AllriskpoliciesattheSocietyarereviewedat
leastannuallyandapprovedbytheirrelevantexecutiveand
boardriskcommittee.
TheSociety’sCreditRiskteamalongsideEnvironmental
Sustainabilityhavereviewedclimate-relatedKeyRisk
IndicatorstoensuretheSocietyhasappropriatelimits
tomonitorthephysicalandtransitionriskspertinentto
ourlendingportfolios.Thesemeasuresarereviewedand
updatedasrequiredonanannualbasis.
Duringtheyear,theSociety’sclimateriskscenario
analysisfedintoourcreditrisk,riskappetiteandkeyrisk
indicatorreview.
How YBS identifies and assesses climate-
related opportunities
YBSutilisesexistingprocessestoidentifyandassess
climate-relatedopportunities,suchastheproduct
developmentprocess,aswellasemployingtheexpertise
ofthosethatattendworkinggroupsandcommittees,
suchastheClimateRiskWorkingGroup.TheClimate
ChampionNetworkhasalsoplayedakeyroleinidentifying
opportunitiesacrosstheSociety,includinginthe
BranchNetwork.
How YBS manages climate-related
opportunities
Climate-relatedopportunitiesaremanagedthrough
variousfunctionsandgovernancestructuresacrossthe
Societyaccordingtoneed.TheESGCommitteeiscentralto
managingthoseopportunitiesandgivingadirectivesteer
onhowtomanageopportunitiesaccordingtotheSociety’s
purposeprioritiesandclimatestrategy.
Group Discussion
Climate Risk
Working Group
Energyperformancecertificates
(EPCs)andthedistributionacross
mortgagebookportfoliotohelp
understandtransitionrisk.Flood
risk‘heatmaps’tounderstand
distributionofphysicalriskacross
residentialmortgageportfolio.
Asset and
Liability
Committee
Scenarioanalysisupdatesand
discussiononfinancialrisk
managementofclimatechange.
Environmental,
Social and
Governance
Committee
Potentialnewregulatoryregimes,
suchastheInternational
SustainabilityStandardsBoard’s
IFRSS2.
Retail and
Commercial
Credit Risk
Committee
Anoverviewofclimatechangeand
associatedrisks.
Executive Risk
Committee
Undertookaclimatechange
masterclasstraininganddiscussion.
25 Tier1RiskCategoriesinclude:StrategicRisk;RetailandCommercialCreditRisk;CapitalRisk;FundingandLiquidityRisk;MarketRisk;ModelRisk;TreasuryRisk;
OperationalRisk;ComplianceandConductRisk.
26 www.ybs.co.uk/your-society/inside-your-society/corporate-governance/policies
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
2726
StrategicReport>Our ESG Priorities
Metrics and targets
Our targets
TosupporttheSociety’sclimatestrategy,threeNetZeroambitionsarecurrentlyinplace,supportedbytheSociety’sClimate
Commitmentssetoutin
Strategy
.Thebaselineyearforthesetargetsis2023.
In2024,theSocietyreduceditsScope1emissionsby4%andScope2emissionsremainedflatagainstthe2023baseline.
Therewasanincreaseof5%inScope3Operationalemissions(excludingSupplyChain)againstthe2023baseline.The
overallchangeincarbonfootprintbetween2023to2024whencomparinglike-for-likeemissionsprofilewas+4%(-6%
in2023),whencalculatingonamarketbasis.ThereasonsforthisaresetoutintheStreamlinedEnergyandCarbonreport.
TheSocietycontinuestoimproveitsreportingofFinancedEmissions,andforthefirsttimesetsouttheemissionslinkedto
commerciallending.
Energy use and emissions report
AspertheGreenhouseGasProtocolCorporateAccountingandReportingStandard(‘GHGProtocol’)28,energyusageand
emissionsfromourbusinessactivitiesareclassifiedasfollows:
Assurance
RicardoEnergy&Environment,YBS’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2024GreenhouseGas(GHG)assertion:
isnotmateriallycorrectandisnotafairrepresentation
ofgreenhousegas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assertions
andtheGHGProtocolCorporate
Standard.Thisstatementisvalidforthecarbonfootprint
verificationreviewfortheperiodsfrom1January2024to
31December2024.
Methodology
Ourapproachtocalculatinggreenhousegasemissions
andenvironmentalimpactwithintheGroupalignswith
theGreenhouseGasProtocolCorporateAccountingand
ReportingStandard(GHGProtocol).Emissionsarereported
inmetrictonnesofcarbondioxideequivalent(tCO2e),
whileenergyusageisquantifiedinkilowatthours(kWh).
TheSocietyensurestheaccuracyandcompletenessofthe
Streamlined energy and carbon report (SECR)
InlinewiththeSociety’sobligationsunderTheCompanies(Directors’report)(EnergyandCarbonreport)Regulations2018
andtodemonstrateprogressinunderstandingandreducingtheSociety’senergyuseandcarbonfootprint,belowcontains
theSociety’sSECRreport27.
datacollectedandusesthemostuptodateUKGovernment
GHGConversionFactorsforCompanyReportingwith
theexceptionofcertainhotelstaysand'market-based'
renewableelectricitytariffs.Allemissionsandenergyusage
is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person(FTE).Furthermore,themethodology
ofmeasuringwaterconsumptionhasbeenupdatedto
encompassthetotalsumwithanomaliesremovedwhere
required,comparedwithsummingonlypositivereadings
ashadbeendonein2023.Thismeansthatinthe2023
restatementtherewasareductioninemissionsdueto
waterconsumptionanddischarge.2023Q4dataforgas,
electricityandwaterconsumptionhavealsobeenupdated
toreflectthemostup-to-datebillingforthisperiod,
whereestimateshadbeenusedin2023reporting.2024
SeptembertoDecembergasdataisbasedonestimates,as
is2024JunetoSeptemberwaterdata.Bothestimatesare
basedontheusagefromthesameperiodinpreviousyears.
Thesewillbeupdatedinfuturereportingwhenactualdata
isavailable.
Resetting the baseline
TheSocietyhasresetthebaselineforenergyuseand
emissionstrackingto2023,duetothesignificantincrease
intheavailabilityofdatainthisyear.Thisnewbaselineyear
appliestothewholecarbonfootprintandaforementioned
targetsacrossallscopes.
27 InpreviousyearstheSociety’sSECRwaspublishedwithintheDirectors’report.In2024,theSocietydecidedtoincludeitalongsidetherestoftheclimate-related
reportingintheStrategicreportforeaseofnavigationandtoreflectthestrategicnatureofthereport.
28 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.
29 2023Q4dataforgas,electricityandwaterconsumptionhavebeenupdatedtoreflecttheactualusagefortheyear.
Internal Energy Usage (kWh) 2024 202329
Heating 3,760,518 4,077,089
Emergencyfuelusage 64,412 31,730
Companyownedvehicletransport(Maintenance) 4,324 7,706
Scope 1 Total 3,829,254 4,116,525
NationalGridElectricityConsumption 8,148,043 8,183,654
OnsiteSolarElectricityGenerationConsumption 137,233 150,157
EVOwnedandLeasedVehicleUsage 987 201
Scope 2 Total 8,286,263 8,334,012
BusinessTransport-expensedmileage 553,151 517,020
HireCars 2,618 3,618
Scope 3 Total 555,769 520,638
Total Energy Use 12,671,286 12,971,175
Target:ToreachNet
ZeroinScope1and2
emissionsby2035.
Ambition:ToreachNet
ZeroinScope3Operational
emissionsby2050.
Ambition:ToreachNet
ZeroinScope3Financed
emissionsby2050.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
2928
Carbon Footprint
TheSociety’scarbonfootprintisasfollows.Thefootprintisdisclosedasbothlocation-basedandmarket-basedemissions,
wheremarket-basedreflectthecontractualarrangementschosenbyYBS,forexample,choosingtopurchaserenewable
energy,whichcanbereportedashavingzeroemissions.
As at 31 December 2024 2024 2023
Location
tCO
2
e
Market
tCO
2
e
Location
tCO
2
e
Market
tCO
2
e
Scope 1 Generationofheat(gasconsumption)30 688 688 746 746
VehiclesusedonSocietybusiness 1 1 2 2
Refrigerantgases 32 32 3 3
Biodiesel(back-upgenerators) 0.23 0.23 0.11 0.11
Total Scope 1 721 721 751 751
Scope 2 Electricityconsumption 1,687 - 1,695 -
Electricityforownedvehicle 0.20 0.20 0.04 0.04
Total Scope 2 1,687 0 1,695 0
Scope 3 Category 3:Well-to-tank–Electricity 374 - 376 -
Category 3:Well-to-tank–Gas 117 117 124 124
Category 3:Transmissionanddistributionlosses-Electricityand
gasconsumption
149 149 147 147
Category 3:Well-to-tankTransmissions&Distribution
losses-Electricity
32 32 32 32
Category 5:Watersupplyandtreatment 5 5 8 8
Category 5:Wastedisposal 5 5 9 9
Category 6:Businesstravel–AirTravel 66 66 110 110
Category 6:Businesstravel–Colleagueownedvehicles
forbusinessuse
39 39 40 40
Category 6:Businesstravel-Train 34 34 34 34
Category 6:Rented/Leasedvehicle 95 95 85 85
Category 6:Taxi 1 1 1 1
Category 6:Businesstravel–Hotel 19 19 24 24
Category 6:Well-to-tankforbusinesstravel 53 53 56 56
Category 7:EmployeesCommuting31 2,265 2,265 2,132 2,132
Category 7:HomeOffice 1,205 1,205 1,089 1,089
Total Scope 3 (Categories 3, 5, 6, 7) 4,459 4,085 4,267 3,891
Total Carbon Footprint 6,867 4,806 6,713 4,642
30 YBShaschangeditsapproachtoreportingemissionsfromgasbackedbyrenewablecertificatestoalignwithcurrentbestpractice,meaningmarket-basedemissions
fromgasusagearenolongerreportedaszero.
31 2023employeecommutingemissionshavebeenrecalculatedbasedonimprovedaccuracy.
32 DuetodataconstraintstheSocietyhascalculateditsCommercialportfoliolendingemissionsutilisingloandatafromNovember2023andEPCdatafromNovember
2024.ThishasallowedtheSocietytoincreaseitscoverageofEPCsduetodataenhancementsin2024givingabetterreflectionoffinancedemissionsoftheportfolio
inNovember2023.
StrategicReport>Our ESG Priorities
As at 30 November 2023
Category 15 Investments – Retail
Portfolio
Total Emissions (tCO
2
e) 662,265
PhysicalIntensity(kgCO
2
e) 45.26
PCAFdataqualityscore 3.83
Category 15 Investments – Commercial
Portfolio32
Total Emissions (tCO
2
e) 30,795
PhysicalIntensity(kgCO
2
e) 71.99
PCAFdataqualityscore 3.62
TheSociety’sfinancedemissionsareasfollows.Similarly,itisnecessarytopublishtheseemissionsayearinarrears.Future
emissionsdataisalsolikelytobevariableasUKhousingstockdecarbonisesandascalculationframeworksdevelop.
Scope 3
Additionally,forthefirsttime,theSocietyhaspublisheditssupplychainemissions,asof31December2023.Duetothe
natureofthedatasetthatisinputintothesupplychainemissionscalculation,theseemissionshavebeenpublishedayear
inarrears.Itisexpectedthatoverthecomingyears,datafromoursupplychainwillbevariableforanumberofreasons,
includingduetoanincreaseinsupplierreportingofemissions.
As at 31 December 2023
Category 1: Purchased goods and services Total emissions (tCO
2
e) 16,110
Category 2: Capital goods Total emissions (tCO
2
e) 4,725
Whilstemissionsfromgasandelectricityusagehavedecreased,theSociety’sScope3emissionshaveincreasedslightly.
Thisispredominantlyduetoanincreaseinemployeecommutingandhomeofficeemissions,inpartduetoanincreasein
colleaguenumbers.
TheSocietypurchasesbiodieselforitsback-upgenerators.Assuch,theGHGProtocolallowsthebiogenicportionofthe
resultingemissionstobereportedoutsideofScope.Thenon-biogenicportionisreportedwithinScope1emissions.
Outside of scope biogenic emissions 2024 biogenic content (tCO
2
)
Biodiesel(back-upgenerators) 15.76
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
3130
StrategicReport>Our ESG Priorities
TheSocietyisworkingtoimproveitsunderstandingofScope3emissionscategories.In2024,theSocietyworkedto
discloseallmaterialemissionscategories,whichhasbeenachieved.ThetableshowsYBS’currentstatusforeachcategory.
Futureactionswillincludeconsiderationoftheimplicationsofthedataset,whichwillhelpinformthenextstepsaround
reducingemissions.
Scope 3 emissions category Detail
1. Purchased goods and services Publishedforfirsttimein2024.
2025:Plannedimprovementstoaccess,qualityandcoverage.
2. Capital goods Publishedforfirsttimein2024.
2025:Plannedimprovementstoaccess,qualityandcoverage.
3. Fuel & energy related activities Published
4. Upstream transportation &
distribution
Notyetcalculated.Initialunderstandingoftheavailabledata.Currently
capturedwithinourSupplyChainemissions.
5. Waste generated in operations Published,exceptfortheemissionsfromwastecustomercommunications
(e.g.,letters)
6. Business travel Published
7. Employee commuting & working
from home
Published
8. Upstream leased assets Notyetcalculated.Initialunderstandingoftheavailabledata.Currently
capturedwithinourSupplyChainemissions.
9. Downstream transportation and
distribution
Notyetcalculated.Initialunderstandingoftheavailabledata.Currently
capturedwithinourSupplyChainemissions.
10. Processing of sold products Notapplicable
11. Use of sold products Notapplicable
12. End of life treatment of sold
products
Notapplicable
13. Downstream leased assets Notyetcalculated.Initialunderstandingoftheavailabledata.Currently
capturedwithinourSupplyChainemissions.
2025:Plannedimprovementstoreporting,separatingfromSupplyChain.
14. Franchises Notapplicable
15. Investments Emissionsfromresidentialandcommerciallendingcalculatedandpublished.
Explanation of carbon footprint and energy saving measures
Scope 1
Scope1emissionsencapsulatethosefromburninggasorfuelsforheatingthe
Society’spropertyandthoseemissionsgeneratedfrominternalcombustion
enginevehiclesownedandoperatedbytheSociety.In2024,YBS’gascontract
cameupforrenewalandtheSocietychosetocontinueprocuringrenewablegas
backedbyRenewableGasGuaranteeofOrigin(RGGO)certificatesforthenext
threeyears.TheSocietyhasalsobegunthejourneyofdegassingitsestateand
iscurrentlyexploringtherightoptionsfortransitioningtoelectricheatingacross
officesandbranches.Thisworkwillbeamulti-yearprojectsothattheSociety
fullyunderstandswhatthebestsolutionsarefortheestate.
Scope 2
Scope2emissionsaccountforalldirectelectricityusageintheSociety’sproperty
andforchargingelectricvehiclesownedandoperatedbytheSociety.Similarly
togas,in2024,YBS’electricitycontractwasrenewed,agreeingacontinual
supplyofrenewableelectricityforthenextthreeyears,backedbyRenewable
ElectricityGuaranteeofOrigin(REGO)certificates,allowingtheSocietytoreport
zeroemissionsfromelectricityonamarket-basis.TheSocietyhasalsotakensteps
toreduceitsgridelectricitydemandthroughinstallationofsolarpanelarrays
attwoofitssites.TheSocietyhascontinueditsrolloutofLEDlighting,meaning
thatcirca98%ofSocietyownedandoperatedbuildingsarenowwithLED
lightfittings.
Scope 3
Scope3emissionsarisefromtheSociety’sindirectbusinessactivities.The
SocietycontinuestoimproveitsScope3reporting,andassuchtherehasbeenan
increaseinthetotalScope3emissionsin2024comparedto2023.Anincrease
inYBS’employeecommutingandhomeofficeemissionshasbeenseen,partly
duetoanincreaseincolleaguenumbers.Additionally,theSocietyhasforthefirst
timepublisheditssupplychainemissionsandcommerciallendingemissions,as
oftheyearend2023
For more information about how the Society’s supply chain emissions are
calculated please see the upcoming ESG Report.
Intensity ratio
From2024,theSocietywillreportanintensityratiobaseduponnumberofemployeesonly.Reportinganincome-based
intensityratiowouldbelessreflectiveoftheSociety’sunderlyingemissionsgiventhatCategory15FinancedEmissionsare
excludedfromtheratio,andthatlevelsofincomecanchangeduetoavarietyoffactorsincludingtheprevailinginterestrate
environmentwhichdonotnecessarilytranslatetoachangeinemissions.
2024 2023
Colleague intensity ratio Colleagues
(FTE)
GHG Emissions
tCO
2
e
Intensity ratio
tCO
2
e/person
Colleagues
(FTE)
GHG Emissions
tCO
2
e
Intensity ratio
tCO
2
e/person
Location
4,923
6,867 1.4
4,773
6,713 1.4
Market 4,806 1.0 4,642 1.0
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
3332
StrategicReport>Our ESG Priorities
Understanding the transition risks of
our lending book: Energy performance
certificates (EPCs)
EPCsrecordtheenergyefficiencyofapropertyand
actasaproxyforunderstandingtheemissionsthe
propertygenerates.Theyalsoprovideinsightonhowa
property’senergyefficiencycouldimproveviaretrofit
activities.Therefore,understandingtheSociety’sEPC
dataaidsunderstandingoftransitionriskexposure,for
example,shouldnewretrofittingorenergyefficiency
regulationsbeintroduced,andalsoraisesawarenessof
transitionopportunities.
Commercial lending portfolio – EPC Data
TheSocietyisdisclosingforthefirsttime
itsEPCdatawithinitscommerciallending
portfolio,coveringbothbuy-to-letand
commercialinvestmentproperties,following
improvementsininternalEPCdatathat
allowedforabetterrepresentationofthe
Society’sposition.EPCdataforourbuy-to-
letlendingissourcedfromourthird-party
providerhowever,forcommercialinvestment
properties,theSocietysourcesthisinternally
fromthenon-domesticEPCregister.Itis
importanttonotethatthenon-domestic
EPCregister,whilehavingasimilarenergy
efficiencylabel(i.e.A–G)thedatawithin
thereports,comparedtothedomesticEPC
register,differs.
Retail lending portfolio – EPC Data
In2024,wehaveEPCdatafor60%ofourretailportfolio
ofwhich45%areEPCCorabove.Ofthosewithavalid
EPC,98%havethepotentialtobeanEPCCorabove,
demonstratingthescaleofchangepossiblewithin
residentialpropertyandtheneedforgoodqualityand
scaledretrofitsupplychainstomeetnation-widedemand.
There are several known limitations to EPC data,
which the Society discussed in its 2023 Building a
greener society report33.
2024 2023
Owner occupied Buy-to-let Owner occupied Buy-to-let
EPC Current Potential Current Potential Current Potential Current Potential
A 552 15,908 33 1,549 397 14,922 21 1,491
B 19,662 72,937 2,713 24,742 18,415 71,800 2,531 23,371
C 36,125 35,538 16,001 12,403 32,127 35,157 14,129 11,884
D 51,699 2,480 16,747 770 52,611 2,507 16,403 761
E 15,373 263 3,885 47 17,040 258 4,285 50
F 3,063 44 99 1 3,371 41 145 3
G 703 7 34 0 731 7 47 1
No EPC 101,953 11,124 98,972 11,497
% with EPC 56 78 56 77
2024 2024
Buy-to-let Investment
EPC Current Potential Current
A 10 227 8
B 765 1,694 72
C 1,716 1,865 305
D 1,217 215 355
E 298 19 148
F 9 1 37
G 6 0 45
No EPC 1,614 640
% with EPC 71% 60%
33 2023AnnualReportandAccounts
Understanding the physical risks of the mortgage
book: Flood risk
ThemostsignificantphysicalriskarisingfromclimatechangethatimpactsUK
homesisflooding.Whilstdistressingforhomeowners,floodingcanalsobring
aboutfinancialrisksasdiscussedinStrategy.Understandingtheproportionofthe
mortgagebookthatisexposedtosignificantfloodriskisthereforevitalforthe
Societytomitigateagainsttherisksofclimatechange.
TheSociety’sfloodriskdatacoversc.96.8%ofourretaillendingportfolioandis
providedatanindividualpropertylevelwheredataisavailable.Thedataisprovided
acrossfourtimeperiods(presentday,2030,2050and2080),acrossdifferingranges
ofclimatechangescenarios.
For further detail on the Society’s climate scenario analysis please see the
Strategy section of the Building a Greener Society report.
Whenanalysingtheevolvingnatureoffloodriskacrossvaryingclimatescenario
pathways,wefindthatapropertywithnegligibleriskoffloodingatthepresentday
willcontinuetodosogoingforward.Itmustbenotedthatthisanalysisisbasedon
climatemodellingandassumptionsofincreasesingreenhousegasconcentrationsin
theatmosphereandthereforecannotbetakenasfact.Theanalysisacrossthebook
atvaryingdegreesofclimatechangeistohighlightpotentialimpactsandidentify
potentialriskareas.
Ourfloodriskdatafromathirdparty,Hometrack,presentedbelow.Themapshows
theSociety’sexposuretoveryhighfloodrisksplitbyregionasof31stOctober
2024.Futureactionswillbefocusedondetermininganappropriateresponseto
managethisrisk.
Region % of total
mortgage lending34
% of total mortgage lending
at very high risk35
% of exposure to very high
flood risk 2024
EastofEngland 4.4 0.2
GreaterLondon 19.5 0.2
North West 10.3 0.2
SouthEast 22.1 0.2
Scotland 6.5 0.1
SouthWest 6.7 0.1
WestMidlands 7.6 0.1
YorkshireandtheHumber 8.6 0.1
NorthEast 3.6 0.0
EastMidlands 6.7 0.0
NorthernIreland 0.8 0.0
Wales 3.3 0.0
0.2%
0.1%
0.0%
Understanding YBS’ broader environmental impact
TheSocietyisalsotakingstepstounderstanditsbroaderenvironmentalimpactandgathersdatasuchasthelandfilldiversion
rate.In2024,97%oftheSociety’swastewasdivertedfromlandfill.
34 Duetoroundingpercentagesdonotaddupto100%.
35 Roundingto1decimalplace.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
3534
StrategicReport>Our ESG Priorities
Opportunity Number in 2024
New products and propositions Energy-related additional loan
Anadditionalloanatreducedrateforpurposesof
installingenergyefficientretrofitsolutions.
30 customers
New products and propositions New build enhanced affordability proposition
Affordabilitycriteriathatcanoffercustomersabetterrate
onnewbuildhomesthataremoreenergyefficient.
240 customers
Supporting our customers,
members and colleagues
Energy saving trust tool
ToolaccessedviaYBSwebsitetoassessenergyefficiency
ofhomeandhowtoimprove.
21 people
(Available to anyone
accessing our website)
Supporting our customers,
members and colleagues
Climate change awareness training
Trainingtouchesonhowclimatechangeimpactsthe
world,theUK,YBS,individualsandhomes.Itwas
launchedinOctober2024.
481 YBS
colleagues and agency
staff
Monitoring climate-related opportunities
Thereareanumberofclimate-relatedopportunitiesavailablefortheSociety’smembers,customersandcolleagues.In2024,
thefollowingnumbersofpeopleaccessedthoseopportunities:
Risk management
Responsiblemanagementofouroperationsunderpinsour
commitmenttobeingapurpose-ledbusiness.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.
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.
Climate metrics in remuneration
For details of how climate metrics and progress is embedded in our remuneration
schemes. Please see the Director’s remuneration report.
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.
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.
Engaging with our
stakeholders
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
3736
Key
stakeholders
Who they are How we
listen and engage
What they expect from YBS Material ESG
topics identified
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
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
•
Impactofclimate
change
•
Sustainablehomes
•
Diversity,equity,
andinclusion
•
Dataprivacyand
informationsecurity
•
Financialinclusion
•
Responsiblelending
StrategicReport>Engaging with Our Stakeholders
Key
stakeholders
Who they are How we
listen and engage
What they expect from YBS Material ESG
topics identified
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
3938
our
financial
review
Mortgages performance
Savings performance
Mortgages 2024 2023
Grosslending £9.7bn £9.2bn
Netlending £2.9bn £1.6bn
Growthinmortgagebalances 6.2% 3.6%
Marketshareofresidential
grosslending36
3.8% 3.9%
Savings 2024 2023
Sharesbalancegrowth37 10.6% 12.0%
Sharesbalancegrowth38 £4.9bn £5.1bn
Averagesavingsratedifferentialtothe
marketaverage39
0.90pp 1.01pp
Marketshareofretailsavingsbalances40 2.5% 2.3%
Helpingpeoplesecureaplacetocallhomeremainsone
ofourcorepurposepriorities.Ourtotalgrosslendingwas
£9.7bnin2024(2023:£9.2bn).
Followingasubdued2023,wesawanincreaseinsizeof
theretaillendingmarketthisyear.Weachievedashare
ofgrosslendingbroadlyconsistentwithlastyearof3.8%
(2023:3.9%).Particularlystronggrowthwasdelivered
inthefirsthalfoftheyear,andlevelsoflendingwere
managedtoalowerlevelinthesecondhalf.
Ournetlendingperformanceimprovedthisyearat£2.9bn
(2023:£1.6bn),drivenbyanumberoffactors:
•
Increasedgrosslendingasnotedabove,
•
alowerlevelofmaturitiesin2024comparedto2023,
whichwasparticularlyhigh,
•
improvedretention,bothatmaturityandduringthe
productterm.
Weexperiencedanimprovementinretention,inpartas
adirectresultofthemarketenvironment;relativelyhigh
customerratesbothdisincentivised,andinsomecases
madeitmoredifficultfor,customerstoleavetheirproduct
mid-termtomovetoanalternativemortgageprovider.
More information on the external mortgage 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.
TheSocietyhasdeliveredstronggrowthintheyear,
withsharesbalanceshavingincreased£5.0bn(2023:
£5.1bnincrease)representingagrowthrateof10.6%
(2023:12.0%).
Inadditiontosustainingahighrateofgrowth,theamount
ofvaluereturnedtoourmembersthroughsavingsrates
toremainsubstantial.Thisisdemonstratedthrough
thedifferentialinouraveragesavingsratecompared
totherestofmarketaverage,whichremainedhigh,at
0.90%(2023:1.01%)despitealowerrateenvironment,
equivalentto£430.2m,additionalinterestforoursavers
(2023:£441.1m).
Thesavingsmarketin2024sawamorestableBank
Rateenvironmentinthefirsthalfoftheyearfollowed
bydecreasesinthesecondhalfoftheyear.Wealways
considerourresponsetoBankRatechangescarefully,and
wehaveadoptedabalancedapproachinordertosupport
bothnewandexistingmembers.
WeexperiencedanothersuccessfulISAseasonatthe
commencementofthenewtaxyear,drivenbyour
market-leadingLoyaltySixAccessISA,aswellasour
competitivelypricedDoubleAccessISAandfixedISArange.
WealsolaunchednewRewardISAsforthosemembers
whose2023LoyaltyISAmatured,andhighlevelsof
retentionwereachieved.
Wecontinuallylooktoaddnew,targetedproductstoour
rangeofsavingsproducts.InMarch2024,welaunched
ourFirstHomeSaverproduct,whichwasexclusively
designedtosupportfirst-timebuyers.Thisproductoffered
arewardinginterestrateondepositsofupto£500per
month.Intandemwithour£5kDepositMortgageproduct,
whichlaunchedatthesametime,thesepropositionsaim
toaddressthechallengesfacedbyprospectiveborrowers.
36 BasedonBankofEnglandtotalindustrygrosslending.DataperiodJanuary–December2024.
37 ForthecalculationofSharesBalanceGrowthrefertotheBalancesSheetsonpage132.
38 SharesbalancegrowthmovementcalculatedusingtheSharesbalancesroundedtothenearest£0.1bn,pertheSummaryBalanceSheetonpage41.
39 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2024–December2024.
40 Source:YBSanalysisofBSAHouseholdsavings.DataperiodJanuary–October2024.
ThiswasfollowedinSeptemberbythelaunchofour£50RegularSaver,offeringanattractiverate,designedtoillustratethe
benefitsofstartingahealthysavingshabit.Wewillcontinuetoexploreopportunitiestodeepentheimpactwehaveonthe
livesofourmembersandcustomers.
More information on our Financial wellbeing priority can be found in the Our purpose section.
Financial performance
ThefiguresbelowareconsolidatedamountsinrespectofYorkshireBuildingSocietyanditscontrolledentities(‘theGroup’).
Thisyear’sresultsrepresentanormalisationofprofitabilityfortheSociety’sbalancesheet.Weexpectedalowerlevelof
profitabilityin2024asaresultofanumberoffactors.Theseincludemovingfromanincreasingtoadecreasinginterest
rateenvironment,thematurityofhighermarginfixed-ratemortgageproductswrittenduringthepandemic,andincreased
competitionleadingtosavingsandmortgagemargincompression.Ourcostshaveincreasedyearonyearthroughboth
strategicinvestmentandanupliftinourongoingoperatingcosts.
Thefinancialperformancestrengthenedourcapitalandliquiditypositions,whichremainsignificantlyaboveregulatory
requirements.Wehavedeliveredtheseresultsatthesametimeascontinuingtosustainablygrowmortgageandsavings
balances,andofferingcompetitiveratestorewardourmembers.Oureffectivemanagementofliquidityenabledustorepay
theremaining£1.0bnoftheBankofEngland’sfundingscheme,TFSME,comfortablyaheadofitsrefinancingwindowin2025.
Alternative performance measures are defined within the Glossary on page 223.
2024 2023
Statutoryprofitbeforetax £383.7m £450.3m
Coreoperatingprofit £345.7m £449.9m
Netinterestmargin 1.16% 1.31%
Costtocoreincomeratio 51% 42%
Managementexpensesratio 0.58% 0.56%
Liquiditycoverageratio(‘LCR’) 202.7% 158.2%
Liquidityratio 24.6% 23.3%
Commonequitytier1capitalratio 18.1% 16.7%
Leverageratio(UK) 6.6% 6.2%
Summary Income Statement
2024 2023
£m Statutory
Remove non-
core items Core Statutory
Remove non-
core items Core
Netinterestincome i 736.5 (2.4) 734.1 786.0 (2.3) 783.7
Fairvaluegainsandlosses ii 36.2 (36.2) - (5.5) 2.2 (3.3)
Netrealisedgains 0.2 - 0.2 1.6 - 1.6
Otherincomeandexpenses iii (21.1) (0.2) (21.3) 4.3 - 4.3
Total income/core income 751.8 (38.8) 713.0 786.4 (0.2) 786.2
Managementexpenses (366.6) - (366.6) (332.7) - (332.7)
Impairmentoffinancialassets (0.2) - (0.2) (4.0) - (4.0)
Movementinprovisions iv (1.3) 0.8 (0.5) 0.6 (0.2) 0.4
Profit before tax/core operating profit 383.7 (38.0) 345.7 450.3 (0.4) 449.9
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,andonnon-coreequityinvestments.
iii) Profit/(loss)onthesaleoffixedassetsandonthedisposalofintangibleassets.
iv) Non-coreelementsoftherestructuringprovision.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
4140
StrategicReport>Our Financial Review
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2024
was£383.7m(2023:£450.3m)and
coreoperatingprofitwas£345.7m
(2023:£449.9m).Themaindifference
betweenstatutoryprofitbeforetax
andcoreoperatingprofitisa£36.2m
gainonfairvalue(2023£2.2m
loss)relatingtoswapsnotinhedge
accountingrelationships.
Net interest income
Netinterestincomewas£736.5m
in2024,decreasingby£49.5m
yearonyear(2023:£786.0m),and
representsareducednetinterest
marginof1.16%(2023:1.31%).
Margincompressioninthemortgages
andsavingsbookandthenon-
repeatedbenefitofarisingBank
Ratein2023,coupledwithfalling
interestratesinthesecondhalfof
2024,hasresultedinnetinterest
incomereducingtomorenormalised
levels.Thedownwardpressureonnet
interestincomewaspartiallyoffset
bytheincreaseinbalancesheetsize
andperformanceofourstructural
hedgewhichcontributed£376.7mof
grossinterestincomein2024(2023:
£215.7m).Grossstructuralhedge
contributionsrepresenttheincome
earnedfromthefixedreceiptsonthe
internalproducthedgeswithinthe
structuralhedgeportfolio.
Inprioryears,agencycommission
wasshownasareductiontonet
interestincome(2023:£22.1mcost).
Followingareclassificationtobetter
reflectthecontractualagreement,this
costisnowincludedinnetfeesand
commission.Onalikeforlikebasis,
netinterestincomein2023would
havebeen£808.2m.
Fair value gains and losses
Afairvaluegainof£36.2mwas
recordedin2024(2023:£5.5m
loss).Akeydriveroftheyear-on-
yearchangeinfairvaluegainsand
lossesrelatestoderivativesnotin
hedgeaccountingrelationships,
includingmortgagepipelineswaps
whichhavehistoricallynotbeen
assignedintohedgeaccounting,
aswellasshorter-termswapsto
hedgefixed-ratesavingsbalances.
Toutilisehedgeaccountingmore
efficientlyandminimisetheimpact
offairvaluevolatilityontheincome
statement,twonewdesignations
wereimplementedintheyear,a
savingsmacrofairvaluehedgeand
amortgagepipelinemacrocash
flowhedge.Althoughthemovement
inswapratesischaracteristically
volatile,changestoswapratesin
2024weremorepronouncedthan
inrecentyears,resultinginagreater
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 and expenses
Thenetofotherincomeandexpenses
intheyearwasacostof£21.1m
(2023:£4.3mincome)andincludes
incomefromoursecondarylines
ofbusiness,includingcommission
frominsurancebrokering.Agency
commissionexpenseof£23.3mis
alsoincludedintheotherincome
andexpensesline,followinga
reclassificationtobetterreflectthe
contractualagreement,withthisitem
previouslycategorisedwithinnet
interestincome.
Management expenses
Overallmanagementexpenseswere
£366.6min2024(2023:£332.7m).
Themajorityofthisincreaserelates
topeoplecostsduetohigherthan
typicalpayawardstocolleagues,
requiredtomaintainourcompetitive
positioninthelabourmarket,and
anincreaseinheadcount,reflecting
anincreaseinouroperationalscale.
Wealsoincurredaone-offproperty
impairmentchargeof£4.6m.
AchangetotheBankofEngland
LevyFrameworkwhichreplaces
thepreviousCashRatioDeposit
schemehasalsocontributed£8.0m
towardagreaterlevelofcosts.
Thislevypreviouslyhadtheeffect
ofsupressingnetinterestincome
asliquiditywasringfencedand
couldnotbedeployedelsewhere
inthebusiness.
Thedeliveryofenhancementsto
customerexperiencehasaccelerated
ourinvestmentinchangeactivities
whichtotalled£69.7min2024,an
increaseof£5.9mfrom£63.8min
2023.Theyear-on-yearincrease
includesinvestmentinanumber
ofkeystrategicareasincluding
governance,regulatoryandcontrol
functions.Weplantocontinueto
investinourstrategiccapabilitiesat
elevatedlevelsintheneartermto
deliverOurStrategy.
Ourcosttocoreincomeratiohas
increasedto51%,up9percentage
pointson2023;thisincreaseis
predominantlyduetothereduction
inincome,ratherthantheincrease
tothecostbase.
Impairment of
financial assets
Atotalnetimpairmentchargeof
£0.2m(2023:£4.0m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chargeof£1.3mintheperiod
relatestoprovisionswhichinclude
customerredress,restructuring
andotherspecificitems(2023:
£0.6mrelease).
Summary Balance Sheet
£bn
2024
2023
Liquidassets 14.6 12.8
Loansandadvancestocustomers 49.7 46.8
Fairvalueadjustmentforhedgedriskonloansandadvancestocustomers (0.5) (0.6)
Otherassets 1.7 2.0
Total assets 65.5 61.0
Shares41 52.0 47.1
Wholesalefundingandotherdeposits42 7.3 7.8
Subordinatedliabilities 1.5 1.6
Otherliabilities 0.7 0.8
Total liabilities 61.5 57.3
Members’interestandequity 4.0 3.7
Total members’ interest, equity, and liabilities 65.5 61.0
Liquidity
Liquiditylevelsremainrobustandwithsignificant
headroomaboveregulatoryandinternalrequirementswith
aliquiditybalancesheetratiostandingat24.6%(2023:
23.3%),andaLiquidityCoverageRatioat202.7%(2023:
158.2%).Strongsavingsinflowsintheyearhavehelped
tofacilitatethefinalrepaymentofTFSMEborrowing.A
prudentapproachtoliquiditymanagementismaintained
withourinvestmentportfolioconsistingmainlyof
exposurestotheBankofEnglandandtheUKGovernment,
inlinewithourbalancesheetstrategy.
High-qualityliquidassets(‘HQLA’)balancesstoodat
£13.7bnasat31December2024(2023:£10.7bn).Cash
reservebalancescomprised£5.6bn,£5.3bnwasheldin
AAAratedassetsandtheremainder£2.8bnheldinassets
ratedbetweenAA+andA.
Loans and advances to customers
Therateofmortgagebookgrowthachievedwas6.2%
(2023:3.6%).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retailmortgageloanbookhasremainedstrong;the
proportionofloansmeetingthesecriterianowstandsat
0.43%byvalue(2023:0.39%).
Theindustryaverageforretailmortgagearrearsismeasured
asthenumberofaccountsinarrearsbythreemonthsor
more(includingpossessions).At0.50%(2023:0.50%)our
performancecontinuestoremainbetterthantheindustry
averageof0.97%(2023:0.87%).
More information on arrears can be found in
the Directors’ report and in Note 31 to the
financial statements.
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.
Insupportofourpurposefullendingstrategy,wehaveseen
anincreasetoourindexedLTVproportionofthebook;
9.4%ofourresidentialmortgagebookhasanindexed
LTV>85%,comparedto4.1%inDecember2023.Asof
December2024,theaverageindexedloantovalueofour
mortgagebookis50.9%(December2023:49.0%).
Asaproportionofgrossmortgageexposure,ECLcoverage
is0.1%(December2023: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%(2023:0.01%).
Stronglevelsofgrowthwereachievedinbothmortgagesandsavingsbalancesintheyear.Theratesofgrowthwere
moreequallybalancedthanduringthelastcoupleofyearswherenetsavingsflowsexceededmortgagenetlendinginan
asymmetricalmanner.AsatDecember2024theSociety'sretailloantodepositratiostandsat94.0%(2023:98.2%).
41 Sharesinthesummarybalancesheetincludesthefairvalueadjustmentforhedgedriskonsharesof£1.0m.
42 Within‘wholesalefundingandotherdeposits’are£0.9billionofretailsavingsdepositsnotclassedasshares(2023:£0.6billion).
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
4342
StrategicReport>Our Financial Review
Wholesale funding
Wholesalefundingmarketswererelativelystablein2024,
whichallowedustosuccessfullyissuetwocoveredbonds
andoneresidentialmortgage-backedsecurity(RMBS).The
RMBSwaslaunchedthroughthenewWhiteRoseMaster
Issuer,thesinglespecial-purposevehiclewhichstreamlines
andsimplifiestheissuanceprocess.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.
During2024,werepaidthefinal£1.0bnoftheBankof
England’sfundingscheme,TFSME.Thisdemonstrates
ourprudentapproachtorefinancinginanticipation
ofheightenedcompetitionforfundsasmarket-wide
maturitiesdrawnearer.
Capital
Introduction to capital
TheSocietyholdsregulatorycapitaltoprovidefinancial
sustainabilityforitsmembersandothercreditorsby
protectingagainstunexpectedlosses.
Regulatorycapitalresourcesencompassgeneralreserves,
fairvaluereservesthroughothercomprehensive
income,andsubordinatedliabilities,allofwhichare
subjecttoregulatoryadjustmentsandIFRS9transitional
arrangementsupto31December2024.
Thecapitaldisclosuresincludedinthisreporthavebeen
preparedinaccordancewiththeUKCapitalRequirements
DirectiveV(UKCRDV),boundbyregulatoryrequirements
fromtheUKCapitalRequirementsRegulation(CRR).
Thedisclosureshavebeenpreparedonaconsolidated
Groupbasis,includingallsubsidiaryentities,unless
otherwisestated.
TheSocietyissubjecttoregulatorycapitalrequirements
establishedbythePrudentialRegulationAuthority(PRA)
intheUnitedKingdom.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 2024 Pillar 3 Disclosures.
Theratios,deductions,anddefinitionshavebeenprovided
inaccordancewithCRDVregulations.
Management of capital (audited)
CapitalriskismanagedviaaBoard-approvedCapital
Policyandriskappetiteframework.TheSocietymanages
capitaltocomplywithregulatoryrequirementsandrisk
appetitelevelstosupportourstrategicobjectivesfor
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.
TheSocietyperformsanInternalCapitalAdequacy
AssessmentProcess(ICAAP)atleastannuallytoensurethat
weholdsufficientcapitalandhaveadequategovernance
andcontrolstomanagetheriskstocapitalarisingfromour
businessmodel.TheICAAPconsidersseverebutplausible
stressscenarios.
Inaddition,theSocietyperformsReverseStressTesting
(RST)tounderstandthepossiblescenariosandriskdrivers
thatcouldleadtothepotentialfailureoftheSociety,andto
assesswhethersufficientmitigationsareinplace.
Capital ratios
AspartoftheSociety’sworktostrengthenitsgovernance,
risk,andcontrolcapabilities,wehavebeenundertaking
focusedworktoimprovethematurityofourcontrol
environmenttosupporttherobustnessofdisclosures
andregulatoryreporting.Theimplementationofthese
enhancementshasbeenreflectedintheSociety’syear-end
capitaldisclosuresandhascontributedtoanincreaseinthe
CET1ratioin2024.
TheSociety’sCET1ratioatyear-end2024stoodat18.1%,
showinganincreasefromtheprioryear(2023:16.7%).
TheSociety’sUKleverageratioincreasedto6.6%(2023:
6.2%).TheCET1ratioremainscomfortablyaboveregulatory
requirementsandriskappetite.
WorkhasnowconcludedregardingtheSociety’supgrade
ofcapitalreporting,whichsignificantlycontributedtothe
increaseintheSociety’s2024year-endCET1ratio;1.1%of
theyear-on-yearincreasecanbeattributedtothiswork.
MREL (Minimum requirement for own funds
and eligible liabilities)
TheMinimumRequirementforOwnFundsandEligible
Liabilities(MREL)isaregulatoryrequirementdesigned
tomakesureinstitutionshavesufficientlossabsorbing
andrecapitalisationcapacityintheeventofaresolution
scenario.TheMRELrequirementscanbemetbyregulatory
capitalresourcesandMRELeligibleresources,suchas
SeniorNon-Preferred(SNP)liabilities.
TheSociety’sMRELRWAratioatyear-endstoodat24.6%,
comparedtotheprioryear’spositionof24.2%.This
remainsthebindingMRELratiofortheSociety.
Capital outlook
TheSocietyremainscommittedtomaintaining
arobustcapitalposition,alignedwith
regulatoryrequirementsandevolvingmarket
conditions.TheimplementationofBasel3.1,
andtheleverageratioframework(LREQ),isa
significantfocusfortheSociety.
TheBasel3.1reforms,aimedatenhancing
therisksensitivityandincreasingthe
transparencyofcapitalrequirements,willtake
effectacrosstheUKin2027.Theseupdates
willleadtoadjustmentsinthecalculationof
RWAs,particularlyinareassuchascreditrisk,
counterpartycreditrisk,andoperationalrisk.
TheSocietyiswell-positionedtocomply
withtheseenhancedrequirements,having
historicallymaintainedaconservative
approachtocapitalmanagement.TheSociety
continuestoholdcapitallevelscomfortably
aboveregulatoryminimumsandthe
implementationofBasel3.1isnotexpectedto
materiallyaffecttheSociety’sabilitytomeet
theseobligations.
Inadditiontorisk-basedcapitalrequirements,
theleverageratioframework,whichmeasures
capitalrelativetothetotalexposureofthe
Society,includingoff-balancesheetitems,
willplayanincreasinglyprominentroleinour
capitalplanning.
AstheSocietymovesclosertoLREQstatus,
wewillbecomesubjecttoaminimum
regulatoryrequirementof3.25%,plusthe
UK’scountercyclicalleveragebuffer.On10
September2024,thePRAannouncedtheir
reviewoftheleverageratiorequirement
thresholds.TheSocietyhasreceived
permissionofamodificationbyconsent
todisapplytheLeverageRatio-Capital
RequirementsandBufferspartofthePRA
Rulebookuntil30June2026.
TheSociety’sstrongcapitalpositionassumes
compliancewiththeminimumleverage
ratiorequirement.Wecontinuetomonitor
theimpactofLREQonourbalancesheet
andcapitalbufferstosupportourstrategic
objectiveswhileremainingcompliantwith
regulatorydemands.
Weanticipateourcapitaladequacyand
leverageratiostoremainstrong,drivenby
prudentmanagement,rigorousstresstesting,
andconservativeriskappetite.Thiswill
supporttheSocietyinadaptingtotheevolving
requirementsofBasel3.1andLREQwhile
maintainingsustainablegrowth.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
4544
StrategicReport>Our Financial Review
2024
£m
2023
£m
Common Equity Tier 1 (CET1)
Generalreserve 3,981.5 3,702.9
Fairvaluethroughothercomprehensiveincomereserve (19.3) (10.2)
Cashflowhedgereserve 7.0 0.4
Common Equity Tier 1 prior to regulatory adjustments 3,969.2 3,693.1
Common Equity Tier 1 regulatory adjustments
IFRS9transitionalarrangements - -
Pensionfundadjustments (23.8) (27.8)
Intangiblefixedassets (16.1) (18.4)
Prudentvaluationadjustment (9.3) (7.7)
Cashflowhedgereserve (7.0) (0.4)
Total Common Equity Tier 1 capital 3,913.0 3,638.8
Tier 2
Subordinatedliabilities 195.5 267.9
Collectiveprovisionsforimpairment - -
Total Tier 2 Capital 195.5 267.9
Total capital (audited) 4,108.5 3,906.7
MREL Resources (unaudited)
SecondaryNon-PreferentialLiabilities 1,147.7 1,313.0
Tier2MRELEligible 68.2 37.1
Total MREL Resources (unaudited) 5,324.4 5,256.8
Riskweightedassets(unaudited) 21,673.5 21,756.1
CommonEquityTier1capitalratio* 18.1% 16.7%
Tier1ratio* 18.1% 16.7%
Totalcapitalratio* 19.0% 18.0%
TotalMRELResourcesratio* 24.6% 24.2%
CRRLeverageratio* 6.1% 5.8%
UKLeverageratio(excludingclaimsoncentralbanks)* 6.6% 6.2%
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Society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ourfinancialandoperationalresilience.
Our top emerging and evolving risks
Emerging or
evolving risk
Principal risk(s) Commentary
Our strategy
and the external
environment
•
Strategic risk
•
Market risk
•
Funding and
liquidity risk
Ourcoremarketsofsavingsandmortgagesarehighlycompetitive.Itis
thereforevitallyimportantweoperatearesponsibleandsustainable
businessonourmembers’behalf.
Wecontrolourcoststightlyandensureinvestmentsareprioritisedtothe
areasthatwilldelivermostforourmembersandcustomers.
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.
Cyber security
threats
•
Operational risk ThecybersecuritythreattotheUKfinancialservicesindustrycontinues
togrow,originatingfrombothorganisedcrimegroupsandnation
stateoperators.‘Threatactors’arebecomingevermoreinvasiveand
sophisticatedintheirapproaches,withransomwareandtheexploitationof
vulnerabilitieskeythreats.
Resiliencetosuchthreats,andanabilitytorespondeffectivelyinthe
eventofanattack,remainessential.Wecontinuetoinvestinandenhance
ourcyberthreatmonitoringandresponsecapabilitytoprotecttheSociety
andourmembersandcustomers,andtomaintaintheconfidenceof
ourregulators.
Fraud
•
Operational risk
•
Compliance and
conduct risk
Criminalsarebecomingevermoresophisticatedintargetingconsumers.
Typicalfraudsinfinancialservicesincludephishing,identitytheft,account
takeoversandscams.
Wecontinuetoinvestinandupgradeourfraudpreventionandmonitoring
controlstohelpprotectourmembersfrombecomingvictimsoffraud.
* Ratiosareunaudited.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
4746
StrategicReport>Risk Overview
Emerging or
evolving risk
Principal risk(s) Commentary
The impact of the
economy of our
customers
•
Retail and
commercial credit
risk
WhiletheeconomicpressuresonUKhouseholdshavestartedtoease,with
therateofinflationandtheBankofEnglandbaseratebothfallingoverthe
year,wenonethelessremainalerttopotentialeconomicimpactsonour
customers.Mortgageborrowingcostsaremuchhigherthantheywerefive
yearsagosohouseholdfinancesformanycustomerswillremainstrained.
Fornewlending,weuse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.And,forexisting
borrowers,wehavebeenstrengtheningourserviceforthosewho
maybeexperiencingfinancialdifficulty,includingintroducingnew
forbearanceoptions.
IT resilience
•
Operational risk Reliableandcost-effectiveITinfrastructureisvitaltodeliverthelevelof
serviceourmembers,customers,colleaguesandregulatorsexpect.AsIT
componentsage,theirhealthandvaluedeteriorateandtheriskstheypose
tosecurityandresilienceincrease.
WethereforecontinuetomoderniseandsimplifyourITinfrastructureto
ensureitremainsresilientandsecure.
Attracting and
retaining the right
people
•
Operational risk AttractingandretainingtherightcolleaguestodeliverOurStrategyis
vital,andwecontinuetoexperiencecompetitionforcertainskillsets;
digital,cybersecurity,changemanagementanddataanalyticsskillsare
particularlyindemand.
Effectiveresourceplanning,forecasting,andsuccessionplanningremain
priorities.Wehavealsofurtherimprovedourpeoplepoliciesforour
colleagueswhoarecarersorparents.
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.
Transforming our
business
•
Operational risk Wearetransformingourbusinesstosupportthenextphaseofourgrowth
plansanddeliverOurStrategy.Thisinvolvesimplementingnewsystems,
automatingbusinessprocessesanddevelopingnewwaysofworking.
Managingthischangecarefullyiscriticaltoensureitwillbecompleted
ontime,attheplannedcostanddelivertheforecastbenefits.Wehave
thereforerefreshedourchangeriskmanagementframeworkwhich
includesstrongergovernanceandoversightcontrols.
The regulatory
environment
•
Compliance and
conduct risk
•
Funding and
liquidity risk
Theregulatoryenvironmentinwhichweoperatecontinuestoevolve,
withnewrulesforborrowersinfinancialdifficultyand‘authorisedpush
payment’scamreimbursementcommencingin2024.
Monitoringandmaintainingourregulatorycompliancepositionsisoneof
ourhighestpriorities.
Wecontinuetohaveopenandconstructivedialoguewithour
regulators,andworkwiththemandindustrybodiestocontributetothe
regulatoryagenda.
Climate change
•
Retail and
commercial 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.
DetailsofourBoardand
ExecutiveTeamaresetoutin
thefollowingsection.
For information regarding our Board and any changes
during 2024 see the Corporate Governance report.
Our Board
and Executive
Team
ThefollowingNon-ExecutiveDirectorssteppeddownfrom
theBoardin2024:
•
JohnHeaps,formerBoardChair,inApril2024.
•
AlisonHutchinson,formerViceChair/SeniorIndependent
Director,inDecember2024.
•
JennelleTilling,Non-ExecutiveDirector,inDecember2024.
ThefollowingExecutiveDirectorssteppeddownfrom
theBoardin2024.
•
AlasdairLenman,formerChiefFinanceOfficer,inApril2024.
•
DavidMorris,formerChiefCommercialOfficer,inSeptember2024.
AuditCommittee
Committee Membership Key:
BoardRiskCommittee
(GroupRiskCommitteeto
31December2024)
AC
BGNC
BRC
RC
E&SPC
BoardGovernanceand
NominationsCommittee
RemunerationCommittee
EnvironmentalandSocial
PurposeCommittee
(from1January2025)
Introduction Strategic Report Governance Financial Statements Other Information
49
Introduction Strategic Report Governance Financial Statements Other Information
48
Joined our Board in
2023 as Board Chair
Designate, becoming
Board Chair in 2024.
Joined our Board
in 2019.
Chair
of the Board
Annemarie Durbin
BComm LLB MSc
Chair
BGNC
Independent
Non-Executive Director
Guy Bainbridge
MA (Cantab), ACA
Whistleblowing Champion.
Vice Chair (from 1 January
2025)
AC BRC
Chair
BGNC
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.
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LimitedandaNon-ExecutiveDirector,
ChairoftheAuditCommitteeandamemberofthe
CorporateGovernance&NominatingCommitteeat
ManulifeFinancialCorporation.
Governance>Our Board and Executive Team
Joined our Board
in 2024.
Joined our Board
in 2022.
Independent
Non-Executive Director
Peter Bole
MA Chartered Accountant
AC
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,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
(includingmemberoftheRiskCommittee,AuditCommittee,
GovernanceandNominationsCommitteeandCustomerand
ConductCommittee),MemberofCouncilfortheLondon
SchoolofHygieneandTropicalMedicine(includingChairof
theFinanceandDevelopmentCommittee.
Background and career
PeteriscurrentlyChiefFinancialOfficerforesureGroup
wherehehasplayedakeyroleinthedigitaltransformation
programme.Priortojoiningesure,heheldtheroleof
ChiefFinancialOfficeratTescoBankandalsoatVirgin
Money,wherehewentontobecometheGroupIntegration
Director.HehasalsopreviouslyheldseniorrolesatRBS
Insurance,StandardLifeandDeloitte.
Skills and experience
Peterhasover25years’experienceinfinanceleadership
rolesacrossseveralstrongconsumerbusinesseswithin
theBankingandInsurancesectors.Hehassignificant
experiencethroughouthiscareerwithorganisations
experiencingperiodsofgrowthandtransformation.
Other roles
ChiefFinancialOfficerofesureGroup.
Independent
Non-Executive Director
Angela Darlington
BSc, FIA
Non-Executive Director for
Workforce Engagement
Chair
ACBRC
BGNC
From1January
2025
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
5150
Joined our Board
in 2023.
Joined our Board
in April 2021.
Background and career
Debrahasover30yearsofexperienceasasenior
executiveinfinancialservices.Shespentalargepartof
herexecutivecareerwithAmericanExpress,inavariety
ofseniorrolesincludingleadingtheUKBusiness,leading
ProductMarketinggloballyandrollingouttheAmerican
Expressbusinessacross55CountriesinEurope,theMiddle
EastandAfrica.Shehasstronggeneralmanagementskills
havingledlarge,complexbusinessesandmulticultural,
multifunctional,geographicallydispersedteams.Shealso
representedtheCompany’sinterestsinsignificant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andSeniorIndependentDirector
atAXAUKplc,ChairoftheRemunerationCommittee
andmemberoftheAuditandRiskCommittees.
Non-ExecutiveDirectorofIntrumAB,Chairofthe
TransformationCommittee.
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.
Independent
Non-Executive Director
Dina Matta
BSc, BA (Double Hons) Engineering
and Business Studies
RC
Governance>Our Board and Executive Team
Independent
Non-Executive Director
Debra Davies
BA Hons, Business Studies
Chair
BRCRC
E&SPC
From1January
2025
Joined our Board
in 2020.
Joined our Board
in 2024.
Background and career
JanetjoinedLloydsBankingGroupin2008torunthe
savingsbusinessandfrom2012to2023wasChiefofStaff
andlatterlyChiefSustainabilityOfficer,aGroupExecutive
Committeerole.PreviouslysheheldrolesasChief
ExecutiveatAllianceTrustSavings,EVPGlobalStrategyat
VisaInternationalandspent10yearsatStandardChartered
BankwheresheheldavarietyofrolesincludingRetail
BankingMDforAfrica.
Skills and experience
Janet'sbackgroundisretailbankingandcorporate
governance.Sheisahighlyexperiencedbankingexecutive
withatrackrecordfordrivingsuccessfulstrategy,retail
bankinganddiversityimprovements.Shealsohasextensive
non-executiveexperienceingovernmentdepartments,
charitiesandtheprivatesector.
Other roles
ChairofCharitiesAidFoundation(CAF)BankandChair
ofNominationsandRemunerationCommittee.Trusteeof
StepChangeDebtCharityandTheCamdenSchoolforGirls.
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Limited.
Independent
Non-Executive Director
Mark Parsons
BA, FCMA
Senior Independent Director
(from 1 January 2025) .
Board Consumer Duty /
Member Champion.
AC
BRC BGNC
E&SPC
From1January2025
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
5352
Independent
Non-Executive Director
Janet Pope
BSc Econ, MSc Economics, MBA
RC
From1January2025
E&SPC
Chair
Joined the
Society and
our Board in 2023.
Joined the
Society and
our Board in 2024.
Executive Director
Susan Allen
BA Hons (Econ), ACIB, ACT, OBE
Chief Executive Officer
Background and career
Susanhasheldanumberofseniorexecutiverolesin
someoftheUK’slargestretailbanks,includingBarclays,
SantanderandRoyalBankofScotland,leadingand
successfullydeliveringsignificanttransformationand
customercentricchange.PriortojoiningYBSshewas
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.
AtSantander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alsoaformerBoard
memberofUKFinance.
Skills and experience
Susanhasmorethan30yearsofexperienceinfinancial
servicesacrossawiderangeofdifferentbusinesses.She
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
DirectorofTheCityUKandmemberoftheBoardofTrustees
fortheAlzheimer’sSociety.MemberoftheBuilding
SocietiesAssociationCouncil.
Executive Director
Tom Ranger
BA Hons
Chief Financial Officer
Background and career
TomjoinedYBSfromSantanderUKplc,whereheworked
forsixteenyears,thelastsevenofwhichhewasUKGroup
Treasurer.Inadditiontohisexecutiverole,hewasaNon-
ExecutiveBoardDirectorofSantanderFinancialServices
plcandSeniorOfficerofSantanderInternational’sJersey
Branch.TomstartedhiscareeratNorthernRockplcin1999,
movingtoAlliance&Leicesterin2007,justpriortotheir
acquisitionbyBancoSantanderSAplcin2008.
Skills and experience
Tomhasover25years’experienceinfinancialserviceswith
significantexpertiseacrossUKretailbanking,specifically
withinfinanceandspecificallyTreasury,includingmarkets,
funding,capitalandliquiditymanagement,balancesheet
managementandplanning,interestraterisk,pensions,
stresstestingandinvestorrelations.
TomisalsoChairofAccordMortgagesLimited.
Governance>Our Board and Executive Team
Joined the
Society in 2024.
Chief Officer
Richard Bowles
MSc, BSc
Chief Risk Officer
Background and career
JameshasbeenwithYBSsince2016inrolesincluding
theGroupLeadforComplianceAdvisory,SeniorManager
inourMortgageAdviceTeamandmostrecentlyasthe
DirectorofCompliance,MLROandDPOresponsiblefor
secondlineoversightofComplianceandConductriskand
managementofthekeyregulatoryrelationships.Priorto
thishehashadrolesineachofthethreelinesofdefence
atFinancialServicesinstitutionsincludingLloydsBanking
GroupandAviva.
Skills and experience
Jameshasabroadrangeofaudit,riskandfinancial
experienceacrosseachofthethreelinesofdefencewithin
thefinancialservicesindustry.He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.
Background and career
RichardhasheldarangeofRiskleadershiprolesacross
manyofthemajorbanks,includingLloydsBankingGroup
andTSB.PriortojoiningYBSRichardwasChiefRiskOfficer
atCoventryBuildingSociety.Heisresponsibleforensuring
thatthereareappropriateproceduresandcapabilityforthe
managementofalltheSociety’s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over15years’experienceinretailbankingand
bringsabroadrangeofriskmanagementexperienceanda
proventrackrecordfordeliveringmajortransformation.
Joined the
Society in 2016.
Chief Officer
James Heslip
BA Hons, MSc
Chief Internal Audit Officer
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
5554
Governance>Our Board and Executive Team
Joined the Society in 2023. Joined the Society in 2024. Joined the Society in 2014.
Chief Officer Chief Officer Chief Officer
Fraser Ingram
MBA FCB
Chief Operating Officer
Holly Rankin
FCIPD
Chief People Officer
Thomas Simpson
BA Hons
Interim Chief Commercial Officer
Background and career
PriortojoiningYBS,FraserwasChief
DigitalandInnovationOfficeratVirgin
Money.Throughhiscareerhehelda
rangeofrolesincludingGroupChief
OperatingOfficer,ChiefInformation
OfficerandInnovationandChange
Director.BeforeVirginMoneyhis
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
PriortojoiningYBS,Hollyhasheld
rolesatBarclaysBank,whereshe
wasManagingDirectorHR,and
haspreviouslyheldtherolesof
HRdirector,communitybanksand
wealthatLloydsBankingGroupand
HeadofHRfortheretailnetwork
atSantanderUK.
Skills and experience
Hollyhasover28years'experience
inhumanresources,including
16yearsinfinancialservicesand
bringsawealthofexperiencein
shapingandleadingstrategicpeople
plans,coveringculturechange,
talentandsuccession,rewardand
leadershipcapability.
Background and career
PriortobecomingInterimChief
CommercialOfficer,Thomas
establishedandledtheYBS
CommercialMortgagesbusinessfor
around5years,transformingrisk,
product,process,peopleanddigital
capabilitiesandleadingthebusiness
expansion.Beforethis,Thomasheld
seniorriskrolesatYorkshireBuilding
Society,includingasCompliance
Director,MLRO,andDPO.AtDeloitte
LLP,hewasDirectorofRiskand
Regulation,leadingapracticeacross
theMidlandsandtheNorthof
England.PriortoDeloitte,Thomas
workedinstrategyandtransformation
atNavigantConsultingasaSenior
ConsultantinRetailBanking.
Skills and experience
Thomasbringsabroadrangeofskills
andexperience,gainedduringhis
timeinindustryandprofessional
servicesincludingcommercial
andP&Lleadership,strategy,risk
managementandtransformation.
Awordfromthe
BoardChair
Iampleasedtopresentmy
firstCorporateGovernance
reportsincebecoming
BoardChairinApril2024.
Ithasbeenaprivilege
tojointheBoardofsuch
alongestablishedand
purposefulorganisation.The
mutualvaluestheSociety
holdsdearhaveremained
centraltotheworkofthe
Boardanddecisionmaking
duringtheyear.
TheBoardplaysavitalrolein
representingtheinterestsofour
currentandfuturemembersand
ensuringwemaintainhighstandards
ofcorporategovernanceiskeytothe
Society’songoingsuccess.
Ourapproachtocorporate
governanceisbasedonthebest
practicesetoutintheprinciples
andprovisionsoftheUKCorporate
GovernanceCode(theCode)
publishedbytheFinancialReporting
Council(FRC).Thisreportexplains
howwehavecompliedwiththeCode
in2024,includingtheroleofthe
Boardandkeyactivitiesin2024.
Our Board
During2024wesaidfarewellto
twolongstandingBoardmembers.
JohnHeaps(mypredecessoras
BoardChair)steppeddownfrom
theBoardaftertheAnnualGeneral
Meeting(AGM)inApril2024.Alison
Hutchinson,ourViceChair/Senior
IndependentDirectorsteppeddown
fromtheBoardattheendofthe
yearafterovernineyearsofservice.
JennelleTillingalsosteppeddown
asaNon-ExecutiveDirectorafter
threeyears’service.Wethankeach
ofthemfortheirbroadanddiverse
contributionsovertheirrespective
yearsofservice.
WewerepleasedtowelcomePeter
BoleandJanetPopeasNon-Executive
DirectorsonourBoardinSeptember
andOctoberrespectively.Peterhas
broughtstrongaccountingknowledge
andcommercialexperience,together
withrelevantUKretailbanking
experienceandprovidesuswith
additionalcoverforourAudit
Committee.Janetbringsextensive
experienceinfinancialserviceswith
aparticularfocusonsustainability,
responsiblebusinessanddiversity
andinclusion.Sheisalsothefirst
chairofournewEnvironmentaland
SocialPurposeCommitteewhich
hasbeenformedwitheffectfrom
1January2025.
Duringtheyearwewerepleasedto
welcomeournewChiefFinancial
Officer,TomRanger,totheBoard
followingtheretirementofhis
predecessor,AlasdairLenman.We
thankAlasdairforhisserviceover
thepastsevenyearsasbothChief
FinancialOfficerandInterimChief
Executiveforaperiod.
DavidMorris,ourformer
ChiefCommercialOfficeralso
steppeddownfromourBoardin
September2024.
FollowingtheretirementofAlison
Hutchinson,twoofourlongstanding
Non-ExecutiveDirectors,Guy
BainbridgeandMarkParsons,
assumedtherolesofViceChair
andSeniorIndependentDirector
respectivelywitheffectfrom
1January2025.
Corporate
Governance
report
Annemarie Durbin
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
5756
Board composition and
other roles
AsaBoardwestronglybelieve
inthevalueofstimulating
diverseperspectivesinan
inclusiveenvironment.
WekeepthediversityofourBoard
underreviewthroughourBoard
GovernanceandNominations
Committeeandanupdateonour
progressduring2024isprovidedin
theCommittee’sreport.
OurBoardGovernanceand
NominationsCommitteealsokeeps
theskillsandexperienceofthe
Boardunderreviewand,when
reviewingourBoardSkillsMatrix,it
wasdecidedthatwewouldbenefit
frommorerecentandpracticalcyber
experiencetosupporttheBoard.
Asaresultwehaveappointedan
independentBoardCyberAdviser
whoreviewsallrelevantinformation
andwillattendatleastthreeBoard
meetingsduring2025toprovidehis
independentperspective.
Webelieveincreatingan
environmentwhere,overtime,
insocietyatlarge,therewillbea
broader,deeperandmorediverse
pooloftalenttoserveonboardsin
anon-executivecapacity.Tosupport
this,theBoarddecidedtoappoint
aBoardFellowinconjunctionwith
anorganisationcalledEmpowering
PeopleofColour(EPOC).Wehave
identifiedourfirstBoardFellow
whowillattendBoardmeetingsand
bementoredbyanexperienced
memberoftheBoardduring2025.
Thisindividualisofferinghisservices
probonoinexchangeforthe
experiencehewillgain.Thehopeis
that,followingthefellowshipperiod,
thisindividualwillbereadytojoin
anotherorganisation’sboardasa
fully-fledgedNon-ExecutiveDirector.
Succession planning
In2024wehavebeenparticularly
focusedonbothBoardandExecutive
successiontoensurewehavethe
rightcompositionnotjustnowbut
inthefuturetosupportthedelivery
ofOurStrategy.
Further details of our work
during 2024 can be found in
the Board Governance and
Nominations Committee report.
Ambitious culture
OurBoardandExecutiveCommittee
leadbyexampletocultivateand
embedourAmbitiousCulture.We
haveagreeda‘BoardCharter’which
setsoutthehigh-levelprinciples
thatwefollow.Thisunderpinsthe
Society’sfourkeybehaviours:care
aboutpeople,sayitstraight,make
ithappenandreachforbetter.Asa
Boardwemeasureourperformance
againsttheCharterattheend
ofeachmeeting.
Further details on our Ambitious
Culture can be found in the
Strategic report.
Board effectiveness
AstheSocietycontinuestogrow,
servingmoremembersand
customers,itisimportantthat
theBoard’sgovernancepractices
continuetoevolve.Attheendof
2023,weundertookanexternally
facilitatedBoardeffectivenessreview.
Theoutcomeofthishasinformedour
planstobuildupontheBoard’sstrong
governancefoundationsaspartofour
BoardEffectivenessActionPlan.
Takingintoaccountcorporate
governancebestpractice,wehave
adjustedhowourBoardspends
itstimetogethertoensurethatwe
arefocusedonthemostimportant
strategictrendsandfactorsthatwill
drivetheSociety’slong-termfinancial
strength,resilienceandprosperity
forourmembersovertheshortand
long-term.Thisalsomeansthat
eachoftheBoardCommitteeshas
assumedadditionaloversightduties.
Anotherimportantchangearising
fromthereviewhasbeenthecreation
ofournewEnvironmentalandSocial
PurposeCommitteereflectingthe
Board’scommitmenttooverseeing
keyareasrelatingtotheenvironment,
communityengagementand
socialpurpose.
Further details on our approach
to Board and Committee
effectiveness reviews, and the
outcomes from the 2023 and
2024 reviews, can be found
in the Board Governance and
Nominations Committee and
Corporate Governance reports.
Stakeholder engagement
and member value
AsaBoardandamutualwe
understandtheimportanceof
ensuringtheSocietydeliversMember
Valueandthatourstakeholder’s
voicescontributetoBoarddecisions.
Continuingtodevelopandstrengthen
ourunderstandingofourmemberand
colleagueschangingneedsisakeyto
ourworkasaBoardandthedelivery
oftheSociety’sStrategy.Inaddition
toourdedicatedNon-Executive
DirectorChampionsforMembers
andColleagues,ourBoardmembers
havespenttimeduringtheyearwith
colleagues,membersandcustomers
throughbranchandcallcentrevisits,
ColleagueListeningSessionsandYour
TimetoTalkEventsforourMembers.
ThisisinadditiontotheMembers,
MarketsandCompetitorsinsight
reportthattheBoardreceivesateach
Boardmeeting.
Further details on our
stakeholder engagement can
be found in the Corporate
Governance report.
2025 and Beyond
Lookingforwardto2025,theBoard
willcontinuetooverseethedelivery
oftheSociety’sStrategyandensure
theSocietyisservingtheinterests
ofourmembersthroughpromoting
financialwellbeing,supporting
ourcustomerstohaveaplaceto
callhomeanddeliveringmember
value.Tosupportthis,wewillbe
embeddingtheworkwehavedone
todevelopourBoardandCommittee
governanceframeworkandwill
continuetooverseetheembedding
ofourambitiouscultureacross
theorganisation.
Annemarie Durbin
BoardChair
Governance>Corporate Governance Report
Corporate Governance Statement
Forthe2024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,former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(AGM)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ensuredthe
ongoingcontinuityandstabilityoftheBoardduringthis
periodandsupporteditsongoingeffectiveness.MrHeaps
steppeddownattheendoftheAGMinApril2024.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
5958
Governance>Corporate Governance Report
Board
Chair: Annemarie Durbin
Collectivelyresponsibleforthelong-termsuccessoftheSociety.
Board Committees
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.
Remuneration
Committee
Audit
Committee
Board Risk
Committee
Board Governance
and Nominations
Committee
Environmental
and Social Purpose
Committee
(GroupRisk
Committeeto31
December2024)
(Establishedwith
effectfrom1January
2025)
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:
Annemarie Durbin
OverseesBoard
governance,including
composition,
successionand
appointment
processesfor
theBoard.
Chair:
Janet Pope
Oversees
theSociety’s
environmental
andsocial
purposeagenda.
The Terms of Reference for the Board and its Committees are available on our website.
Executive Committees
Executive Committee (‘ExCo’) Executive Risk Committee (‘ERC’)
Chair: Susan Allen, Chief Executive
Overseesanddirectsthemanagementofallaspectsofthe
Society.AllChiefOfficersaremembers.
Chair: Richard Bowles, Chief Risk Officer
Overseesdaytodayriskmanagementactivitywith
delegatedauthorityfromtheBoardRiskCommittee.
Board leadership and the Society’s purpose
Our Board and Committee architecture
Committee Changes
AtitsmeetinginDecember2024,theBoardagreedto:
•
EstablishanEnvironmentalandSocialPurposeCommitteeasanewBoardCommitteewitheffectfrom
1January2025assetoutabove.
•
RemovetheChair’sCommitteefromthegovernancestructure.TheChair’sCommitteewasanadhoc
committeewhichdealtwithanymattersdelegatedbytheBoardandwasnolongerrequiredasworking
practiceshavechanged.
Board and Committee Architecture
Review 2024
TheCommitteechangessetoutaboveformedpartofthe
outcomesofadetailedreviewofourBoardandCommittee
Architectureundertakenin2024.Thereviewtookaccount
oftheoutcomesofourexternalBoardandCommittee
effectivenessreviewin2023andbuiltonthesolid
foundationsinplacetocreateaframeworkwhichsupports
thedeliveryoftheSociety’sStrategyandensurestheright
topicsarecoveredattherightgovernancebodiestodoso.
TheBoardiscommittedtoensuringthatitstimeisdevoted,
asmuchaspossible,todebatingthekeystrategicchoices
andprioritieswhichpromotetheSociety’slong-term
interestsandthoseofourmembers,whilstensuringall
legal,regulatoryandotherstakeholderrequirementsare
metinthemosteffectiveway.
EachoftheCommitteeChair’shasbeenengagedin
theprocessandthereviewconsideredwhichkey
areasofstrategicoversightshouldbedelegatedtothe
BoardCommittees.
TheCommitteesTermsofReferencehavebeenupdated
toreflecttheoutcomesofthereviewandareavailable
onourwebsite.
Climate and environment governance
Assetoutabove,theBoardhasnowestablishedanew
EnvironmentalandSocialPurposeCommitteewhichwill
provideoversightoftheenvironmentalagenda.
DetailsoftheworkoftheCommitteewillbeincludedinthe
AnnualReportandAccountsfor2025.
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theSocietywithinaframeworkof
riskmanagement(includingapprovalofriskappetite).
•
Establishingthepurpose,valuesandstrategyofthe
Societytogetherwithasustainablebusinessmodel.
•
Oversightofthedevelopmentofandapprovingthe
desiredculture,monitoringhowthishasbeenembedded
andsettingthe‘tonefromthetop’.
•
OversightoftheSociety’soperations,supportedbythe
workofrelevantBoardCommitteesinaccordancewith
theirTermsofReference,including:
- deliveryofcustomeroutcomes;
- competentandprudentmanagement;
- soundplanningandriskmanagement;
- adequateandeffectiveinternalcontrols;
- adequateaccountingandotherrecords;
- compliancewithstatutoryandregulatoryobligations;
- adequatefinancialresources;and
- appropriateriskalignedremunerationsystems.
•
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
6160
Governance>Corporate Governance Report
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:
•
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.In2024thishasbeen
supportedbythereviewoftheBoardandCommittee
Architecturetoensureanappropriatestructureisin
placetoprovideoversightofthedeliveryoftheSociety’s
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andcustomers.Thisissupportedby
strongsuccessionplanningandongoingreviewsofBoard
compositionbytheBoardChairandBoardGovernance
andNominationsCommittee.
•
Strategy:ensuringtheSocietyhasacleardirectionwhich
enablesittoaddresscurrentandfutureopportunitiesand
challenges.
•
People:ensuringpoliciesandproceduresareconsistent
withtheSociety’sStrategy,purposeandbehaviours.
•
Culture:anAmbitiousCultureandstrongbehaviours
whichsupportthedeliveryofourpurposeandstrategy.
•
Fit for Growth:ensuringthattheSocietyiscapabilityled.
•
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considerationtheagreedriskappetite.
•
Compliance:goodcorporategovernanceensuresthatwe
meetlegalandregulatoryrequirementsandavoidany
consequencesofnotdoingso.
•
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andarenowunderpinnedbythe
newlyestablishedEnvironmentalandSocialPurpose
Committee.
•
Finance:ensuringstrongcapitalandliquidity
management.
Further information on our priorities, purpose and
behaviours can be found in the Strategic report.
Board activities in 2024
Boardmeetingsandotherrelatedactivitiesareplanned
inadvancetoensurethattherightmattersreceivethe
appropriateamountoftimeandattention.Eachmeeting
agendagenerallyincludesthefollowing:
•
ReportfromtheBoardChair.
•
ChiefExecutivereportsettingoutthekeyupdatesin
relationtoperformance,includinganythingwhichmaybe
affectingorcouldaffecttheSociety.
•
ChiefFinancialOfficerreport.
•
Member,MarketandCompetitorUpdate.
•
BoardCommitteeUpdates.
•
AtleastonekeyStrategicTopicfordiscussion/decision.
ExamplesofsomeofthekeyactivitiesoftheBoard
during2024aresetoutbelowtogetherwithkey
stakeholderimplications:
Activity Key stakeholder implications
Strategy discussions
Delivery of Our Strategy
and 2024 Priorities
C
M&C
G&R
I
P
CO
Strategic Growth Options
C
M&C
G&R
I
P
CO
Member Value
M&C
Key strategy updates, such
as our Brand Strategy
C
M&C
G&R
I
Budget, Corporate
Plan and One Plan
(our Transformation
Plan underpinning the
Corporate Plan and Budget)
C
M&C
G&R
I
P
CO
Performance, Members, Markets and Customers (in addition
to the updates considered at each meeting)
Reviewed and approved
the annual Consumer
Duty Assessment.
M&C
G&R
C
Colleagues
M&C
Members&Customers
G&R
GovernmentandRegulators
I
Investors
P
Partners
CO
Communities
Key
Duringtheyear,theBoardhascontinuedtofocusonthe
deliveryofournewStrategywhichwasannouncedin2023.
Thishasincludedtwostrategyfocussedsessionsduringthe
yearwhichhavecoveredareasincluding:
•
approvalofourOnePlan(TransformationPlan);
•
approvaloftheapproachtodevelopingandembedding
ourAmbitiousCulture;
•
theuseandapplicationofArtificialIntelligence,including
relevantBoardtraining;and
•
ourongoingapproachtomortgages,savings,commercial,
non-commerciallendingandstrategicgrowthoptions.
Engagement with stakeholders
OurBoardiscommittedtomaintainingastrongrelationship
withitsstakeholdersandrecognisestheimportant
contributionitmakestoachievingtheSociety’spurpose
anddeliveringitsstrategy.Thisincludesunderstandingthe
views,areasofinterestand/oranyconcernstheymayhave
aspartofBoarddecisionmaking.
FurtherdetailsofhowourBoardengageswithour
members,customersandcolleaguesaresetoutinthe
followingsections.
Inaddition,ourBoardalsoengageswithotherstakeholders
suchasdebtinvestors,regulators,partners(suchasbrokers,
agencyproprietors,tradeunions),industrybodiesand
communitiesasrequired.TheBoardconsidersupdatesin
relationtoregulatorymattersandinputsasappropriate
tothefollowing:
•
Responsetoconsultations.
•
Membershipofindustrybodiesandinvolvementin
industryconferencesandforums.
•
Regularupdatesinrelationtokeystakeholderactivities,
suchastoourcommunityintereststrategyandresilience
ofkeysuppliers.
•
Feedbackfromtradeunions(throughtheRemuneration
Committee).
•
Visitstobrokers.
AllBoarddecisionstakeaccountofthepotentialimpact
onstakeholderswitheachreporttotheBoardincluding,
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.
For more details on how the wider Society engages
with its key stakeholders see the stakeholder section
in the Strategic report.
Activity Key stakeholder implications
Finance, Capital, Liquidity and Risk
Approved the
Annual Report and
Accounts for 2023
C
M&C
G&R
I
P
CO
Approved the Half-Yearly
report for 2024
C
M&C
G&R
I
P
CO
Approved the Society’s
Risk Appetite for 2025
C
M&C
G&R
I
P
CO
Oversight and approval of
the annual Internal Capital
Adequacy Assessment
Process (ICAAP)
C
M&C
G&R
I
Oversight and approval
of the Internal Liquidity
Adequacy Assessment
Process (ILAAP)
C
M&C
G&R
I
Reviewed the approach and
approved the Operational
Resilience Self-Assessment
C
M&C
G&R
I
P
CO
People and Culture
Discussed the position
in relation to Workforce
Engagement to satisfy
itself that our colleague
voice framework continued
to be effective
C
G&R
Approved the approach
to the development
and embedding of our
Ambitious Culture
C
M&C
G&R
Governance
Approved the outcomes of
the Board and Committee
Architecture Review
C
M&C
G&R
I
P
CO
Approved the Board
Effectiveness Action Plan
including actions for 2024
C
M&C
G&R
I
P
CO
Approved Non-Executive
Director and Executive
Director appointments on
the recommendation of
the Board Governance and
Nominations Committee
C
M&C
G&R
I
P
CO
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
6362
Governance>Corporate Governance Report
Our members and customers
Asabuildingsociety,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,bothnowandinthefuture,andthisincludesusingtheirfeedback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2024onceagainwewereabletohavemembersjoiningusinpersonandonlinewiththoseonline
alsobeingabletovoteandaskquestions.Itisimportantthatourmembersareabletohavetheirsayat
ourAGMso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2024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theBoardinbalancingtheshortandlong-terminterests
ofourmembers.
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isouronlinecommunitywherememberscaninteractwithusandwecanlearnwhatis
importanttothemsowecancontinuetoimproveandmakesurewearegettingitright.Thecommunity
enablesmembersto:
•
Sharetheirviews:takepartinquickpolls,surveys,anddiscussionswithothermembers.
•
Beheard:havetheiropinionsheardbytherightpeopleinourSociety.
•
Helpusimprove:bytellinguswhatwecoulddobetterandwhattheywantustokeepdoing.
•
Makeadifference:understandingweareactingontheirfeedbackandthedifferencetheyaremaking.
Your Time
to Talk
WeholdYourTimetoTalkeventstoenablememberstohearfirst-handhowwearelookingafter
theirinterests.
InJune2024weheldanonlineYourTimetoTalkeventwherememberswereabletolistentoashort
presentationonSavingsTipsandHowISAscanhelp.Therewasalsoanopportunitytoaskquestionsin
aninteractivesessionwithourseniorteam,includingtheChiefCommercialOfficer,DirectorofMarketing
andDigitalChannels,DirectorofSavings,DirectorofMortgagesandDirectorofRetailDistributionand
Transformation.
InSeptember2024wetrialledacomplementaryapproachtoourYourTimetoTalkevents.Weasked
memberstosharewithusquestionsontopicsthatmattermosttothemandreceivedover1,400
questions.WethenhostedsomeQuestionandAnswersessionstorespondtothequestionswhichwere
usedacrossarangeofchannelsaspartofourmemberengagement.
Operational
visits
OurBoardrecognisesthecontributionvisitstoouroperationalareasmaketothecontinued
understandingofwhatismostimportanttoourmembersandcustomers.During2024thishasincluded:
•
Visitstoourcallcentreswheretheyhavemetcustomerfacingteams.
•
AspartoftheOctober2024Boardcycle,allBoardmembersengagedincalllistening.
•
Branchvisitsbyindividualdirectorswhichhaveprovidedtheopportunitytospeaktoourbranch
colleagues,membersandcustomers.
Other Otherareasoffeedbackinclude:
•
StandingBoardagendaiteminrelationtoMember,CustomerandMarketissues
•
NetPromoterScore(‘NPS’)tracking.
•
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.
Our colleagues
Wearecommittedtoensuringwe
haveaneffectivecolleaguevoice
frameworksowecanengagewith,
andlisten,tocolleaguesatalllevels
acrosstheSociety.
Oneofourprimaryfeedbackchannels
isourquarterlyColleagueForum.
Thishascolleaguerepresentation
fromacrosstheSociety,andAngela
DarlingtonwhoisourNon-Executive
DirectorforWorkforceEngagement
alsoattends.Angelahasheldthisrole
sinceJanuary2024.
AkeyroleoftheColleagueForumisto
helpinformbetterBoarddiscussions
anddecisions,ensuringcolleagues’
viewsareheardandconsidered.Itis
designedtoexplorefeedbackfrom
colleaguesonspecificBoardtopics
aswellastocaptureanyothertimely
feedbackcolleagueswouldliketo
share.OurColleagueForumcontinues
tobewellattendedbydedicated
representativesfromallareasof
theSocietywhocomethoroughly
preparedtoparticipatefullyin
discussions.TheadditionofColleague
NetworkChairsasattendees
continuestoensurewehaveastrong,
diverserepresentationateachforum.
AftereachColleagueForum,
representativessharetheoutputs
withtheirteams,andAngelaprovides
asummaryofcolleagues’views
toBoard.TinaHughes,Directorof
Marketing&DigitalChannels,and
ChairoftheColleagueForum,also
sharestheoutputswithour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ourSeniorLeadershipTeam
continuetorotatetheirattendance
ateachforumtodirectlyhear
colleagues’views.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
6564
Governance>Corporate Governance Report
SomeexamplesofhowColleagueForumfeedbackissupportingcolleaguesacrossYBSinclude:
Improving our intranet
WereceivedfeedbackattheColleague
Forumaboutourintranetandhowit
couldbeimproved.Thiswasfedback
directlyintoBoardandtheForumChair
playedakeyroleinescalatingthe
prioritisationfortheimprovements.In
late2023,wesuccessfullymovedour
intranettotheCloudandinJuly2024
weupgradedtothelatestversionof
thesoftware.Thishasnotonlyhelped
tomoderniseitslookandfeel,butit
ismuchmoreengagingforcolleagues
andhasbroughtimprovedfunctionality.
Usingthelatestversionalsoprovides
thefoundationsforfuturetechnical
developmentssuchaspersonalisation.
Small changes that make a real difference
OurColleagueForumwasengagedaspartofourworkto
provideagreatofficeenvironmentatourHeadOfficesite
atYorkshireDrive,andmakethebestofthespacewehave.
TheForumwasinvolvedinensuringthespacewouldnot
onlyhelpattractandretainthebesttalentbutalsothatit
wassomewherethatwastrulyinclusiveandaccessiblefor
allcolleaguesandpromotedwellbeing.Thishasincluded
providingmorespaceforcollaborationandlearningand
accessibledesksforthosecolleagueswhoneedthem.
Atthebeginningof2024,wechangedoursigninprocess
atheadofficesites,soleadershadtovouchforcolleagues
whohadforgottentheirpass.FeedbackatColleagueForum
highlightedfrustrationsamongstcolleagueswiththis
change.WesharedthisfeedbackwiththePropertyteam
andthepolicyrevertedbacktothepreviousprocedure,
wherebyanyteammembercanvouchforsomeonewhohas
forgottentheirpass.
Anothersmallchangewhichhasmadeabigdifferenceis
inrelationtocommunicationsaroundtheappointment
ofnewExecutiveCommitteemembers.Wehadseveral
appointmentsin2024,andalthoughSociety-wide
announcementsdidhappen,somecolleaguesfeltwe
couldhavedonemorelocalcommunicationswithinthe
relevantteams.Thisfeedbackhashelpedussharethe
importanceoflocalcommunicationsasafollow-upto
formalannouncements.
AlongsidetheColleagueForum,
wehaveseveralotherimportant
communicationchannelswhere
colleaguescansharetheir
viewsinconfidence:
•
Wehaveaflowofregular
engagementtemperaturecheck
surveystosupplementafull
engagementsurveyatyear-end.
•
Allcolleaguesareencouragedto
completeourannualDiversity,
EquityandInclusionsurvey.
•
Boardlisteningsessionscontinueto
beheldwithcolleaguestoraiseany
questionstheyhavedirectlywith
ourNon-ExecutiveDirectors.
•
Boardmembersmetwitharound
80colleaguesfromvarious
departmentsaspartofthe
October2024Boardcycle.The
eventprovidedtheBoardwiththe
opportunitytoheardirectlyabout
ourcolleagueslivedexperience
atYBSandenabledcolleaguesto
gainaclearersenseoftheroleand
focusoftheBoard.
•
Colleaguescanattendworking
lunchesand‘AskMeAnything’
sessionswithourExecutive
Committeeonaregularbasis.
•
WehaveadirectlinktoourChief
Executiveviaamailboxwitheach
messagereceivingapersonal
response.
•
Wehaveeffectivearrangementsin
placeforreportableconcernstobe
raisedunderourWhistleblowing
Policy,includingarangeof
channelsforindividualstoreport
concernsanonymouslyshould
theywishtheiridentitynottobe
revealed.
For further details see the
Whistleblowing section.
AllBoardandCommitteepapersare
structuredtoensuretheyinclude
detailsofhowcolleagueviewshave
beenconsideredtoinformany
recommendations,togetherwithany
potentialimplicationsforcolleagues.
TheBoardalsoreceivesanannual
assessmentandupdateonour
colleaguevoiceframework.
Our culture
OurBoardrecognisestheimportance
ofourorganisationalcultureandthe
profoundimpactithasoncolleagues
andcustomers,influencingthe
waywedothingsandoutcomes
throughoutthebusiness.Throughout
2024theBoardhasapprovedthe
approachtoandprovidedoversight
oftheworkbeingundertakento
developandembedour‘Ambitious
Culture’tosupportthedeliveryofOur
Strategy.Akeypartofthisprocess
hasbeentoensurethatthevoices
ofourcolleagueshavehadarolein
thisprocessprovidinginputtohelp
shapeourplans.
Workhasbeenundertakentodefine
ourAmbitiousCultureandunderstand
whatneedstobedonetodriveit
forwards.Thishasincludeddefining
thekeycharacteristicsthatunderpin
whatwemeanbyAmbitiousCulture,
ensuringourheadlinebehaviours
arealignedandidentifyingthekey
actionswhichwillhelpcreatethe
rightconditionsforsuccess.
Ourcultureandbehaviours
arepromotedthroughoutthe
organisationbyourBoardand
ExecutiveTeamandtosupport
this,theBoardandExecutive
Committeehaveagreedandadopted
aBoardandExecutiveCommittee
Charter.TheChartersetsoutthe
high-levelprinciplestheywillwork
to,underpinningtheSociety’s
behaviours,toactasaguideand
supporttheiractivities,discussions
anddecisionmaking.
WorkonourAmbitiousCulturewill
continueinto2025andtheBoard
willcontinuetomonitorandassess
progressonhowitisembedded
throughouttheorganisation.
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.The
currentWhistleblowingChampionis
oneofourNon-ExecutiveDirectors,
GuyBainbridge.
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
6766
Governance>Corporate Governance 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changestowhicharemonitoredbyourBoard
GovernanceandNominationsCommittee.
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
TherolesandresponsibilitiesoftheNon-ExecutiveandExecutiveDirectorsofourBoardaresetoutbelow:
TheSocietyhasalsoappointedaGroupSecretaryinaccordancewiththeRuleswhoisresponsibleforadvisingtheBoard
ChairandtheBoardasawholeonallcorporategovernancematters.
Non-Executive Directors
Board Chair
Vice Chair / Senior Independent
Director*
Non-Executive Directors
•
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approvalof
theSociety’sStrategy,Corporate
Plan,OnePlan,Budget,Risk
Appetite,CapitalandLiquidityPlans
andCulture.
•
Deputisesforandprovidessupport
andguidancetotheBoardChair.
•
Actsasanintermediaryforother
directors.
•
Leadstheperformanceevaluationof
theBoardChair.
•
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.
•
Usetheirownexperienceandskills
toconstructivelychallengethe
ExecutiveTeam.
* AspartofthereviewofBoardandCommitteeArchitectureitwasagreedtoseparatetheSeniorIndependentDirectorandViceChairintotwoseparateroleswith
effectfrom1January2025takingintoaccountthedifferentareasoffocus.
Executive Directors
Chief Executive Executive Director
•
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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.
Independence
AlltheNon-ExecutiveDirectorscontinuetobeconsideredindependentbasedontheguidanceintheCodeandassetoutin
the
OurBoardandExecutiveTeam
section.TheBoardChairwasconsideredtobeindependentonappointment.
AlisonHutchinson,SeniorIndependentDirector/ViceChairto31December2024,reached9yearsofserviceontheBoard
inFebruary2024.ItwasagreedthatshewouldremainontheBoardforashortperiodbeyondthistimeinordertoprovide
akeypointofstabilityandcontinuityduringtheprocessoftransitionfortheBoardChairroletoensurebothkeyrolesdid
notchangewithinthesametimeframe.InaccordancewiththeCode,theBoardconsideredtheongoingindependenceofMrs
HutchinsontakingintoconsiderationthatshewouldserveontheBoardforashort-timebeyondnineyearsfromherdateof
appointment.TheBoardagreedthatshewouldremainindependentinbothcharacterandjudgement,hadnoothersignificant
linkswiththeSocietyandwouldcontinuetomakeandeffectiveandvaluablecontribution.Inaccordancewithsuccession
plans,MrsHutchinsonsteppeddownfromtheBoardon31December2024.
Attendance at Board and Committee meetings
ThetablebelowshowsourdirectorsandthescheduledBoardandCommitteemeetingstheyattendedduring2024(where
theywereamemberduringtheyear)followedbythenumberofmeetingsthedirectorwaseligibletoattend.
Director Board
Board
Strategy
Board Committees
Chair's1 Audit
Board Governance
and Nominations Remuneration Board Risk^
Board Chair
Annemarie Durbin2 8/8 2/2 Nomeetings
requiredin20241
– 2/2 – –
John Heaps3 4/4 – Nomeetings
requiredin20241
– 2/2 – –
Non-Executive Directors
Guy Bainbridge 8/8 2/2 – 4/4 4/4 – 4/4
Peter Bole4 3/3 1/1 – 0/1 – – –
Angela Darlington 8/8 2/2 – 4/4 – – 4/4
Debra Davies 7/8 2/2 – – – 5/5 4/4
Alison Hutchinson5 8/8 2/2 Nomeetings
requiredin20241
– 4/4 5/5 4/4
Dina Matta 8/8 2/2 – – – 5/5 –
Mark Parsons 8/8 2/2 – 4/4 – – 4/4
Janet Pope6 2/2 1/1 – – – – –
Jennelle Tilling7 8/8 2/2 – – – 5/5 –
Executive Directors
Susan Allen 8/8 2/2 Nomeetings
requiredin2024
1
– – – –
Alasdair Lenman8 4/4 – – – – – –
David Morris9 5/5 1/1 – – – – –
Tom Ranger10 4/4 2/2 – – – – –
^ (GroupRiskCommitteeto31.12.2024)
1. Meetingsonlyheldwhenrequiredtoconsider
adhocmattersspecificallydelegatedtoitby
theBoard.TheChair’sCommitteehasbeen
removedfromtheBoardgovernancestructure
witheffectfrom1January2025.
2. AnnemarieDurbinbecameBoardChair
andChairoftheBoardGovernanceand
NominationsCommitteeon23April2024.
3. JohnHeapssteppeddownasChairanda
memberoftheBoardon23April2024.
4. PeterBolejoinedtheBoardandbecame
amemberoftheAuditCommitteeon1
September2024.
5. AlisonHutchinsonsteppeddownfromthe
Boardon31December2024.
6. JanetPopejoinedtheBoardon
29October2024.
7. JennelleTillingsteppeddownfromtheBoard
on31December2024.
8. AlasdairLenmansteppeddownfromtheBoard
on23April2024.
9. DavidMorrissteppeddownfromtheBoardon
2September2024.
10. TomRangerjoinedtheBoardon18June2024.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
6968
Governance>Corporate Governance Report
In2024,inadditiontothe
scheduledmeetingssetoutinthe
table,thefollowingformaladhoc
meetingswereheld:
•
OnemeetingoftheBoard
GovernanceandNominations
Committee.
•
TwomeetingsoftheRemuneration
Committee.
•
OnemeetingoftheBoardRisk
Committee(formerlyGroupRisk
Committee).
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.
TheBoardChair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:
•
TentimesbytheBoard.
•
TwotimesbytheBoardGovernance
andNominationsCommittee.
•
ThreetimesbytheAudit
Committee.
•
FourtimesbytheRemuneration
Committee.
Directors’ time
commitment and other
directorships
AllNon-ExecutiveDirectorsare
expectedtoensurethattheyhave
enoughtimefortheresponsibilities
oftheirroleandtosupportthis:
•
Availabilityandothercommitments
arereviewedandconsideredwhen
recruitingandpriortoappointing
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
2024thisincluded:
•
PeterBole,Non-Executive
Director–joinedtheSocietyin
September2024.
•
JanetPope,Non-Executive
Director–joinedtheSocietyin
October2024.
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RegisterofInterests.
NoneoftheExecutiveDirectorshave
heldanynon-executivedirectorships
inaFTSE100companyduring2024.
During2024areviewoftheBoard
andCommitteeArchitecturehas
beencompletedwhichwasapproved
bytheBoardinDecember2024.In
conjunctionwiththisanextensive
reviewofNon-ExecutiveDirectortime
commitmentandfeeshasalsobeen
undertaken,includinganexternal
benchmarkingexercise.Asaresultof
thereview,andtakingintoaccount
theincreasedrequirementsofthe
Non-ExecutiveDirectorroleandthe
outcomesofthetimecommitment
andfeesreview,thenon-conflicted
membersoftheBoard(ie.the
ExecutiveDirectorsandBoardChair)
agreedarevisedtimecommitmentfor
allNon-ExecutiveDirectors(excluding
theBoardChair)togetherwiththe
associatedfeeseffectivefrom1
January2025.Revisedlettersof
appointmenthavebeenissuedtoall
Non-ExecutiveDirectors.
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.
Board composition
DetailsofthecompositionoftheBoardaresetoutbelowforboththeperiodend,31December2024,and26February2025
notingthatAlisonHutchinsonandJennelleTillingsteppeddownfromtheBoardon31December2024.
Tenure
AsummaryofthetenureofthecurrentBoardissetoutinthe
Boardcomposition
section.
Further information in relation to Inclusion and Diversity can be found in the Board Governance and Nominations
Committee report.
Gender balance Board Ethnicity Board Tenure
67%33% 11
1
58%
8.5%
8.5%
25%
60%40% 9
1 10%
20%
70%
Female
Male
Whitebackground
Minorityethnicbackground
0-2Years 3-4Years
5-7Years 8-9Years
As at 31
December
2024
As at 31
December
2024
As at 31
December
2024
As at 26
February
2025
As at 26
February
2025
As at 26
February
2025
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
7170
Governance>Corporate Governance Report
Annual Board effectiveness review 2023
AsreportedintheAnnualReportandAccountsfor2023,anexternalBoardeffectivenessreviewoftheBoardandits
Committeeswasundertakenin2023facilitatedbyLintstockConsulting.TheoutcomeswerediscussedbytheBoardatits
meetinginJanuary2024andwereusedtoinformtheBoardEffectivenessActionPlanactionsfor2024.Keythemesforthe
2024ActionPlantogetherwithprogressmadeduringtheyeararesetoutbelow:
Annual Board effectiveness
review 2024
Asanexternalreviewwascompleted
in2023,aninternaleffectiveness
reviewprocesswasundertaken
in2024.Takingintoaccountthe
detailedexternalreviewundertaken
byLintstocktogetherwiththework
beingundertakentodelivertheBoard
EffectivenessActionPlan,itwas
agreedthataninternalreviewwould
becompletedinQuarter42024.The
purposeofthereviewwastofocus
ontheactionsidentifiedandprogress
madeagainsttherecommendations
fromtheexternalreview.
Theoutcomesofthereviewwere
discussedattheBoardmeetingin
January2025andtherewereno
significantissuesarising.
Furtherdetailswillbeprovidedinthe
AnnualReportandAccounts
for2025.
For further details on the
process followed for the Board
and Committee evaluations
please see the Board
Governance and Nominations
Committee report.
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whichsets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2024keyBoardtrainingand
developmenttopicsincluded:
•
WaysofWorking
•
CyberSecurity
•
ExternalMarketsandEnvironment
•
ArtificialIntelligence
TheformalBoardTrainingPlan
isalsocomplementedbyself-
directedandcontinuallearningby
directorstogetherwithoperational
visitssuchascolleaguelistening
andbranchvisits.
InordertoprovidetheBoardwith
additionalsupport,in2024the
BoardGovernanceandNominations
Committeeagreedtheappointment
ofanindependentCyberSecurity
Adviser.Whilsttheworkcompleted
torefreshtheBoardSkillsMatrix
identifiedthattherewasstronglevel
ofexperienceontheBoard,itwas
agreedthattheappointmentwould
supplementthoseexistingskillsand
ensuretheBoardhasaccesstorecent
andrelevantexperiencetogetherwith
independentadvice.
Theme Background Update
Succession
planning
Continuingtoensure
robustsuccessionplanning
andinductionisinplace
forallBoardandExecutive
Committeeroles.
Non-Executive,ExecutiveandChiefOfficersuccessionplanning
areakeypartoftheroleoftheBoardGovernanceand
NominationsCommitteewhichreviewsupdatesateachmeeting
andidentifiesanyactionsarising.
WorkhasbeenundertakentorefreshtheBoardSkillsMatrixin
2024tosupporttheCommitteeinitswork.
Board and
Executive
Committee
Ways of
Working
CreatingaBoardand
ExecutiveCommittee
Chartersettingout
WaysofWorking.
AnewBoardandExecutiveCommitteeCharterhasbeenagreed
in2024settingoutkeyWaysofWorkingunderpinningthe
Society’sbehaviours.
Board and
Committee
Architecture
Ensuringthatthereisspace
onBoardandCommittee
agendasforhighquality
debatefocussedonkey
strategicitems.
AfullreviewofBoardandCommitteeArchitecturehasbeen
completedduring2024andtheoutcomesapprovedbytheBoard
forimplementationfrom1January2025.Furtherdetailonthe
reviewisprovidedearlierinthisreport.
Executive and Non-Executive Director
Induction Plans
Full,formal,andtailoredinductionplansareputinplace
forallExecutiveandNon-ExecutiveDirectorsonjoining
theBoard,basedontheirskillsandexperience.ForNon-
ExecutiveDirectorsthisincludesaspecificinduction
programmeforanyCommitteestheywillbejoining.Role
specificinductionsarealsoarrangedwhereadirectortakes
onanewroleorCommitteemembershipasappropriate.
TheBoardGovernanceandNominationsCommittee
monitorsthecompletionofallExecutiveandNon-Executive
Directorinductionplans.
For2024thathasincluded:
•
CompletionoftheinductionplanforAnnemarieDurbin,
BoardChair.
•
InductionPlanforPeterBoleasbothaNon-Executive
DirectorandmemberoftheAuditCommittee.
•
InductionPlanforJanetPopeasaNon-ExecutiveDirector.
•
InductionPlanforTomRangerasChiefFinancialOfficer
andExecutiveDirector.
Allcurrentinductionplanswillcontinuetobemonitored
untilcompletionin2025.
MoreinformationonourBoardisavailableinothersections
ofthisdocument:
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
BoardRiskCommittee(formerlyGroupRiskCommittee)
reviewstheeffectivenessoftheriskmanagement
framework.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BoardChair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theBoard’sapprovalandisreviewedbythe
ExecutiveDirectorsandtheBoardChaironly.
Annemarie Durbin
BoardChair
26February2025
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
7372
Iampleasedtointroducemyfirstreport
sincebecomingtheChairoftheBoard
GovernanceandNominationsCommittee.
TheCommittee'sroleiscriticaltoensurethattheBoard
hastherightgovernancestructure,skills,knowledge,
experience,diversity,andsuccessionplanstodeliveron
theSociety'spurpose,visionandstrategy.
In2024therehasbeenparticularfocusonBoard
successionwiththreeNon-ExecutiveDirectorsand
twoExecutiveDirectorssteppingdownfromtheBoard
duringtheyear.TwoNon-ExecutiveDirectorsandone
ExecutiveDirectorjoinedtheBoardandweappointedan
independentBoardCyberSecurityAdviser.Weupdated
andactivelyutilisedtheBoardSkillsMatrixtoassist
ustoidentifytheskillsthatweneededastheBoard's
compositionevolved.
Tosupportthedevelopmentofabroaderarrayofdiverse
BoardreadycandidatesintheUK,wepartneredwith
EmpoweringPeopleofColour(EPOC)andKornFerryto
identifyandappointaBoardFellowwhowillattendand
participateinBoardmeetingsduring2025.
Duringtheyear,wereviewedtheSociety'sBoardand
Committeegovernancestructures.Thisincludedthe
formationofanewBoardCommitteethatwillfocuson
theimportanttopicsofenvironmentalsustainabilityand
socialpurpose.AteachBoardmeeting,wemadespace
todiscusskeystrategictopicswhilsttaskingeachofthe
BoardCommitteestooverseeimportantrisk,governance
andcontrolmatters.
Weplantoconsolidateandembedthechangesmade
thisyearduring2025.InadditiontheCommitteewill
assumeoversightresponsibilitiesfortheSociety's
executivegovernancestructurestoensurethatthere
continuestobeeffectivelinkagesbetweenBoardand
Executivelevelgovernance.
Annemarie Durbin
BoardGovernanceandNominationsCommitteeChair
Awordfromthe
BoardGovernance
andNominations
CommitteeChair
Board Governance and Nominations
Committee members and meetings
ThemembersoftheCommitteeduring2024were:
Annemarie Durbin
Board Chair
*JoinedtheCommitteefrom1January2025followingtheBoardand
CommitteeArchitecturereview.
AlisonHutchinson(formerSeniorIndependentDirector/ViceChair)was
amemberoftheCommitteeto31December2024whenshestepped
downfromtheBoard.
JohnHeaps(formerBoardChair)wasChairoftheCommitteeto23April
2024whenhesteppeddownfromtheBoard.
Guy Bainbridge
Independent Non-Executive
Director/ Vice Chair
(from 1 January 2025)
Mark Parsons *
Senior Independent Director
(from 1 January 2025)
Angela Darlington *
Board Risk Committee Chair
(formerly Group Risk Committee)
For more details on the Board and Committee
Architecture review see the Corporate
Governance report.
ThemajorityofmembersoftheCommitteeareandwill
continuetobeindependentNon-ExecutiveDirectors
inaccordancewiththeUKCorporateGovernance
Code(theCode).
Onlymembersofthe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heldfourscheduledmeetingsin2024and
onead-hocmeetingtodiscussExecutivesuccession.
Details of the number of scheduled Committee
meetings attended by each member is available in the
Corporate Governance report.
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,theBoard’s
DiversityStatementandtheBoardSkillsMatrix.
•
Overseeingsuccessionplanningfortheexecutiveand
seniorleadershipteams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,ExecutiveDirectorsandotherkeyBoardroles.
•
Agreeing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.
FollowingthereviewofBoardandCommitteeArchitecture,
from1January2025theCommitteewillalsobe
responsiblefortheoversightofsubsidiarygovernance,
executivegovernanceandtheappointmentofPension
SchemeTrusteeDirectors.
Further detail on the role and responsibilities of the
Committee can be found in the terms of reference
which are available on our website.
Further information in relation to Board training and
conflicts of interest can be found in the Corporate
Governance report.
Corporate governance
TheCommitteeisresponsiblefortheoversightofBoard
governanceandensuringweworkwithinastrongcorporate
governanceframework.During2024thishasincluded:
•
LeadingonthereviewofBoardandCommittee
ArchitectureonbehalfoftheBoard.Furtherdetailsonthe
BoardandCommitteeArchitecturereviewcanbefoundin
the
CorporateGovernancereport
.
•
AnnualreviewoftheSociety’scompliancewiththeCode
(asitappliestoabuildingsociety).
•
ReviewtheCorporateGovernancereportandtheBoard
GovernanceandNominationsCommittee’sreportand
recommend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agreedorrecommended
totheBoardasappropriatetoensurethecorporate
governanceframeworkisbasedonbestpractice,
includingchangestotheCodepublishedbytheFinancial
ReportingCouncil(FRC)inJanuary2024.
•
OversightoftheBoardEffectivenessActionPlan
monitoringdeliveryofthekeyactionsfor2024whichwill
continuetostrengthentheBoardgovernanceframework.
Succession planning
TheBoardremainscommittedtoensuringithastheright
compositionbothnowandinthefuturetoenableitto
providetherightoversighttosupportthedeliveryofOur
Strategyandthelong-termsuccessoftheSociety.The
BoardGovernanceandNominationsCommitteeworks
onbehalfoftheBoardtokeepunderreviewthesize,
compositionandskillsmixofourBoardanditsCommittees.
TheCommitteeensuresthateffectivesuccessionplans
areinplacetoensurethatanyimpactonBoardcontinuity
isappropriatelymanagedduringperiodsoftransition,
particularlyinrelationtokeyroles.Thisincludesensuring
futurerecruitmentrequirementsforNon-Executive
Directorsareplannedandreflecttheongoingandfuture
skillsrequirementsoftheBoard.
Board Governance
and Nominations
Committee report
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
7574
Governance>Board Governance and Nominations Committee Report
TheBoardGovernanceandNominationsCommitteeuses
arangeofinformationtosupportitsworkinrelationto
successionplanningincluding:
throughtheappointmentprocessforChiefOfficerroles
andthedevelopmentofstrengthenedsuccessionplans
andtalentpipelines.Thiswillcontinuein2025asthe
CommitteesupportstheBoardinprovidingoversightofthe
effectivenessoftheExecutiveTeam.
Recruitment of Non-Executive Directors,
Executive Directors and Key Board roles
TheCommitteeleadstherecruitmentofnewNon-Executive
andExecutiveDirectorsonbehalfoftheBoardensuring
robustrecruitmentandappointmentprocessesare
followed.Allrecruitmentisundertakentakingaccountof
successionplansandthecurrentandfuturecomposition
requirementsoftheBoardanditsCommittees.During
2024,theCommitteehasalsoledtheprocessesforthe
appointmentofaBoardCyberSecurityAdviserandBoard
FellowinpartnershipwithEPOC.
Non-Executive Directors
In2024recruitmentprocesseswereundertakenfortwo
newNon-ExecutiveDirectors.Foreachappointment,
theCommitteeagreedapersonspecificationsettingout
thekeyrequirementsfortheroleandacomprehensive
recruitmentprocesswascompleted,includingformal
interviewsandmeetingswithkeyBoardstakeholders.
AsaresulttheCommitteerecommendedthefollowing
appointmentstotheBoard:
•
Peter Bole–whobroughtstrongaccountingknowledge
andcommercialexperience,togetherwithrelevant
UKretailbankingexperience,totheBoardandfurther
strengthenedthecompositionofourAuditCommittee.
•
Janet Pope–whobroughtextensiveexperiencein
financialserviceswithaparticularfocusonsustainability,
responsiblebusinessandinclusionanddiversity.
RussellReynoldsAssociateswasappointedtolead
thesearchwhichidentifiedPeterBoleasthepreferred
candidate.TheyhavepreviouslyassistedtheSocietyin
therecruitmentofAnnemarieDurbin,BoardChairin2024;
DebraDavies,ChairofRemunerationCommitteein2024;
andGuyBainbridge,ChairofAuditCommitteein2018.
RussellReynoldsissigneduptotheEnhancedVoluntary
CodeofConductforExecutiveSearchFirmswhichmeets
thepreferredapproachforYBSassetoutintheBoard
DiversityStatement.
Asageneralrule,theCommitteewilluseanexternal
searchagencyand/oropenadvertisingtoassistin
Non-ExecutiveDirectorrecruitmentprocesses.However,
therearesomecircumstanceswhereotherprocessesare
deemedappropriate.
Forexample,theprocesswhichidentifiedJanetPopeas
thepreferredcandidatewasinternallyled,supportedby
amarketmappingexercise.Thiswasduetothespecialist
natureoftherequirementsfortherolewhichwasintended
tobetheChairofthenewEnvironmentalandSocial
PurposeCommittee(formedwitheffectfrom1January
2025).TwocandidateswereinterviewedwithJanet
emergingasthepreferredcandidate.AswithanyBoard
appointment,externalreferenceswereprovidedbefore
Janet’sappointment.
TheCommitteecontinuedtooverseesuccessionplanning
in2024,forNon-ExecutiveDirectorsthisincluded
takingaccountofthetenureofexistingdirectorsand
currentandfutureskillsrequirementswhilstbalancing
theneedforstabilityandcontinuityduringaperiodof
transitionforkeyroles.
During2024theCommitteehadanimportantrole
inprovidingoversightofsuccessionplanningforthe
ExecutiveCommittee,supportingtheChiefExecutive
Board Skills
Matrix
Basedonaself-evaluationby
directorsoftheirskillsand
experience.Theinformationthis
providessupportstheCommittee
initssuccessionplanningand
recruitmentexercisestoensure
theBoardanditsCommitteeshave
theskillstheyneed.In2024the
Committeecompletedadetailed
reviewoftheapproachtotheSkills
Matrixtoensureitcontinuedto
providekeyinsightintothecurrent
balanceofskillsandexperience
toinformfuturerecruitmentand
successionplanning.
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 Diversity
Data
SettingoutourBoard’s
commitmentstoinclusionand
diversityandunderstandingthe
compositionofourBoard.
Non-
Executive
Director
Succession
Timeline
Settingoutappointmentdates,terms
ofofficeandexpectedretirement
datesforNon-ExecutiveDirectors
includingkeyrolessuchastheBoard
andCommitteeChairs.
Chief Officer
and Director
Succession
Plans
EnablingtheCommitteetohave
oversightofthetalentpipelinefor
seniorrolesandunderstandany
opportunitiesorrisks.
Contingency
Planning
Procedure
WhilsttheCommitteemonitorsand
plansforfuturesuccessionplanning
itrecognisesthatemergency
situationscouldarise.Assuchithas
anagreedContingencyPlanning
Proceduretoensureplansarein
placeforunexpectedcircumstances.
Executive Directors
During2024theCommitteeoversawthe
recruitmentprocessforaChiefFinancial
OfficerandExecutiveDirectortosucceed
AlasdairLenmanfollowinghisretirement.
Followingthedecisiontocommencea
recruitmentprocess,CarbonLeadership
LLPwasappointedtoleadthesearch.
CarbonLeadershipdoesnothaveany
previousconnectionswiththeSociety
inthisrespect.
Arobustrecruitmentprocesswas
undertakenincludingalongandshort-
listingprocess,firesidechats,formal
interviewsandmeetingswithcurrent
Boarddirectorstogetherwithanexternal
assessmentprocess.TomRangerwas
identifiedasthepreferredcandidate
bringingover25years’experiencein
financialserviceswithdeepexperience
acrossallareasofTreasury,including
funding,capitalandliquiditymanagement,
investorrelationsandenterprise-wide
stresstesting.
Other roles
AspartoftheongoingreviewoftheBoard
SkillsMatrixandBoardcompositionitwas
agreedthat,whilsttherewasastronglevel
ofexperienceontheBoardinrelationto
cybersecurity,anewBoardCyberSecurity
Adviserwouldbeappointedtosupplement
thisandensuretheBoardhadongoing
accesstorecentandrelevantexperience.
TheCommitteeledtheprocesstoseek
anappropriateindependentadviserand
asaresultitwasagreedtoappointColin
SlaterwitheffectfromSeptember2024.
Colinhasbroughtsignificantexperience
inrelationtocybersecurityandwillact
asanindependentvoicefortheBoardto
considerriskandresiliencechallenges.
In2024theCommitteeagreedtopartner
withEPOCwithaviewtoparticipatingin
theirBoardFellowshipprogramme.Korn
FerryhavesupportedtheSocietyinthe
processasarecruitmentanddevelopment
partnerbringingwiththemastrong
understandingofourvalues,behaviours
andculture.Followingacomprehensive
process,theCommitteeagreedthe
appointmentofapreferredcandidate.The
BoardFellowwillattendandparticipatein
Boardmeetingsduring2025.
Details of the induction process
for Non-Executive and Executive
Directors 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wasappointedto
supportthesearchforanewNon-Executive
DirectorandCarbonLeadershipforan
ExecutiveDirectorandbotharesigned
uptothe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2024was67%andexceeded
thetarget.FollowingAlisonHutchinson
andJennelleTillingsteppingdownfrom
theBoardon31December2024,the
percentageofwomenontheBoardasat26
February2025is60%.
Forprioryearsseethe
Boardcomposition
sectionofthe
CorporateGovernancereport
.
At least one of
the senior Board
positions (Chair,
Chief Executive
Officer or Senior
Independent
Director) should be
women
Asat31December2024allthreesenior
Boardpositionswereheldbywomen.
FollowingAlisonHutchinsonsteppingdown
fromtheBoardon31December2024,and
assuchherroleasSeniorIndependent
Director,asat26February2025twosenior
Boardpositions(ChairandChiefExecutive
Officer)wereheldbywomenandthetarget
continuedtobemet.
At least one member
of the Board should
be from an ethnic
minority background
excluding white
ethnic groups
TherewasonememberoftheBoardfrom
anethnicminoritybackgroundasat31
December2024(andasat26February2025)
and,assuch,thetargetisbeingmet.
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
7776
Governance>Board Governance and Nominations Committee Report
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2024(andforcomparison2023):
Board and Committee
effectiveness reviews
TheBoardGovernanceand
NominationsCommitteeagreesthe
annualeffectivenessreviewprocess
fortheBoardanditsCommittees.
Asanexternalreviewwascompleted
in2023inaccordancewiththeCode
whichrequiresanexternalreview
everythreeyears,itwasagreedthat
aninternaleffectivenessreview
processbecompletedfortheBoard
anditsCommitteesin2024basedon
aquestionnaireapproach.
Further details on the
appointment of the approach to
the review can be found in the
Corporate Governance report.
Board Chair
OurSeniorIndependentDirector
meetswithourBoardChairtwicea
yearonbehalfofourBoardtoreview
theChair’sperformance.Thereview
incorporatesfeedbackfromkey
stakeholdersincludingtheExecutive
andNon-ExecutiveDirectors.
Theannualreviewfor2024was
completedbyAlisonHutchinson,
asSeniorIndependentDirector,in
December2024priortoherstepping
downfromtheBoard.Theoutcomes
werereportedtotheDecember
2024Boardmeetingwithoutthe
BoardChairpresent.
Non-Executive Directors
TheBoard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BoardChairinthecase
oftheChiefExecutive),against
agreedobjectives.
TheBoardChairmeetswith
theNon-ExecutiveDirectorsat
leastannuallytoconsiderthe
performanceofmanagementandthe
ExecutiveDirectors.
Board Governance and
Nominations Committee
effectiveness review
Followingtheexternalreview
completedbyLintstockin2023,the
Committeeundertookaninternal
effectivenessreviewin2024based
onaquestionnaireapproach.
TheCommitteeconsideredthe
outcomesofthe2024effectiveness
reviewatitsmeetinginJanuary2025.
Therewerenourgentorsignificant
actions,however,theCommitteehas
identifiedthefollowingareasfor
focusduring2025:
•
ContinuedoversightofExecutive
Succession.
•
Oversightoftheeffectivenessof
thenewBoardandCommittee
Architecture.
•
Developmentofitsnewrolein
respectofExecutiveGovernance
oversight.
Annemarie Durbin
BoardGovernanceandNominations
CommitteeChair
26February2025
For more details on our colleagues and inclusion and diversity please see the Strategic report.
31 December 2024
%
31 December 2023
%
Executive Committee
TheLeadershipTeamimmediatelybelowourBoard(assetoutinthe
UKCorporateGovernanceCode)
28.6 42.9
Senior Managers
OurcolleaguesinrolesGradeEorabove(inaccordancewithour
commitmentsundertheWomeninFinanceCharter)
49.1 49.2
All Colleagues 60.4 61.1
Awordfromthe
Chairofthe
AuditCommittee.
Iampleasedtopresentour2024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progressinstrengtheningtheGroup'scontrol
environmenttomeetexternalthreatsandregulatory
requirements,andtoprotectourmembers’interests.We
havealsoconsideredtheimpactofthechangesinsenior
managementoftheGroupoverthelasttwoyears,and
whatweneedtobefitforpurposeforourfuture.We
continuedtooverseedevelopmentsinourinternalaudit
function,includingprogressagainstitsstrategicpriorities
andtheresultsofitsqualityassuranceprogramme.
Wehaveremainedfocusedontheimpactsofthe
economicenvironment,notablyinterestrates,inflation,
andunemployment,andregulatoryandlegislative
developmentsuponourcurrentandfuturebusiness.The
Boarddelegatedresponsibilityfortheoversightofthe
Group'sannualEnvironmental,SocialandGovernance
(ESG)ReporttotheCommitteein2023andweapproved
the2023reportinJune2024,followingtheintroduction
ofaregularCommitteemeetingtomeettheESG
Reporttimetable.
In2025,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
26February2025
Audit
Committee
report
Audit Committee membership
ThemembersoftheAuditCommitteeare:
Guy Bainbridge
Committee Chair
Independent Vice Chair
Mark Parsons
Senior Independent
Non-Executive Director
(from 1 January 2025)
Peter Bole
Independent
Non-Executive Director
Angela Darlington
Independent
Non-Executive Director
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
7978
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FinancialOfficer,ChiefInternalAudit
Officerandtheexternalauditorwereinvitedtoattend
allmeetingsin2024,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2024.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.WealsousedtheWrittenResolutionprocessthree
timeswheremattersrequiredreviewandapprovaloutside
oftheplannedmeetingschedule.
Details on the number of meetings attended by each
of the Audit Committee members during 2024 are
shown in the Corporate Governance report.
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.
The Code was updated in 2024 and you can find out
more about the Code, and how it applies to building
societies, in the Corporate Governance report.
In2024,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.TheCommittee
welcomedtheappointmentofPeterBole,whojoined
theSocietyandAuditCommitteeinSeptember2024.
Peter’srecentandrelevantfinancialservicesexperience
willensureourcontinuingstrongcompliancewiththe
Coderequirement,bringingsignificantfinancialservices
experienceintheRetailBankingandInsurancesector,
withparticularexperienceduringperiodsofgrowthand
transformation.
TheAuditCommitteebenefitsfromadiverserange
ofexpertiseintheareasofauditing,finance,riskand
transformation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 Board and
Executive 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.You
canfindthemonourwebsite.
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.
Governance>Audit Committee Report
Significant financial reporting matters considered by the Audit Committee since the last
Annual Report and Accounts
Matters
Considered
Key Activities 2024
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.
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.Thegeneraloutlook
oftheeconomyin2024hasbeenpositiveandrelativelystablewhencomparedto2023.The
Committeehaveconsideredtheexternaleconomicenvironmentandthepotentialfutureimpacts
onmembersandupdatedeconomicassumptionshavebeenappliedtotheECLmodelreflecting
thissteadierenvironment.
Considerablereviewanddiscussionshavebeenhadaroundassumptionsforbasecase,upside
anddownsidescenarios,aswellasforasevereeconomicdownturn,andhavebeenagreed.The
Committeeconcurredwithmanagementthatthescenariosusedreflectedanappropriaterange
ofassumptionsandtheupdated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.
Thecontinuedimpactofraisedinterestratesonaffordabilitywhenrefinancingattheendof
significantlylowerfixedrateproductshasbeenafocusareafortheCommittee,withtheGroup's
affordabilityPMAchallengedtoensuretheapproachremainedfitforpurpose.
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throughoutthisreportingperiod.
Thereisalevelofunderprediction,specificallyintheprobabilityofdefault(PD)calculation,
inherentinthefourthgenerationmodelsandPMAshavebeenraisedtocorrectthis.Onereflects
thelimitedsensitivitytothedifferenteconomicscenariosovertheavailablehistory.Thenarrow
rangeinaveragePDestimatesacrossthevariousscenariosused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2023.
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.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continues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AnnualReportandAccountsreviewand
approvalprocess.
TheCommitteewassatisfiedthattheimpairmentprovisionandthedisclosuresprovidedinthe
financialstatementswereappropriate.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
8180
Governance>Audit Committee Report
Matters
Considered
Key Activities 2024
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.
Twonewhedgestrategieshavebeeninceptedin2024toreducethefairvalue,andhenceprofit,
volatilityseeninpreviousyears.Historically,themostsignificantsourceoffairvaluegains
andlosseshasbeenfrombothpay-andreceive-fixinterestrateswapsnotplacedintohedge
accountingrelationships;aproportionoftheseswapsarenowdesignated.
Currentlynotallunmatchedinterestrateswapscanbedesignatedintoahedgerelationship.
However,investigationsareon-goingintohowtoformallydesignatetheremainingunmatched
interestrateswapstomitigatefurtherthefairvaluevolatility.
TheCommitteeissatisfiedthattheamountsrecognisedinthefinancialstatementsare
appropriatelystated.
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),including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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.
Significant financial reporting matters considered by the Audit Committee since the last
Annual Report and Accounts
Matters
Considered
Key Activities 2024
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dateofapprovalofthisreport.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2027.
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.
Other significant reporting matters
considered by the Audit Committee since
the last Annual Report and Accounts
In2024theCommitteeapproved,forthefirsttime,the
2023Environmental,SocialandGovernance(ESG)Report
(theESGReport).Thisfollowed,inlate2023,theCommittee
consideringtheobjectives,structureanddraftkey
messagesofthe2023ESGReport,aswellasthetimeline
andgovernanceprocessforitspublication.InApril2024
theCommitteemettoreviewanddiscussthe2023ESG
Reportanditsdeliberationstookintoconsiderationthe
controlsandprocessesimplementedtoensuretheaccuracy
andcredibilityofthedataandmessagespresentedwithin
theESGReport.TheCommitteeconsiderednewcontrols
thathadbeenintroducedandtheworkthatwasbeing
undertakentoalignthecompilationoftheESGReportwith
theAnnualReportandAccountstimetable,workonwhich
willcontinueinto2025.
TheCommitteeapprovedthe2023ESGReportinJune
2024.TheCommitteeinNovember2024beganitsreview
ofthe2024ESGReport,againlookingattheobjectives,
structure,keymessages,timelineandgovernance
processes.The2024ESGReportwillbemoreclosely
alignedtothepublicationofthe2024AnnualReportand
Accounts,withaviewtobeingfullyalignedforthe2025
report.TheCommitteealsoconsideredtheimpactofthe
creationofanEnvironmentalandSocialPurposeCommittee
effectivefromthe1January2025,whichiscoveredin
moredetailinthe
CorporateGovernancereport
.The
EnvironmentalandSocialPurposeCommitteewilloversee
theSociety’senvironmentalandsocialpurposeagendaand
willcontributetotheAuditCommittee’soverallapproval
oftheESGReportbyprovidingtimelyandscheduledinput
intothe‘environmental’and‘social’aspectsoftheESG
Report.Goingforwardthe‘governance’sectionswillbe
recommendedforapprovalbytheBoardGovernanceand
NominationsCommittee.TheCommitteewillcontinueto
monitortheprogresstodevelopasingleprocessforboth
theESGReportandtheAnnualReportandAccountsand
willseekupdatesin2025toensurethatgoingforwardboth
processesanddocumentationwillbealigned.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
8382
Governance>Audit Committee Report
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economicfactorsaffecting
ECLsandnewhedgingstrategiesand
operationalrisks.
For further information about
materiality and how it is
calculated, please refer to the
Independent Auditors’ report.
TheAuditCommitteehasconsidered
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.
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.Conclusionsare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in2023andbelieve
itremainssothroughthe2024audit.
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
Financial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2024.
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.Having
completedthemaximumtermof
fiveyearsastheauditpartnerasat
the2023yearend,HeatherVarley
hasbeensucceededbyMichael
Whyte,whowilldischargethese
responsibilitiesforthe2024year
end.PwCwerereappointedasthe
Society’sexternalauditoratthe2024
AGMandtheAuditCommitteehas
recommendedtotheBoardthatthey
beapprovedforreappointmentas
externalauditoratthe2025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BoardRiskCommittee(formerlyGroupRisk
Committeeuntil31December2024)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2024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2024,Internal
AuditdrewAuditCommittee’sattentiontoarangeof
areasthatrequiredsignificantimprovement,including:
payrollcontrols,disasterrecoveryandoperational
resilience,ITapplicationandsystemaccesscontrols,
regulatoryreporting,andgovernanceovertherecovery
planningactivitiesrequiredbyregulation.
•
Updates on risk management culture: Duringtheyear
theCommitteediscussedtheSociety’sriskculture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2023audit,
togetherwithnon-firmspecificfeedbackfromthePRA.
•
Report on the adequacy of internal controls in 2024:
The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.AuditCommittee’sattentionwasdrawn,in
particular,toimprovementsbeingrequiredtopayroll,
disasterrecoveryandoperationalresiliencecontrols,
governanceoverregulatoryreportingandrecovery
planning,andcontrolstoprotectthesecurityofthefirm’s
systemsandapplications.Thereisalsoaneedtocontinue
tostrengthencapitalandconductriskmanagement
controls.
•
TheAuditCommitteeconsideredwhetherany
recommendationshouldbemadetotheRemuneration
Committeeforapossibleadjustmentto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2024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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
8584
Governance>Audit Committee Report
Oversight of the Internal Audit function
ThepurposeofInternalAuditistoprovideanindependent
andobjectiveopiniontotheBoardontheadequacyand
functioningoftheSociety’ssystemofinternalcontrol.This
isprimarilyachievedbyperformingrisk-basedreviews,
followinganestablishedauditmethodology.Internal
Audit’sfocusincludesassessingcontrolsandgovernance
processestoensure:
•
Significantriskexposuresareappropriatelyidentified,
reportedtotheBoardandtheSociety'sSeniorLeadership
Teamandeffectivelycontrolled.
•
Significantfinancial,management,andoperating
informationisaccurate,reliableanddeliveredinatimely
manner.
•
TheSociety'sactionscomplywithpolicies,standards,
procedures,andapplicablelawsandregulations.
OurInternalAuditfunctionisgovernedbyacharter,which
theAuditCommitteereviewsandapprovesannually.
The Audit Committee reapproved the charter
in November 2024 and you can find a copy of it
on our website.
AnewChiefInternalAuditOfficerwasappointedtorole
in2024.TheChairoftheAuditCommitteedetermined
theprocessforrecruitingtheofficialandinterviewedall
short-listedcandidates.AuditCommitteeasabodyformally
approvedtheappointmentdecision.
The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.During2024,theChairoftheAuditCommittee
alsoprovidedinputtotheChiefInternalAuditOfficer’s
performanceobjectives,annualperformanceappraisal
andremuneration.
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2024,thishasincludedconsideration
oftheresourcestheInternalAuditfunctionmayneedover
theyearahead,andtheprogressmadeindevelopingthe
function’sdataanalyticscapability.
InternalAuditcontinuestooperateitsownquality
assuranceandimprovementprogramme.In2023an
externalqualityassessmentofthefunctionwasperformed,
whichbenchmarkedInternalAuditagainstrelevant
professionalstandardsandcodesandindustrybest
practice.Theassessmentwasperformedbyanindependent
third-party.Therecommendationsputforwardbythethird-
partytoenhancethefunction’sapproach,effectiveness,
quality,skillsandexperiencewereimplementedin2024.
Overall,theAuditCommitteeremainssatisfiedthatthe
InternalAuditfunctioniseffectiveandhastheappropriate
resources,includinguseofexternalthird-partysupport
wherenecessary,tofulfilitsresponsibilities.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.Asreferencedinthe
AuditCommitteereport
in
theAnnualReportandAccounts2023theAuditCommittee
evaluationsfor2023wereincorporatedintotheBoard
externalevaluationprocess.TheAuditCommitteehas
throughout2024continuedtoprogresstheactions
agreedaspartofthe2023process.For2024theBoard
CommitteeevaluationswereincorporatedintotheBoard
internalevaluationprocess.Aself-assessmentexercise
wasperformed,co-ordinatedbyGroupSecretariat,anda
summaryoftheresultswasreportedtotheCommitteeand
discussedinJanuary2025.The2024reviewconcludedthat
theAuditCommitteeoperatedeffectivelyduringtheyear
andthattherewerenosignificantareasforimprovementor
significantactionsarisingfortheCommittee.
Further details on the evaluation process for 2024
can be found in both the Board Governance and
Nominations Committee report and the Corporate
Governance report.
TheAuditCommitteereviewsitsTermsofReferenceevery
yeartoensureitcontinuestofulfilitsresponsibilities
andmeetsregulatoryrequirementsandgoodpractice.
TheAuditCommitteeconfirmedthatin2024ithadmet
allofitsresponsibilities.BoththeAuditCommitteeand
BoardapprovetheTermsofReferenceeachyear.In2024
changestotheTermsofReferencewereapprovedtoreflect
developmentsfollowingthepublicationoftheGlobal
InternalAuditStandardsinJanuary2024,alongwith
changestoaligntheAuditCommittee'sTermsofReference
withthoseofourotherBoardCommitteesandthe
outcomesoftheBoardandCommitteeArchitectureReview.
Further details can be found in the Corporate
Governance 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2024the
AuditCommitteeagreedtosetasideadditional
timetobebriefedonhedgingandhedge
accounting,withBoardmembers,andthis
sessionisplannedforearly2025.
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.
TheSocietyandtheAuditCommittee
willcontinuetomonitorthegovernance
developmentsfollowingthepublicationof
therevisedUKCorporateGovernanceCode,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.Furtherdetailsonthe
newCodecanbefoundinthe
Corporate
Governancereport
.
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isseenas
goodgovernance.TheAuditCommitteewill
considertheStandardinmoredetailin2025
howeveraninitialreviewhasonlyidentified
afewareasthattheAuditCommitteewill
focusonin2025.
Guy Bainbridge
ChairoftheAuditCommittee
26February2025
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
8786
AwordfromtheChairof
theBoardRiskCommittee
IampleasedtopresentourRisk
Managementreportfor2024.Thereport
explainstheroleoftheBoardRisk
Committee(BRC,knownastheGroupRisk
Committeein2024);describesthematters
theCommitteeconsideredduringtheyear;
andgivesanoverviewofhowtheSociety
managestherisksitfaces.
Asinpreviousyears,ourattentionin2024hasbeen
balancedbetweenfinancialrisk,operationalriskand
complianceandconductrisk.Weregularlyassessedthe
Society’sprincipalrisks,monitoredperformanceagainst
the2024riskappetiteexposures,reviewedtheproposed
2025riskappetiteexposures,andconsideredtheresults
ofstresstesting.Wealsomonitoredtheprogressofthe
Society’s2LoDoversightplanandtheprogressofthe
Governance,RiskandControlprogrammetostrengthen
theSociety’sriskmanagementarrangementstosupport
itsgrowthambitions.
AsChairoftheBRC,IamsatisfiedtheSocietyhasa
clearriskappetite,alignedtoitsstrategy,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materialdeviationfromtheriskappetite
andanyunplannedriskstheSocietyencounters;and
appropriatelybalancestherisksittakesbetween
beingpurposefulforcurrentandfuturemembers
andcustomers,andprotectingtheresilienceand
sustainabilityoftheSociety.
MyBRC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Society’sriskpositions.
Angela Darlington
ChairoftheBoardRiskCommittee
26February2025
About the Board Risk Committee
ThecurrentmembershipofBRCcomprises:
Angela Darlington
Committee Chair and Independent
Non-Executive Director
AlisonHutchinsonwasamemberoftheCommitteeto
31December2024whenshesteppeddownfromtheBoard.
Guy Bainbridge
Independent Non-Executive
Director / Vice Chair
(from 1 January 2025)
Debra Davies
Independent
Non-Executive Director
Mark Parsons
Senior Independent
Non-Executive Director
(from 1 January 2025)
TheBRCisalsoattendedbytheChair
oftheBoardandmembersofthe
executiveteamincludingtheChief
ExecutiveOfficer,theChiefFinancial
Officer,theChiefCommercialOfficer,
theChiefOperatingOfficer,the
ChiefRiskOfficerandtheChief
InternalAuditOfficer.
TheBRC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our
principalrisks.
The BRC’s terms of reference
are available from our website
at ybs.co.uk/your-society/
inside-your-society/corporate-
governance/committees.
FollowingareviewofBoardand
CommitteeArchitectureduring2024,
itwasagreedthattheGroupRisk
Committeewouldbeknownasthe
BoardRiskCommitteewitheffect
from1January2025.
For more information on the
review process and outcomes
please see the Corporate
Governance report.
Matters considered
during 2024
TheBRCmetfivetimesin2024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BRC:
•
ApprovedtheSociety’senterprise
riskmanagementframework.
•
Reviewedandrecommendedthe
Boardapprovethe‘tier1’risk
appetiteexposurelimitsfor2025
andoversawcompliancewiththose
agreedpreviouslyfor2024.
•
ReceivedtheChiefRiskOfficer’s
quarterlyreportsandviewofthe
Society’sprincipalrisks.
•
Monitoredtheprogressofthe
secondlineofdefence’soversight
planincludingitskeyfindings.
•
Monitoredprogressofthe
Governance,RiskandControl
programme(seebelow).
Foritsoversightof
financialrisk,theBRC:
•
Reviewedandrecommended
theBoardapprovethescenarios
andresultsofthe2024internal
liquidityadequacyassessment
process(ILAAP)andinternalcapital
adequacyassessmentprocess
(ICAAP).
•
Reviewedthescenariosfor,and
resultsof,theSociety’sreverse
stresstests.
•
Reviewedandapprovedthe
Society’srecoveryplan.
•
MonitoredtheSociety’scompliance
withtheresolvabilityassessment
framework.
•
Reviewedandrecommended
theBoardapprovethemortgage
propositionforfirsttimebuyers
whereaminimumdepositof
£5,000isrequired.
•
Reviewedandrecommendedthe
BoardapprovetheSociety’spolicies
onfundingandliquidityrisk,capital
risk,marketrisk,treasuryriskand
retailandcommerciallending.
Foritsoversightof
operationalrisk,theBRC:
•
Reviewedandrecommended
theBoardapprovetheSociety’s
annualoperationalresilience
self-assessment,andmonitored
progressoftheworktocomplywith
theoperationalresiliencerules.
•
MonitoredprogressoftheSociety’s
worktostrengthenitscontrol
frameworkoverpeoplerisk,
financialcrimerisk,climateriskand
itsagenciesnetwork.
•
Reviewedandapprovedthe
Society’spoliciesoninformation
andcybersecurity,information
management,andreviewed
andrecommendedtheBoard
approvetheSociety’spolicyon
procurement,outsourcingand
third-partyrisk.
Andforitsoversightofcompliance
andconductrisk,theBRC:
•
Reviewedtheannualreportfrom
theSociety’sMoneyLaundering
ReportingOfficerandthehalf-
yearlyreportsonregulatory
compliancefromtheDirectorof
Compliance.
•
MonitoredprogressoftheSociety’s
worktoremedylegacyissueswith
deceasedanddormantaccounts.
•
MonitoredprogressoftheSociety’s
worktocomplywiththeConsumer
Dutyrules.
•
Reviewedandapprovedthe
Society’spolicyonregulatoryrisk,
andreviewedandrecommended
theBoardapprovetheSociety’s
policyonfinancialcrime.
Committee evaluation
TheeffectivenessoftheBRCis
assessedannuallyinaccordance
withitstermsofreference.There
werenourgentorsignificantactions
arisingfromtheeffectivenessreview
presentedtoApril2024’smeeting.
Informationonanyactionsidentified
inthereviewpresentedtoApril
2025’smeetingwillbeincludedin
the2025AnnualReportandAccounts
andwillbemonitoredbytheBRCand
theBoardasappropriate.
Further details on the evaluation
process for 2024 can be found
in both the Board Governance
and Nominations Committee
report and the Corporate
Governance report.
Risk
management
report
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
8988
Governance>Risk Management Report
Outlook
TheBRCwillcontinuein2025toprovidebalanced
oversightoffinancialrisk,operationalriskand
complianceandconductrisk,aswellasensuringits
governance,riskandcontrolcapabilitiescansupport
theSociety’snewstrategyandfuturegrowth.
Themulti-yearGovernance,RiskandControl
programmewasmobilisedduring2024.Itwilldeliver
anupdatedenterpriseriskmanagementframework
(‘ERMF’);anewrisktaxonomy,toprovideanimproved
balancebetweenfinancialandnon-financialrisks;a
newriskmanagementsystem,toautomatemanual
processesandprovidebetterMI;andanewrisk
operatingmodel,whichwillensuretheSociety’srisk
capacityandcapabilityisfitforthefuture.
Our Enterprise Risk Management
Framework (‘ERMF’)
OurcurrentERMFenablesrobustyetefficientrisk
management,whichhasanimportantandintegralrole
inprotectingtheSocietyagainstunplannedfinancial
outcomes;providingcustomerswithgoodoutcomes;
and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Society.Thekeyelementsofrisk
managementcovertheidentification,assessment,
control,monitoringandreportingofrisk.
Itcomprises:
•
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good
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
T
H
I
R
D
L
I
N
E
O
F
D
E
F
E
N
C
E
S
E
C
O
N
D
L
I
N
E
O
F
D
E
F
E
N
C
E
F
I
R
S
T
L
I
N
E
O
F
D
E
F
E
N
C
E
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.Thesecondlinealso
actsastheownerofcreditriskviaanewcreditrisk‘centreofexcellence’.
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Society’sstrategicaims,its
appetiteforriskandtherisksitfacesatanytime.TheRiskdivisionensures
thattheBRC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BRC,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.
2
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.
3
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
A summary of these responsibilities is set out below.
1
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
9190
Governance>Risk Management Report
Governance
TheSociety’sBoardandseniormanagementcommitteestructureisillustratedbelow,withthecommitteesmostdirectly
involvedwithriskmanagementgovernancehighlightedinorange:
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BRC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Society’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Society’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categoryandbusinessunitrisksub-
committees.Thesemonitorriskmanagementactivityacross
thekeyriskcategories,actingasapointofescalationfor
mattersofSociety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.Duringtheyear,theSociety
replaceditsdivisionalrisksub-committeeswithcategory
risksub-committeesfocusingonoperational,conduct
andcreditrisks.
Board and related
Committees
Management and
Sub-committees
Group Risk
Committee
Executive Risk
Committee
Audit
Committee
Remuneration
Committee
Executive
Committee
Board
Governance &
Nominations
Committee
Operational
Risk
Committee
Environmental,
Social and
Governance
Committee
Conduct Risk
Committee
Performance
and Reward
Committee
Covered Bond
Management
Committee
Regulatory
Reporting
Oversight
Committee
Asset and
Liability
Committee
Wholesale
Funding
Committee
Commercial
Lending
Sanctioning
Committee
Model Risk
Committee
Retail
Credit Risk
Committee
Commercial
Lending
Credit Risk
Committee
The Board
Strategic risk
TherisktotheSociety’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prevailinghighinterestrateenvironment
remainedabarrierforthoseseekinga
mortgage.Homeownerswithanexisting
mortgagedemonstratedahigherpropensityto
remainwiththeirexistinglenderlikelydueto
affordabilityconstraints,resultinginareduced
rangeofoptionsforthosereachingtheendof
theirfixedrateterm.Thesizeoftheremortgage
marketreducedasaresultofthisdynamic
•
Astablebenchmarkrateledtoanobserved
easingincompetitiveintensityinthesavings
market,withmarket-leadingratesgradually
decreasingsincetheirpeakinlate2023
•
Whilstcost-of-livingpressuresdocontinueto
weighonthepersonalfinancesofmany,the
savingsmarkethascontinuedtogrow,with
inflationarypressureshavingeasedandreal
incomeshavingincreasedslightly
Principal risks and uncertainties and how we mitigate them
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BRC.
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beimplemented
incorrectly
•
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(SS1/23)hasbeen
carriedoutandaplantoclosegapshasbeen
reportedtotheMRC
•
Giventhecurrentpoliticalandeconomic
climateandourgrowthinsizeandcomplexity,
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
9392
Governance>Risk Management Report
Capital risk
TheriskthattheSociety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
•
TheICAAPisperformed
annuallytodemonstratethat
weareappropriatelycapitalised
relativetoitscurrentandfuture
growthandriskprofileunder
abasecasecapitalplananda
rangeofseverebutplausible
stressscenarios
•
Weconductinternalteststo
ensuresufficientcapitalis
availablefortheSocietyto
maintainitsminimumcapital
requirements,eveninastress
scenario
•
Furtherinformationonour
capitalmanagementcanbe
foundintheSociety’sPillar3
disclosuresonourwebsite
•
Wemaintainedstrongcapitallevelsthroughout
2024,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theSociety’smodificationbyconsent
todisapplytheLREQrulesexpireson30June
2026.Wehavesurpassed£50bnofretail
depositsandthereforemightexpecttobe
classifiedasLREQthereafterdependingonthe
outcomeofthePRA’sreviewoftheexisting
thresholds.Wearewellcapitalisedtomeet
theserequirements
•
WecontinuetoprepareforIRBaccreditation,
andpreparationsarealsounderwayto
implementBasel3.1perthePRA’snear-final
policystatements(PS17/23andPS9/24)on
1January2027
•
Wearecurrentlysubjecttoend-stateMREL
requirementsonariskweightedbasis,and
expectMRELtobebasedonleverageonceLREQ
statusapplies.Wecomfortablymetboththese
requirementsthroughout2024
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us
•
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andmanageinternal
liquiditystresstestingtoensure
sufficientliquidityisavailable
tomeetbusiness-as-usualand
stressedrequirements
•
Internalstresstestingisreviewed
andapprovedbytheBoardas
partoftheInternalLiquidity
AdequacyAssessmentProcess
(ILAAP)onanannualbasis
•
Wealso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2024
•
WereporttheLCRtothePRAmonthly,
comprisingthequantityofhigh-qualityliquid
assetsagainstnetliquidityoutflowsovera30-
daystressperiod,forboththeSocietyandonan
unconsolidatedbasis.AtDecember2024,the
GroupLCRwas202.7%
•
Liquiditylevelsareforecasttoremainabove
regulatoryandinternallyderivedminimum
requirementsacross2025
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
9594
Governance>Risk Management Report
Market risk
TherisktotheSociety’searningsorthevalueofitsassetsandliabilitiesduetochangesinexternalmarketrates.
Sources Approach Commentary
•
Interestraterisk,which
takesavarietyofforms,
includingbasisrisk,
optionalityrisk,and
repricingrisk
•
Foreignexchangerisk,
duetomovementsin
exchangerateswherewe
holdexposure
•
Creditspreadrisk,which
istheriskthatshifts
inthemarket’sview
oncreditworthinessor
liquiditywillaffectthe
valueofassetsinthe
bankingbook
•
Theoverallriskappetitefor
marketriskissetbytheBoard.
Ourprudentialriskpoliciesand
policyguidesoutlinehowthe
risksaremanagedandexecuted
•
Wehaveadedicatedsystem
tomodelmarketrisk.This
coversbothearningsandvalue
measures,includingscenario
analysis,PV01andValue-at-Risk
(VaR)
•
Arangeofassumptionsare
capturedwithinthemarketrisk
models,includingoncustomer
behaviour.Assumptionsare
subjecttoreviewattheMonthly
ALMForumbythesenior
leadershipwithdelegated
authority
•
Marketriskmetricsarereported
onadaily,weekly,monthlyand
quarterlybasiswithinformation
providedtotheBoard,theBRC,
theAsset-LiabilityCommittee
(ALCO)andtheERC
•
Marketriskoperatesunderour
threelinesofdefencemodel
withoversightprovidedbythe
governancecommittees
•
AnICAAPPillar2ARisk
AssessmentforIRRBB,including
FXandcreditspreadrisk,is
undertakenannuallywithfinal
approvalattheBoard
•
Allmarketriskappetitemetricsarereviewed
eachyeartoensuretheyremaineffectiveinthe
currentrateenvironmentandtokeeppacewith
projectedbalancesheetgrowth
•
Weproactivelymanageourinterestraterisk
exposurewithinapprovedriskappetitelimits
•
CreditSpreadRiskismonitoreddailythrough
CSR01
•
PV100(themarketvalueimpactarisingfroma
parallel100bpsincreaseininterestrates)results
inaloss,withayear-endvalueof-£14.88min
2024.Thispositionsusunfavourablyforarisein
rates,butfavourablyshouldratesfall
•
The12-monthearningssensitivityhas
decreasedyearonyear(impacton1yearnet
interestincomeofa2.5%parallelincrease/
decreaseinrates).Theworstoutcomeasat
December2024wasa£5.3mcostagainstthe
paralleldownshock
•
Astructuralhedgeisinplacetomitigate
theinterestrateriskontherepricingof
administeredratesavingsbalances
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
retailand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)
•
Wehavestartedtoseesomestabilityinour
arrearsratesandoverallratesremainlow.At
theyear-endour>=3marrearsrate(%by
volume)forRetailmortgageswas0.50%,inline
withwherewewereattheendof2023.This
comparesfavourablytothelatestUKfinance
marketaverageof0.97%
•
OurCommercialLending>=3marrearsratehas
seenanimprovementthroughout2024which
hasreducedfrom0.54%attheendof2023,
to0.05%attheendof2024,withonlytwo
accountscurrentlyinthearrearsstock
•
Ourinternalarrearsforecastanticipatesarrears
willcontinuetorise,albeitataslowerratethan
previouslyforecast,andwewillbemonitoring
thiscloselyin2025.Wecontinuetoproactively
contactthemostat-riskcustomerstosupport
themthroughtheeconomicenvironment
•
Ourresidentialpossessionratewas0.02%
attheyear-end,comparedtothelatestUK
financemarketvalueof0.03%.ForRetail
BTLmortgages,thepossessionrateis0.12%,
comparedtotheUKfinancemarketaverageof
0.10%,whichismainlydrivenbyourlegacy
retailbuy-to-letportfolios
•
Wehaveseenanincreasetoourindexed
LTVpositionofthebook;9.4%ofourretail
mortgagebookhasanindexedLTV>85%,
comparedto4.1%inDecember2023.This
hasbeendrivenbybothdeclininghouseprice
movementsin2024andahigherproportion
of>85%LTVcompletionstosupportour
purposefullendingstrategy(27%in2024
comparedto22%in2023).Houseprices
haveseenanimprovementduringQ4andare
anticipatedtocontinuetoimprovethroughout
2025meaningtheproportionofloanswithan
indexedLTV>85%isexpectedtoreduceduring
the year
•
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
9796
Governance>Risk Management Report
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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ourcapitalpositionto
ensurethatourfinancialviability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
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adecreaseinthevalueof
operationallossesin2024to£1.69m(2023:
£2.64m)
•
Oursecurityimprovementprogrammehas
enhancedsecuritymeasuresandongoing
projectsarefocusingonimprovingdata
protection,cloudcapabilities,anddisaster
recoveryprocesses
•
Wehaveimplementedseveralmeasuresto
enhanceouroperationalcontrolenvironment,
improvingriskmanagementandgovernance.
Keyinitiativesincludeaprioritisedchange
plan,asimplifiedchangeframework,
dedicatedgovernance,andsupplier-base
rationalisation.Additionally,ongoingIT
infrastructuremodernisationfocusesonsecurity
improvementsandupgradingcriticalsystemsto
mitigaterisks
•
Wehaveimprovedvisibilityofriskidentification
andcontrolinourITandchangefunctions
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ConsumerDutyregulationforopen
productsandserviceswasextendedtoclosed
productsandservicesandcameintoforce
inJuly2024.Weundertookaprogrammeof
worktomeetthoseadditionalrequirements,
theoutcomesofwhichwereapprovedbythe
BoardinthefirstannualConsumerDutyBoard
Assessment
•
Complaintsper1,000at2024H2were0.52for
savingsandshareplans,and5.26formortgages
•
Acompliancemonitoringplan,approvedbythe
BRC,hasbeencompletedduring2024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BRC
Climate risk
Werecognisethephysicalandtransition
risksarisingfromclimatechangecreate
riskexposures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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BRC
andtheBoard.
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andinternal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our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weperform
underthisscenarioandrelativetotheorganisationsthatarepartofthis
process.Thetestshowedwearewellpositionedtowithstandastress
eventsuchasthatdefinedintheACS.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
9998
2024hascontinuedtobeayearof
seniorchangesattheSocietywith
TomRangerjoiningasChiefFinancial
Officer(CFO)alongsideanumber
ofnewseniorroleholderswho
willbroadentheexperienceofthe
Managementteam.
Theremunerationpackagefor
thenewCFOisinlinewithour
RemunerationPolicyandwasset
takingintoconsiderationmarket
levelsofremunerationaswellas
hisextensiveFinancialServices
experience.Asnormalinthese
circumstances,wehaveagreedto
compensateTomforthelossof
deferredbonusforfeitedonhis
resignationfromSantander;these
replacementawardsarenomore
generousthantheoriginalawards
andwillbepaidinlinewiththe
priorvestingschedule.Thefull
remunerationdetailsforTomare
outlinedinthisreport.
TheInvestmentAssociation‘Principles
ofRemuneration’werepublishedon
8October2024,withaheightened
emphasisoncompanieshavingthe
freedomtoadoptremuneration
policiesandstructuresconsidered
appropriate.Inadditiontothesewe
areactivelyreviewingtherecently
updated2024CorporateGovernance
Code,whichiseffectivefromfinancial
yearsbeginningonorafter1January
2025andcontainsadditional
disclosurerequirementspertaining
tomalusandclawback.Whilethese
updateshavenoimmediateimpact
ontheSociety,theRemuneration
Committeewillcontinuetowatch
developmentsacrosstheexternal
marketwithinterest.
Directors’ remuneration
outcomes for 2024
ExecutiveDirectorsareeligibleto
receiveabonusawardaspartofthe
‘OurSeniorLeaderBonus’scheme.
Thevalueofthisawardisdetermined
bytheSocietyperformanceas
measuredagainstthescorecardof
strategic,financial,non-financialand
individualmetrics.Fulldetailsare
containedwithinthisreport.
Thefinancialandcustomerunderpins
for2024,havebeenmet,whichhas
unlockedanybonusawardonthis
scheme.Specifically,thishasresulted
inabonusof96.6%(ofsalary)for
theCEOand87.8%fortheCFO.We
haveincludedfulldetailsofhow
remunerationisawardedtoExecutive
Directorsandtheamountslater
inthisreport.
Looking forward to the
year ahead
Lookingaheadto2025,the
RemunerationCommitteewill
continuetoreviewtheupdated
RemunerationPolicy,includingthe
newlyintroducedbonusschemes,
toensurealignmentwithour
strategicobjectivesandtofoster
stabilitywhiledeliveringvalueto
ourmembers.Thesebonusschemes
aredesignedtoalignallcolleagues
withtheSociety’sstrategy,and
theRemunerationCommitteewill
closelymonitorandevaluatetheir
effectivenesstoconfirmtheyachieve
thedesiredoutcomes.
Additionally,theRemuneration
Committeewillmaintainaproactive
approachtotheevolvingregulatory
andcorporategovernancelandscape,
ensuringweremaininformedofand
responsivetoanyupdates.
In summary
IcanconfirmthattheSocietyhas
operatedinlinewiththeapproved
policy,asummaryofwhichisset
outlaterinthisreport,andalways
actsinthebestinterestsofthe
Society’smembers.The
Directors’
Remunerationreport
issubjectto
anadvisoryvotethe2025Annual
GeneralMeeting(AGM).Assuch,
theRemunerationCommittee
recommendsthatmembersvote
atinfavourofthe2024Director’s
remunerationreportattheAGM.
Debra Davies
ChairoftheRemunerationCommittee
26February2025
During2024,werefreshedand
simplifiedallourSocietybonus
schemestoalignwiththenew
strategy.Thenewbonusschemes
‘OurBonus’and‘OurSenior
LeadersBonus’alignallleaders
andcolleaguestothedeliveryof
thestrategywiththesamefinancial
andcustomerunderpinsinplace
acrossbothschemes.
TheleadershipoftheSocietynowhas
onebonusscheme‘OurSeniorLeader
Bonus’.Thenewschemealignsthe
objectivesofallSeniorLeadersand
ensuresadirectlinktothesuccess
oftheSocietybyrewardingdelivery
oflong-termstrategicobjectives.All
seniorleadersarerewardedinline
withthedeliveryofstretchingbut
appropriatefinancial,membervalue
andchangetargets.
Boththe‘OurBonus’and‘OurSenior
LeaderBonus’schemescontinue
tobesubjecttorobustfinancial
sustainabilitymeasuresaswe
maintainourfocusonthelong-term
positionofthesocietyforitscurrent
andfuturemembers.
Theproposedchangestothe
RemunerationPolicywerewidely
supportedandapproved(c.92%
infavour)attheAGMthisyear
andtheRemunerationCommittee
continuestomonitorandreviewthe
applicationofthepolicyensuringitis
operatingasenvisaged.
Iampleasedthatsolidprogress
hasbeenmadein2024withCore
OperatingProfitperformanceabove
target.Inaddition,theSociety
continuedtoprovidestrongservice
toourmembers,demonstratedby
achievingourtargetNetPromoter
Scorefortheyear.
TheSociety’ssolidperformance
indeliveringvalueformembers
andcolleaguesdespiteongoing
economicuncertainty,hasresulted
inabovetargetbonusawardsfor
eligibleSeniorLeaders.Forallother
colleagueseligibleforthe‘OurBonus’
scheme,thishasresultedineligible
colleaguesbeingawardedwithan
averagebonusofc.8%ofsalary.
AwordfromtheChair
oftheRemuneration
Committee.
IampleasedtosharetheDirectors’
Remunerationreport,mysecondasChair
oftheRemunerationCommittee.
Looking back at 2024
Lastyear,theManagementteamsetoutclearambitions
fortheSocietyoverthenextfiveyears.While
acknowledgingcontinuingexternaluncertaintywhich
hasbeenafeatureofrecenttimes,thestrategyremains
attheheartofensuringwecontinuetoprovideRealHelp
withRealLifeformorecustomers,yearafteryear.
For2024,weupdatedourRemunerationPolicy.The
updatedpolicyisinplacetosupportallourcolleagues
inworkingtogetherforthebenefitoftheSociety,
ourmembersandcustomerswiththeRemuneration
Committee’soversightofremuneration,acrossthe
wholeworkforcethefocusofitsagendaintheyear.To
supportourcolleagueswiththecontinuedpressureseen
onpersonalfinancesinaperiodofhighinflationwe
agreedtoawarda5%payincreasepoolforalleligible
colleaguesaspartofthe2024annualpayreview.
About the Remuneration Committee
ThecurrentmembersoftheRemunerationCommittee
consistofNon-ExecutiveDirectors.Theyare:
Debra Davies
Chair
*JoinedtheRemunerationCommitteefrom1January2025
Alison Hutchinson(formerSeniorIndependentNon-ExecutiveDirector
andViceChairaswellasamemberoftheGroupRiskCommittee)was
amemberoftheRemunerationCommitteeto31December2024when
shesteppeddown.
Jennelle Tilling(formerIndependentNon-ExecutiveDirector)wasa
memberoftheRemunerationCommitteeto31December2024when
shesteppeddown.
Dina Matta
Independent
Non-Executive Director
Janet Pope*
Independent Non-Executive
Director (from 1 January 2025)
Directors’
remuneration
report
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
101100
Governance>Directors' Remuneration Report
Basis of Preparation
Forthe2024financialyearwehaveappliedtheprinciplesandcompliedwiththeprovisionsoftheUKCorporateGovernance
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 Director remuneration for 2024
Allremunerationinthe2024performanceyearhasbeenawardedinlinewiththeSociety’sRemunerationPolicy.
Details of the full policy relevant for 2024 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2024and31December2023.Thisinformationhasbeenauditedbyourindependentauditors,PwC.
Base salary
In2024SusanAllenwasawardedapayincreaseof3.18%effective1stMay.Thisupliftwaslowerthanthatprovidedtoall
colleagues(whichwasonaverage5%withaminimumof4%or£1,250whicheverwasgreater)andremainsinlinewithour
analysisofthebroadermarket.AlasdairLenmanandDavidMorrisdidnotreceiveapayincreaseduringtheyear.
Single total figure of remuneration for each Executive Director (audited)
Fixed
Remuneration
V
ariable
Remuneration
Total
Remuneration
Excluding
Replacement
Awards
Total
Remuneration
Including
Replacement
Awards
2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
Executive
Directors Role
Base
Salary
£'000
Ta
xable
Benefits
£'000
Pension
£'000
Total
Fixed
£'000
B
onus
£'000
Replacement
Awards
£'000
Total
Variable
£'000 £
'000 £'000
Susan
Allen43
Ch
ief
Executive
Officer
798 655 32 26 88 72 918 753 777 777 N/A 2516 777 3293 1,695 1,530 1,695 4,046
Alasdair
Lenman44
Chief
Financial
Officer
246 482 16 31 25 50 287 563 144 378 N/A N/A 144 378 431 941 431 941
Tom
Ranger45
Chief
Financial
Officer
259 N/A 19 N/A 29 N/A 307 N/A 426 N/A 869 N/A 1,295 N/A 733 N/A 1,602 N/A
David
Morris46
Chief
Commercial
Officer
281 362 9 12 31 40 321 414 N/A 311 N/A N/A N/A 311 321 725 321 725
43 SusanAllen–joinedYBSasCEOon2March2023and2023salaryreflectspartyearearnings.ThebonusawardedtoSusanforthe2023performanceperiodhas
beencalculatedbasedontheannualbasesalaryasat31December2023.
44 AlasdairLenman–retiredfromtheSocietyasChiefFinancialOfficeron30June2024,alldatadisclosedabovereflectpaymentfortimeinrole.Alasdairwasgranted
GoodLeaverstatuswhichenabledAlasdairtokeepalldeferredawards.PleasenotethatAlasdairwasawardedabonusof£143,749in2024,performancemetrics
wereassessedatpointofretirementandthenreviewedatyearend.ThepaymentmadetoAlasdairwascalculatedbasedonhis2024eligiblepayandtherefore
proratedinlinewithtimeinrole.
45 TomRanger–joinedtheSocietyasChiefFinancialOfficeron18June2024andwasawardedanannualbasesalaryof£485,000.Replacementawardsinclude
£868,937awardedtocompensatefordeferredawardsforfeitedonleavinghispreviousemployer.Inlinewithremunerationregulatoryexpectationsthese
replacementawardswillvestinlinewiththepriorvestingschedule.ThebonusawardedtoTomforthe2024PerformancePeriodunderthe‘OurSeniorLeader
Bonus’schemehasbeencalculatedbasedonhis2024eligiblepay;plusthelostincentiveopportunityawardfortheperiodof2024priortojoiningtheSociety;and
anadditional£26,000discretionaryawardbytheCEO.
46 DavidMorris–resignedfromtheSocietyasChiefCommercialOfficeron4October2024,alldatadisclosedabovereflectpaymentfortimeinrole.Pleasenotethat
Davidforfeitedhis2024bonusaward.
* PleasenotethatasallfourExecutiveDirectorshavenotbeenintheirstatedYBSroleforthefulltwoyearreportingperiod,theirrelevantremuneration
reflectstimeinrole.
Financial sustainability review
Inadditiontotheabove,beforeanybonus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.
‘Our Bonus’
TheSociety’sthresholdperformancelevelsagainsttheCore
OperatingProfitandNPSneedtobeachievedbeforeany
bonusawardwillbegranted.Anadditionalpercentageof
bonusmaybeawardedbasedonindividualperformance.
Theassessmentofindividualperformanceismeasured
againsttheachievementofindividualobjectives,which
maycontainbothfinancialandnon-financialmeasures.
‘Our Senior Leader Bonus’
TheSociety’sthresholdperformancelevelsagainsttheCore
OperatingProfitandNPSneedtobeachievedbeforeany
bonusawardwillbegranted.ThecalculationofSociety
performanceacrossallthemeasuresdeterminesthe
corebonusaward.
Anadditionalpercentageofbonusmaybeawardedbased
onindividualperformance.Theassessmentofindividual
performanceismeasuredagainsttheachievementof
individualobjectives,whichcontainbothfinancialandnon-
financialmeasures.Foreachcolleague,theseareagreedat
thestartoftheyearandaresubjecttoindependentreview
attheyearend.
All bonus awards are subject to the operation of a
Business Controls Overlay (‘BCO’) Process as outlined
in the Remuneration Policy.
Variable pay
Thissectionexplainstheunderpinsandmechanicsofthe
variablepayschemesinoperationbytheSocietyin2024.
For2024andasapprovedatthe2024AGM,wehave
implementedanewapproachtobonus.Therearetwo
separateschemes,oneforSeniorLeaders(including
ExecutiveDirectors):‘OurSeniorLeaderBonus’,andone
forallcolleagues(excludingSeniorLeaders):‘OurBonus’.
Thetwoschemesutilisethesameunderpins:financial
performanceandcustomerexperience.Forthe‘OurBonus’
scheme,financialperformanceandcustomerexperience
unlockanddeterminethebonuspool.For‘OurSenior
LeaderBonus’,financialperformanceandcustomer
experiencearekeydeterminantsofthebonusopportunity.
Financial performance
ThefirstperformancemeasureisProfitBeforeTax(‘PBT’),
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OperatingProfit.
TheRemunerationCommitteehasscopetoadjustthe
calculationofprofitwithinthebonusscheme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bonusawardlevels.
Inlinewiththeprinciplesabove,theoverallCoreOperating
Profitfigureachievedrepresentsaperformancelevelabove
targetfortheSociety’sbonusschemes.
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.
TheoverallNPSfigureachievedin2024was64,which
representsanontargetperformanceabovethethreshold
fortheSociety’s2024bonusschemes.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
103102
Governance>Directors' Remuneration Report
How bonus is awarded for Executive Directors
Inlinewithrelevantremunerationregulations,bonusawardsforExecutiveDirectorsaresubjecttodeferralovera
multi-yearperiod.
Thistablebelowshowstheyearsinwhichthe2024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.
Total Award Deferral schedule
Executive
Director Role
2025 2026 2027 2028 2029 2030 2031 2032
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 388.6 388.6 155.6 155.6 -  -  -  -  46.6 46.6 46.6 46.6 46.6 46.6 46.6 46.6 46.6 46.6
Tom
Ranger
CFO 212.9 212.9 85.4 85.4 -  -  -  -  25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5
Alasdair
Lenman
CFO 71.9 71.9 28.9 28.9 -  -  -  -  8.6 8.6 8.6 8.6 8.6 8.6 8.6 8.6 8.6 8.6
Payments for loss of office
TherewerenopaymentstoDirectorsforlossof
officein2024.
Payments to past Directors
TherewerenopaymentsmadetopastDirectorsin2024
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,our
membersandcustomers.Thiswasreviewedin2023
for2024withthecreationofadiscretionaryelement
inthe‘OurBonus’schemethatsupportsourambitious
culturepillaroftheSociety'sstrategyandseeksto
ensurethathighperformanceandcertainbehavioursare
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.
AngelaDarlingtonhasbeenourNon-ExecutiveDirectorfor
WorkforceEngagementsinceJanuary2024(therolehaving
previouslybeenheldbyAlisonHutchinson),ensuring
colleagueviewsarefedthroughtotheBoard.
Supporting colleagues in 2024
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2024wemadeanothersignificantinvestmentinbase
pay,providingeligiblecolleagueswithanonaverage,circa
5%salaryincrease,thisresultedinaminimumpaymentper
colleagueof4%or£1,250,whicheverwasgreater.
Executive Director personal objectives 2024
InadditiontothesharedSeniorLeaderscorecardfor2024,theExecutiveDirectorshaveanumberofpersonalobjectives.
PerformanceagainstpersonalobjectiveswasassessedtohavemetorexceededTargetforboththeCEOandCFOwith
respectiveoutturnsof15.08%and12%awardedoutofamaximumof20%.
TheRemunerationCommitteethoroughlyreviewedbonusoutturnsfortheExecutiveDirectorstoensuretheyaccurately
reflectedtheirperformance.Ultimately,theRemunerationCommitteewassatisfiedthattheoutcomeswereafair
representationofperformance.
Category Metric Weighting % Achievement Outturn %
Finance
ProfitBeforeTax 30% Target 24.9%
Cost 10% Threshold 4.2%
Strategic/
Non-Financial
Create Joyful
Experiences
CustomerExperience 5% Stretch 5%
NPS 5% Target 2.5%
Double our
Reach and
Deepen our
Impact
DeepenOurImpact:
DeliverMemberValue
7.5% Target 6.1%
DoubleourReach:
MortgagePropositions
5% Stretch 5%
Build a Future
Ready Society
BuildingaGreener
Society
5% Threshold 2.1%
GrowingSustainably 5% Target 3.7%
Cultivate an
Ambitious
Culture
OrganisationalHealth 7.5% Target 3.8%
Shared Scorecard (out of 80%) 57.3%
How ‘Our Senior Leader Bonus’ value was calculated for Executive Directors
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
105104
Governance>Directors' Remuneration Report
Non-Executive Directors
Chair of the Board and Non-Executive Directors
TheChairoftheBoardandNon-ExecutiveDirector(‘NED’)feesarereviewedperiodically.Followinganalysisofthemarketdata
available,andinlinewiththeawardprovidedtoallcolleaguestheNEDfeeswereincreasedinJuly2024asoutlinedbelow.
During2024areviewoftheBoardandCommitteeArchitecturehasbeencompletedwhichwasapprovedbytheBoard
inDecember2024.InconjunctionwiththisareviewoftimecommitmentandNon-ExecutiveDirectorfeeshasalsobeen
undertaken,includingexternalbenchmarking.Asaresultofthereview,takingintoaccounttheincreasedrequirementsof
theNon-ExecutiveDirectorrole,andincludingtheoutcomesofthetimecommitmentreviewandtherevisedBoardand
CommitteeArchitecturethefollowingfeeswereagreedeffectivefrom1January2025:
TherewillbenofurtherreviewofNon-ExecutiveDirectorfeesin2025.TheBoardChairfeewasnotincludedintheprocess
andwill,therefore,besubjecttothenormalannualreviewprocessin2025.
* inadditiontoNon-ExecutiveDirectorbasefee.
Non-Executive Director fees (annual equivalents) Annual fees as at 1 July 2024 Annual fees as at 1 July 2023
£'000 £'000
ChairoftheBoardbasicfee 225.0 216.2
ViceChairoftheBoardbasicfee 84.8 81.5
Non-ExecutiveDirectorbasicfee 59.8 57.5
Additional fee for:
AuditCommittee-Chair 24.3 23.4
AuditCommittee-Member 10.1 9.7
RemunerationCommittee–Chair 19.9 19.1
RemunerationCommittee–Member 7.3 7.0
BoardRiskCommittee1–Chair 24.3 23.4
BoardRiskCommittee1–Member 10.1 9.7
BoardGovernance&NominationsCommitteeMember
(N.B.AdditionalfeedoesnotapplytotheChairorViceChair)
7.3 7.0
Role Fee Effective from 1 January 2025
Non-ExecutiveDirector £62,000
Additional fees:
ViceChair £12,500*
SeniorIndependentDirector(SID) £25,000*
AuditCommitteeChair £27,000
AuditCommitteeMember £13,500
RemunerationCommitteeChair £20,000
RemunerationCommitteeMember £10,000
BoardRiskCommitteeChair £27,000
BoardRiskCommitteeMember £13,500
BoardGovernanceandNominationsCommitteeMember(excludingBoardChairand
SeniorIndependentDirector)
£10,000
EnvironmentalandSocialPurposeCommitteeChair(newCommitteewitheffectfrom
1January2025)
£20,000
EnvironmentalandSocialPurposeCommitteeMember(newCommitteewitheffect
from1January2025)
£10,000
BoardChampionRoles(excludingtheWhistleblowingChampionRoleand/orwhere
ChampionRolesareheldbytheViceChairorSeniorIndependentDirector)
£3,000
1 Pleasenotethatuntil1January2025,theBoardRiskCommitteewasnamedtheGroupRiskCommittee
* 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bonus.
Thetotalremunerationvaluesandbasesalaryvaluesforthe25th,50thand75thpercentileemployeesfor2024are:
25th percentile 50th percentile 75th percentile
Total Remuneration £28,888.74 £39,547.70 £60,106.06
Salary £24,732.30 £33,730.50 £49,448.20
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).
Inlinewithprioryears,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2024.
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.
Wenotethatinlastyear’sreport,the2023CEOpayrationumbersincludedreplacementawardspaidtotheCEOupon
joiningtheSociety(medianCEOpayratioof110:1).ThefiguresbelowreflectthemedianCEOpayratioexcludingany
replacementawards.
Year Defined Method 25th percentile 50th percentile 75th percentile
2024 Option B 59:1 43:1 28:1
2023 OptionB 60:1 44:1 28:1
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
107106
Governance>Directors' Remuneration Report
Asoutlinedinthe
OurStrategy
sectionofthe
Strategic
report
,theSocietystartedanewstrategiccyclein2024and
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RemunerationCommittee
focusedtheirreviewonthebonusschemesinoperationfor
colleaguesacrosstheSociety,includingExecutiveDirectors.
Anewbonusschemewasimplementedfor2024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isaseparatebonusschemesforSenior
Leaders,includingExecutiveDirectors,andoneforthe
broadercolleaguepopulation,thereisalignmentoffocus
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.
Overview of Variable Pay
Schemes for 2024
‘Our Bonus’
Theall-colleagueschemewasintroducedfor2024ensuring
fullalignmentwiththeStrategy.
Theall-colleaguescheme‘OurBonus’isunderpinned
byperformanceagainstCoreOperatingProfit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company
performancelevelsbeingmet,allcolleagues(excluding
SeniorLeaders)becomeeligibleforabonusaward.
Theactualbonusawardedtocolleagueswillbedependent
ontheirindividualperformanceandcontributiontothe
Society.Forthemajorityofcolleagueswhoperformwell
anddeliverasexpected,thiswilllookthesamehowever,
whereperformanceexceedsexpectationsandcertain
behavioursareexhibited,thosecolleaguescannow
experienceahigherbonusawardthantheirpeers,driving
ourambitiousculturevalue.
‘Our Senior Leader Bonus’
Tosupporttheaimofsimplicity,thenewsingleSenior
Leaders’Bonusschemewasimplementedfrom
1January2024.
Ourevolvedapproachtorewardseniorleadershasbeen
influencedbyafewkeyfactors:
Executive Director Remuneration Policy
TherearenoproposedchangestotheRemuneration
Policyfor2025.
As such and for simplicity, details of the full policy
relevant for 2025 can be found at www.ybs.co.uk.
Aligning
all senior
leaders (SLT
and Chiefs
including
EDs) to the
delivery of
Our Strategy
Drivingthreepriorityoutcomesfrom
ourambitiousculturepillar;
a. "leadersarealignedonpriorities
andprovidebothsupport
andchallenge";
b. "highperformanceisrewardedat
YBS,withhowandwhatIdeliver
beingequallyimportant";and
c. "IamclearwhatI'maccountable
forandtrustedtodeliver"
Simplification ToensurethatallSeniorLeaders
arefocusedinthesamedirection
inserviceofOurStrategy,
anchoringbacktotheambitious
cultureoutcomeof:
"IamclearwhatI'maccountablefor
andtrustedtodeliver"
Alignment
with market
best practice
Toensurethatwecanattractand
retaintheskillsweneed.Toensure
wearecompliantwithregulation.
ToensuretheSociety'scost
managementpracticesarerobust
andsustainable.Theschemewill
alsocontinuetobesubjectto
theSociety'sBusinessControls
Overlayprocess.
Single total figure of remuneration for each Non-Executive Director
TheNon-ExecutiveDirectorsbasicandcommitteefeesearnedin2024areoutlinedbelow.Non-ExecutiveDirectorsdo
notreceiveanybenefits,butinadditiontothefeesbelow,arereimbursedforanyexpensesincurred,suchastraveland
subsistence,aspertheSociety’sexpensespolicy.Thisinformationhasbeenauditedbyourindependentauditors,PwC.
2024 2023
Non-Executive Director Basic Fees Committee
Fees
Total Basic Fees Committee
Fees
Total
£'000 £'000 £'000 £'000 £'000 £'000
Annemarie Durbin
(Board Chair from 23 April 2024)
220.6 - 220.6 8.3 - 8.3
John Heaps
(Board Chair to 23 April 2024)
82.1 - 82.1 209.1 - 209.1
Guy Bainbridge 58.7 40.9 99.6 55.6 38.8 94.4
Peter Bole
(joined the Board on 1 September 2024)
19.9 3.4 23.3 - - -
Angela Darlington 58.7 33.7 92.4 55.6 32 87.6
Debra Davies 58.7 29.4 88.1 24.8 10.3 35.1
Alison Hutchinson (stepped down from the
Board on 31 December 2024)
83.2 17.0 100.2 78.8 24 102.8
Dina Matta 58.7 7.1 65.8 55.6 6.8 62.4
Mark Parsons 58.7 19.8 78.5 55.6 18.8 74.4
Janet Pope
(joined the Board on 29 October 2024)
10.7 - 10.7 - - -
Jennelle Tilling
(stepped down from the Board on
31 December 2024)
58.7 7.1 65.8 55.6 6.8 62.4
Remuneration Policy
Thefollowingpagessetoutthe
approvedDirectorRemuneration
PolicyforourExecutiveDirectorsand
Non-ExecutiveDirectors.Therevised
policywasapprovedbymembersat
theAnnualGeneralMeeting(‘AGM’)
on23April2024with92.31%of
thevotescastbeinginfavourof
theresolution.
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.
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:
1. Attractandretaintalent,alignedtoourmutualvaluesandforwardthinkingto
ensurerelevanceinachangingworld.
2. Focusedontotalreward;recognisingthatrewardismorethanjustpay,itis
partofabroaderEmployeeValueProposition.
3. Rewarddecisionsareclearandtransparentforcolleagues;deliveredthrough
effectiveandopencommunication.
4. 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.
5. 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.
Ourrewardprinciplesareappliedconsistentlyregardlessofgender,ethnicity,age,
disabilityoranyotherfactorunrelatedtoperformanceorexperience.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
109108
Governance>Directors' Remuneration Report
Remuneration scenarios in relation to the Remuneration Policy in 2025
Thechartbelowshowsanillustrationofthepotentialsplitofremunerationbetweenfixedremuneration(basesalary,benefits
andpension)andtotalvariablepay(bonus)fortheCEOandotherExecutiveDirectors.Forthepurposesofthisillustration,we
haveusedthedatapertainingtotheChiefExecutiveOfficerandtheChiefFinancial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Officerand50%fortheremaining
ExecutiveDirectors)thatwouldbepaidifSocietyandpersonalperformancemeasuresareachievedin2025.
•
Maximum–themaximumvariablepayaward(125%ofeligiblepayfortheChiefExecutiveOfficerand100%forthe
remainingExecutiveDirectors)thatcouldbepaidassumingstretchobjectivesandoutcomesarefullyrealisedin2025.
Key .FixedPay.Undeferred.Deferred
Figuresinthistablearerepresentedin£'000’s.
£2,500
£2,000
£1,500
£1,000
£500
£0
Minimum MinimumTarget TargetMaximum Maximum
Chief Executive Officer Chief Finance Officer
£930
£1,530
£1,930
£570
£810
£1,050
100% 57%
17%
22%
15%
20%
26%
33%
45%
100% 62% 50%
30%
23%
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’),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.
Deferral and Share Equivalent
Instruments (SEI)
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SEIwhichissubjecttoa
furtherholdingperiodfollowingvesting.
Forthe2025performanceyear,anExecutiveDirector
whoseremunerationexceedsthede-minimislimitwill
receive20%oftheirtotalvariablepayin2026,witha
further20%deliveredviaSEIin2027.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2026)andtheotherhalf
isdeliveredinaSEIandsubjecttoanadditionalholding
periodpriortorevaluationandpayment(in2027).
•
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.
2025 Bonus Delivery 2026 2027 2028 2029 2030 2031 2032 2033 2034
Up-front:April Cash
Up-front: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
Key
Cashbonusdeferral SEIdeferral SEIholdingperiod
Length of time variable pay at risk
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
111110
Governance>Directors' Remuneration Report
Appendices
Appendix 1 – AGM - 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.
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.
Non-Executive Director 2018 2019 2020 2021 2022 2023 2024
To approve the Directors’ Remuneration report 90.29% 91.86% 91.32% 92.45% 91.77% 93.15% 92.89%
To approve the Directors’ Remuneration Policy n/a 90.95% n/a 91.58% n/a n/a 92.31%
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Headof
Reward&Governance.Whereitisfelttobeappropriate,
theChiefExecutiveOfficerisinvitedtoattendtoprovide
furtherbackgroundandcontexttoassisttheRemuneration
Committeeindischargingitsduties.
TheRemunerationCommitteemetfivetimesduringthe
yearandheldtwoExtraordinarymeetings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a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.
Details of the number of scheduled meetings
attended by each Committee member during
2024 can be found in the Attendance at Board and
Committee meetings section of the Corporate
Governance report.
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rewardandregulatorymattersfromEY.The
Committeeissatisfiedthattheadvicereceivedisobjective
andindependent.
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.
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.
Weareactivelyreviewingtherecentlyupdated2024
UKCorporateGovernanceCode,whichiseffectivefrom
financialyearsbeginningonorafter1January2025and
containsadditionaldisclosurerequirementspertainingto
malusandclawback.
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
113112
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.
Our Charitable and political donations
CharitabledonationsmadebytheGroupduringtheyear
were£1.3million(2023:£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(2023: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eachfinancialyear
inaccordancewithUK-adoptedInternationalaccounting
standards.Wearealsorequiredtoprovidedetailsof
directors’remunerationinaccordancewithpartVIIIofthe
Actandregulationsmadeunderit.
AspertheAct,directorsmustnotapprovethefinancial
statementsunlesstheyaresatisfiedthattheygivea
trueandfairviewofthestateofaffairsoftheGroupand
SocietyandoftheprofitorlossoftheGroupandSociety
inthatperiod.
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directorsareresponsibleforsafeguardingtheassets
oftheGroupandSocietyandhencefortakingreasonable
stepsforthepreventionanddetectionoffraudandother
irregularities.
2024 2023 2024 2023
% of mortgage
account/balances
Number of
accounts
249 194 0.09% 0.07%
Balances
outstanding on
accounts
£33.8m £25.4m 0.07% 0.05%
Amount of arrears
included in balances
£4.7m £3.5m 0.01% 0.01%
Directors’
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.
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2025AnnualGeneralMeeting
(‘AGM’)ourdirectorswillallretireand
standforelection/re-election.
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
WelcomefromtheChairoftheBoard
.Detailsoffuturedevelopmentsare
includedinthe
Asolidperformanceandanambitiousfuture
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.
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
115114
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.
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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
Strategy,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alsohasaNon-
ExecutiveDirectorforWorkforceEngagement.
TheBoardhasalsoputinplaceaframeworkto
ensurecolleagueviewsinformitsdecision.
Our ESG priorities section
Corporate Governance report
colleague section
•
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Strategy,which
wassupportedthroughdetailedstakeholder
engagementexercises.
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OurStrategy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 ESG priorities section
Governance>Directors’ Report
Thedirectorsarealsoresponsibleforkeepingadequate
accountingrecordsthataresufficienttoshowandexplain
theGroup’sandSociety’stransactionsanddisclosewith
reasonableaccuracyatanytimethefinancialposition
oftheGroupandSocietyandenablethemtoensure
thatthefinancialstatementscomplywiththeBuilding
SocietiesAct1986.
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 218 to 219 for the 2024 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:
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
PlacetoCallHome
and
FinancialWellbeing–supportingour
Communities
subsectionofthe
Our
ESGpriorities
section
Respect for
human rights
See the
Humanrights
subsectionof
Operatingresponsibly
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
117116
Governance>Directors’ Report
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approvalofthisreport.This
confirmationismadeafterhavingreviewedassumptions
aboutfuturetradingperformance,liquidityrequirements,
capitalrequirementsandorganisationalsustainability.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2024.
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2027,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abudgetforthe
nextfinancialyearandacorporateplanforthefollowing
additionalfourfinancialyears.Theone-yearbudgethas
agreaterlevelofcertaintyandisusedtosetnear-term
targets.Thefive-yearcorporateplanislesscertainthanthe
budget,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2027.
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2025
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.
Annemarie Durbin
ChairoftheBoard
26February2025
Summary of s172
requirements
Yorkshire Building Society Board Relevant Disclosure
•
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OurStrategy.
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.
A Place to Call Home
and Financial Wellbeing
– supporting our
Communities section
Corporate Governance report
member’s section
Streamlined Energy and Carbon Reporting (‘SECR’)
TheSociety’sSECRcannowbefoundinthe
Buildingagreenersociety
sectionofthe
Strategicreport
.In2024,theSociety
haschosentorelocatetheSECRtojoinitsTaskforceforClimate-relatedFinancialDisclosure(‘TCFD’)report.Thisallowsthe
Society’stotalclimate-relatedreportingtobefoundinonelocationandreflectsthestrategicimportancegrantedtoclimate
reportingbytheSociety.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
119118
Our audit approach
Overview
Audit Scope
Thescopeofourauditandthenature,timingandextentofauditproceduresperformedweredeterminedbyourrisk
assessment,thesignificanceofcomponentsandotherqualitativefactors.
WeperformedauditproceduresovercomponentsconsideredtobesignificantinthecontextoftheGrouporinthecontextof
individualprimarystatementaccountbalances.
Key audit matters
•
Expectedcreditlossesforloansandadvancestocustomers(GroupandSociety)
•
Valuationofthefundeddefinedbenefitpensionobligation(GroupandSociety)
Materiality
•
OverallGroupmateriality:£17.4m(2023:£22.8m),basedon5%ofprofitbeforetaxadjustedtoexcludenetgainsand
lossesarisingfromfinancialinstrumentsheldatfairvalue.
•
OverallSocietymateriality:£14.0m(2023:£15.7m),basedon5%ofprofitbeforetaxadjustedtoexcludenetgainsand
lossesarisingfromfinancialinstrumentsheldatfairvalue.
•
Performancemateriality:£13.1m(2023:£17.1m)(Group)and£10.5m(2023:£11.8m)(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.
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’)regulations,thePrudentialRegulationAuthority’s
(‘PRA’)regulationsandUKtaxlegislation,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thepostingofinappropriatejournalentriesthatcouldbeusedtomanipulatefinancialperformanceandthe
potentialformanagementbiasinaccountingestimates.Auditproceduresperformedbytheengagementteamincluded:
•
Enquiriesofmanagementandthosechargedwithgovernanceincludingconsiderationofknownorsuspectedinstancesof
non-compliancewithlawsandregulations;
•
Reviewofinternalauditfindingsthroughouttheyear,insofarastheserelatedtothefinancialstatements;
•
ReviewofcorrespondencewiththePRA,FCAandHMRC;
•
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journalsthatmeetthehigherriskcriteria.
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.
Independent auditors’
report to the members of
Yorkshire Building Society
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 of the Society’s affairs as at 31 December 2024 and of the Group’s
and the Society’s income and expenditure and the Group’s and the 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2024;theGroupandSocietyIncomeStatements,
theGroupandSocietyStatementsofComprehensiveIncome,theGroupandSocietyStatementsofCashFlows,andthe
GroupandSocietyStatementsofChangesinMembers’InterestandEquityfortheyearthenended;andthenotestothe
financialstatementscomprisingmaterialaccountingpolicyinformationandotherexplanatoryinformation.Certainnotes
tothefinancialstatementshavebeenpresentedelsewhereintheAnnualReport,ratherthaninthenotestothefinancial
statements.Thesearecross-referencedfromthefinancialstatementsandareidentifiedas‘(Audited)’.Therelevantdisclosures
areincludedintheFinancialperformancesectionandtheDirectors’remunerationreportdisclosures.
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,asapplicabletolisted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Societyor
itscontrolledundertakingsintheperiodfrom1January2024to31December2024.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
121120
Governance>Independent Auditors’ Report to the Members of Yorkshire Building Society
Key audit matter How our audit addressed the key audit matter
Valuation of the funded defined benefit
pension obligation (Group and Society)
TheGroupandSocietyoperatesafundeddefinedbenefit
pensionscheme.Thepresentvalueofthefundeddefined
benefitobligationat31December2024is£509.3m
(2023:£572.5m).
Thevaluationofthefundeddefinedbenefitobligation
isdependentonanumberofactuarialassumptions.We
considerthediscountrate,inflationrateandmortality
ratestobethemostsignificantassumptionsused
inthevaluation.
Managementusesanactuarialexperttodeterminethe
valuationofthedefinedbenefitobligation.Thevaluation
methodologyusesanumberofmarket-basedinputsand
otherfinancialanddemographicassumptions.
Changesintheseassumptionscanhaveamaterialimpact
onthevaluationduetothelongdurationofthepension
liabilitiesandassuchthevaluationisconsideredtobe
highlyjudgemental.
RefertorelevantdisclosuresinNote17:Retirement
benefitobligations,Note1:Materialaccountingpolicies,
andNote2:Criticalaccountingjudgementsandkey
sourcesofestimationuncertainty.
Weevaluatedtheindependence,objectivityand
competenceofthethirdpartyactuaryengagedby
management.Wereviewedtheactuary’sreportand
obtainedanunderstandingofthemethodology
usedandassumptionssetincalculatingthedefined
benefitobligation.
Weassessedtheappropriatenessofthemethodology
used.Weengagedouractuarialexpertstounderstand
thejudgementsmadebymanagementandthethirdparty
actuaryindeterminingthesignificantassumptions.
Weindependentlyassessed,usingouractuarialexperts,
thereasonablenessofthesignificantassumptions,
specificallythediscountrate,inflationrateand
mortalityrates,bycomparingtheseassumptionstoour
independentlycompiledacceptablerangesbasedon
externalmarketdata.
Weevaluatedandtestedthedisclosuresmadein
theAnnualReportinrelationtothedefinedbenefit
pensionobligation.
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significantdue
toriskandsizeinthecontextoftheGroup’sconsolidatedfinancialstatementsandthereforeweperformedafullscopeaudit
ofthecomponentfinancialinformation.YorkshireBuildingSocietyCoveredBondsLLP,BrassNo.9PLC,BrassNo.10PLC,Brass
No.11PLC,TombacNo.3PLCandWhiteRoseMasterIssuerPLCwereconsiderednon-significantcomponentsinthecontext
oftheGroup’sconsolidatedfinancialstatementswithfurtherauditproceduresbeingperformedovercertainbalances.
Allremainingcomponentswereidentifiedasinconsequentialandnofurtherauditproceduresperformed.
Allauditworkwasperformedbythesameengagementteam.
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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.
Fairvaluehedgeaccountinginrespectofforeigncurrencydebtissuances,whichwasakeyauditmatterlastyear,
isnolongerincludedbecausetheassessedriskisnormalgiventhenatureandsizeofthehedges,andtherehave
beensomeimprovementsinthedatacaptureprocess.Otherwise,thekeyauditmattersbelowareconsistent
withlastyear.
Key audit matter How our audit addressed the key audit matter
Expected credit losses for loans and advances
to customers (Group and Society)
Determiningexpectedcreditlosses(“ECL”)isinherently
judgementalandinvolvesmakingvariousassumptions.
Thiscangiverisetoincreasedestimationuncertainty.
ECLiscalculatedusinghistoricaldefaultandloss
experiencebutrequiresjudgementtobeappliedin
predictingfutureeconomicconditions,e.g.houseprices,
andcustomerbehaviour.
ModellingmethodologiesareusedtoestimateECL.These
maynotappropriatelyaddressrelevantrisksandtherefore
postmodeladjustmentsmaybeapplied.
Ourauditfocusedonthesignificantassumptionsfor
whichvariationshadthemostmaterialimpactonECL.
Weconsiderthefollowingelementsofthedetermination
ofECLforresidentialmortgagestobesignificant:
•
Forwardlookingeconomicassumptions,specificallyHPI
andunemploymentinbaseanddownsidescenarios,
andtheweightingassignedtothesescenarios;and
•
Judgementsinvolvedinthevaluationofmaterialpost
modeladjustmentstoaddresseconomicrisksnot
capturedandknownmodellimitations.
RefertorelevantdisclosuresinNote31:Creditrisk
onloansandadvancestocustomers,Note1:Material
accountingpolicies,andNote2:Criticalaccounting
judgementsandkeysourcesofestimationuncertainty.
Weengagedthesupportofourcreditriskmodelling
specialistsandeconomicexpertstocriticallyassessthe
appropriatenessoftheECL.
Forward looking economic scenarios and
assigned weightings
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wasevaluatedwithreference
toexternalforecasts,includingdatafromhistorical
economicdownturns.
Weevaluatedtheassignedweightings,using
oureconomicanalysistool,whichassessesthe
reasonablenessofthescenariosandweights,giving
specificconsiderationtoobservedhistoricallossesand
thecurrenteconomicenvironment.
Model methodology and post model
adjustments
Wecriticallyassessedtheappropriatenessofthe
methodologyusedinthein-scopeimpairmentmodelsand
evaluatedcompliancewithIFRS9requirements.
Weevaluatedthemethodology,appropriatenessand
implementationofmaterialpostmodeladjustments.We
assessedandtestedtheaccuracyoftheresultsofmodel
monitoringperformedbymanagement.
Wevalidatedthattheinscopemodelswereimplemented
inlinewiththemethodologythroughacombinationof
independentmodelreplicationandcodereviews.
WeevaluatedandtestedtheauditedCreditRisk
disclosuresmadeintheAnnualReport.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
123122
Governance>Independent Auditors’ Report to the Members of Yorkshire Building Society
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£6.5mto£14.2m.
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%(2023:75%)ofoverallmateriality,amountingto£13.1m
(2023:£17.1m)fortheGroupfinancialstatementsand£10.5m(2023:£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£0.9m
(2023:£1.1m)inrespectoftheGroupand£0.7m(2023:£0.8m)inrespectoftheSocietyaswellasmisstatementsbelow
those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:
•
performingariskassessmenttoidentifyfactorsthatcouldimpactthegoingconcernbasisofaccounting,includingthe
currentandforecastfinancialperformance;
•
understandingandevaluatingmanagement’sgoingconcernassessment,includingconsiderationoftheimpactofcurrent
economicenvironment;
•
understandingandevaluatingmanagement’sforecastsandthestresstestingofliquidityandregulatorycapitalperformed
bymanagement;
•
evaluatingmanagement’sabilitytoaccuratelyforecastfinancialperformancebycomparingbudgetedfinancialinformation
withhistoricalactualresults;
•
reviewingregulatorycorrespondence,andrelevantreportsprovidedtogovernanceforums;and
•
readingandevaluatingtheappropriatenessofthedisclosuresmadeinthefinancialstatementsinrelationtogoingconcern.
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when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the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.
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;
•
ConsideredtheexposureoftheGroupandSociety’smortgageportfoliotophysicalandtransitionrisksbyexaminingthe
outputofassessmentsperformedbymanagementduringtheyear.Managementdoesnotconsidertheimpactofclimate
risktohaveamaterialimpactonthefinancialstatements;and
•
Consideredtheconsistencyofthedisclosuresinrelationtoclimatechange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2024.
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:
Group financial statements Society financial statements
Overall
materiality
£17.4m(2023:£22.8m). £14.0m(2023:£15.7m).
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currentyearprofitbefore
tax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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.
Profitbeforetaxisaprimarymeasure
usedbystakeholdersinassessingthe
performanceoftheSocietyandisa
generallyacceptedbenchmarkfor
determiningauditmateriality.
Wechangedthebenchmarkfroma
three-yearaverageoftheadjusted
profitmeasuretothecurrentyear’s
adjustedprofitmeasureasthe
economicenvironmentismorestable,
withlessvolatilityobservedinthe
Society’sperformance.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
125124
Governance>Independent Auditors’ Report to the Members of Yorkshire Building Society
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.
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,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the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orthe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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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.
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2024isconsistentwiththeaccounting
recordsandthefinancialstatement;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.
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theauditor.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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
127126
Financial
Statements
Income statements 130
Statements of comprehensive
income 131
Balance sheets 132
Statements of changes in
members’ interest and equity 133
Statements of cash flows 135
Notes to the financial statements 136
Governance > Independent Auditors’ Report to the Members of Yorkshire Building Society
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 six years, covering the years ended 31 December 2019 to 31 December 2024.
Other matter
The Society is required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules to include these
financial statements in an annual financial report prepared under the structured digital format required by DTR 4.1.15R
- 4.1.18R and filed on the National Storage Mechanism of the Financial Conduct Authority. This auditors’ report provides
no assurance over whether the structured digital format annual financial report has been prepared in accordance with
those requirements.
Michael Whyte (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
26 February 2025
Introduction Strategic Report Governance Financial Statements Other InformationIntroduction Strategic Report Governance Financial Statements Other Information
129128 129
Income Statements
For the year ended 31December 2024
Group
Society
2024
2023
2024
2023
Notes
£m
£m
£m
£m
Interest revenue calculated using the effective interest rate method
3
2,496.5
1,954.6
3,400.9
2,928.4*
Other interest revenue
3
879.9
1,011.7
879.8
1,011.5
Interest revenue
3
3,376.4
2,966.3
4,280.7
3,939.9*
Interest expense
4
(2,639.9)
(2,180.3)
(3,798.1)
(3,332.0)*
Net interest income
736.5
786.0
482.6
607.9
Fee and commission revenue
16.9
20.0
7.0
7.6
Fee and commission expense
(38.8)
(16.6)
(30.4)
(7.4)
Net fee and commission (expense)/ income
(21.9)
3.4
(23.4)
0.2
Net gains/(losses) from financial instruments held at fair value
5
36.2
(5.5)
44.4
(9.7)
Income from investments
8
–
–
75.0
50.0
Net realised gains on disposal of financial instruments
0.2
1.6
0.2
1.6
Other operating income
0.8
0.9
111.5
99.1
Total income
751.8
786.4
690.3
749.1
Administrative expenses
6
(343.1)
(312.3)
(343.0)
(312.1)
Depreciation and amortisation
13 15
(23.5)
(20.4)
(23.5)
(20.4)
Impairment (charge)/release of financial assets
7
(0.2)
(4.0)
2.0
–
Provisions for liabilities and charges
23
(1.3)
0.6
(1.3)
0.8
Profit before tax
383.7
450.3
324.5
417.4
Tax expense
9
(102.0)
(118.6)
(67.6)
(101.0)
Profit for the year
281.7
331.7
256.9
316.4
* Please refer to restatement of other deposits and investments in Note 1 for details of this restatement.
All profit for the year arises from continuing operations and is attributable to members.
The Notes on pages 136 to 216 form part of these financial statements. The Notes on pages 136 to 216 form part of these financial statements.
Statements of Comprehensive Income
For the year ended 31December 2024
Group
Society
2024
2023
2024
2023
Notes
£m
£m
£m
£m
Profit for the financial year
281.7
331.7
256.9
316.4
Items that may be subsequently reclassified through profit or loss
Cash flow hedges:
Fair value movements taken to equity
26
5.7
–
5.7
–
Amounts transferred to the income statement
26
3.5
(13.2)
3.5
(13.2)
Tax on amounts recognised in equity
9
(2.6)
3.7
(2.6)
3.7
Effect of change in corporation tax rate
9
–
–
–
–
Financial assets measured through other comprehensive income:
Fair value movements taken to equity
(13.8)
(18.0)
(13.8)
(18.0)
Amounts transferred to the income statement
1.2
1.2
1.2
1.2
Tax on amounts recognised in equity
9
3.5
4.7
3.5
4.7
Items that will not be reclassified through profit or loss
Remeasurement of retirement benefit obligations
17
(4.2)
(11.2)
(4.2)
(11.2)
Tax on remeasurement of retirement benefit obligations
9
1.2
3.1
1.2
3.1
Effect of change in corporation tax rate
9
–
–
–
–
Total other comprehensive expense
(5.5)
(29.7)
(5.5)
(29.7)
Total comprehensive income for the year
276.2
302.0
251.4
286.7
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
131130
Balance Sheets
As at 31December 2024
Group
Society
2024
2023
2024
2023
Notes
£m
£m
£m
£m
Assets
Cash and balances with the Bank of England
10
5,609.7
4,839.1
5,609.7
4,839.1
Loans and advances to credit institutions
590.0
397.4
433.9
208.6
Debt securities
11
8,421.3
7,561.9
18,989.0
19,354.3
Loans and advances to customers
12
49,705.5
46,815.9
10,571.6
10,920.6
Fair value adjustment for hedged risk on loans and advances to
customers
(454.7)
(615.5)
(454.7)
(615.5)
Derivative financial instruments
26
1,466.9
1,755.0
1,466.0
1,751.9
Investments
8
1.6
3.3
41,433.0
38,045.0*
Intangible assets
13
16.1
18.3
16.1
18.3
Investment property
14
11.1
15.7
11.1
15.7
Property held for sale
0.8
0.6
0.8
0.6
Property, plant and equipment
15
101.4
99.5
101.4
99.5
Retirement benefit surplus
17
33.0
38.6
33.0
38.6
Current tax assets**
5.3
3.8
5.3
3.8
Other assets
18
36.4
35.1
109.2
126.8
Total assets
65,544.4
60,968.7
78,325.4
74,807.3
Liabilities
Shares
19
52,044.4
47,056.7
52,044.4
47,056.7
Fair value adjustment for hedged risk on shares
1.0
–
1.0
–
Amounts owed to credit institutions
1,168.9
1,886.3
1,168.9
1,886.3
Other deposits
20
1,196.8
983.6
14,039.4
14,662.6*
Debt securities in issue
21
5,019.3
4,919.4
5,454.0
5,517.6
Derivative financial instruments
26
555.8
697.4
429.6
584.3
Current tax liabilities
0.2
–
0.2
–
Deferred tax liabilities
16
43.2
22.5
42.1
21.1
Other liabilities
22
75.2
70.5
103.7
119.2
Retirement benefit obligations
17
7.4
8.1
7.4
8.1
Provisions for liabilities and charges
23
4.2
4.0
4.2
3.9
Subordinated liabilities
24
1,453.3
1,621.7
1,453.3
1,621.7
Total liabilities
61,569.7
57,270.2
74,748.2
71,481.5
Members’ interests and equity
3,974.7
3,698.5
3,577.2
3,325.8
Total members’ interest, equity and liabilities
65,544.4
60,968.7
78,325.4
74,807.3
* Please refer to
restatement of other deposits and investments
in Note 1 for details of this restatement.
** Please refer to
reclassification of current tax asset
in Note 1 for details of change in presentation.
Approved by the Board of Directors on 26 February 2025 and signed on its behalf by:
Tom Ranger
Chief Financial Officer
Statements of Changes in Members’ Interest and Equity
For the year ended 31December 2024
Group General Cash flow Fair value Total
reservehedge through other
reservecomprehensive
income
£m
£m
£m
£m
At 1 January 2024
3,708.3
0.4
(10.2)
3,698.5
Profit for the year
281.7
–
–
281.7
Net remeasurement of retirement benefit obligations
(3.0)
–
–
(3.0)
Net movement in cash flow hedges
–
6.6
–
6.6
Net movement in fair value through other comprehensive income
–
–
(9.1)
(9.1)
Total comprehensive income
278.7
6.6
(9.1)
276.2
At 31 December 2024
3,987.0
7.0
(19.3)
3,974.7
Group General Cash flow Fair value Total
reservehedge through other
reservecomprehensive
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
The Notes on pages 136 to 216 form part of these financial statements. The Notes on pages 136 to 216 form part of these financial statements.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
133132
Statements of Changes in Members’ Interest and Equity (continued)
For the year ended 31December 2024
Society General
reserve
Cash flow
hedge
reserve
Fair value
through other
comprehensive
income
Total
£m £m £m £m
At 1 January 2024 3,335.6 0.4 (10.2) 3,325.8
Profit for the year 256.9 – – 256.9
Net remeasurement of retirement benefit obligations (3.0) – – (3.0)
Net movement in cash flow hedges – 6.6 – 6.6
Net movement in fair value through other comprehensive income – – (9.1) (9.1)
Total comprehensive income 253.9 6.6 (9.1) 251.4
At 31 December 2024 3,589.5 7.0 (19.3) 3,577.2
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
The Notes on pages 136 to 216 form part of these financial statements.
Statements of Cash Flows
For the year ended 31December 2024
Group
Society
2024
2023
2024
Restated
2023
Notes
£m
£m
£m
£m
Cash flows from operating activities
Profit before tax
383.7
450.3
324.5
417.4
Non-cash or non-operating items included in profit before tax
35
77.6
147.0
75.4
143.0
Net change in operating assets
35
(2,577.3)
(1,937.2)
(2,709.5)
(1,920.8)*
Net change in operating liabilities
35
4,334.5
1,744.7
3,416.0
282.9*
Tax paid
(80.6)
(101.0)
(45.9)
(83.0)
Net cash flow from operating activities
2,137.9
303.8
1,060.5
(1,160.5)
Cash flows from investing activities
Purchase of property, plant and equipment, and intangible assets
(18.3)
(15.0)
(18.3)
(15.0)
Proceeds from sale of property, plant and equipment
–
(0.2)
–
(0.2)
Purchase of debt securities
(3,769.4)
(3,412.9)
(4,734.3)
(3,412.9)
Redemption and other movements of debt securities
2,897.6
1,520.6
5,087.3
3,276.4
Net cash flow from investing activities
(890.1)
(1,907.5)
334.7
(151.7)
Cash flows from financing activities
Redemption of debt securities in issue
35
(1,429.4)
(1,423.7)
(1,194.1)
(1,165.4)
Issue of debt securities
35
1,543.6
999.2
1,193.6
506.5
Redemption of subordinated liabilities
35
(142.6)
(136.4)
(142.6)
(136.4)
Issue of subordinated liabilities
–
650.0
–
650.0
Interest paid on subordinated liabilities
(76.7)
(51.5)
(76.7)
(51.5)
Interest paid on lease liabilities
(0.5)
(0.6)
(0.5)
(0.6)
Capital repayments on lease liabilities
(2.5)
(3.6)
(2.5)
(3.6)
Net cash flow from financing activities
(108.1)
33.4
(222.8)
(201.0)
Net change in cash and cash equivalents
1,139.7
(1,570.3)
1,172.4
(1,513.2)
Opening balance
5,060.0
6,630.3
4,871.2
6,384.4
Closing cash and cash equivalents
6,199.7
5,060.0
6,043.6
4,871.2
Cash and cash equivalents
Cash and cash equivalents
10
5,609.7
4,839.1
5,609.7
4,839.1
Less Bank of England cash ratio deposit
10
–
(176.5)
–
(176.5)
Loans and advances to credit institutions
590.0
397.4
433.9
208.6
Closing cash and cash equivalents
6,199.7
5,060.0
6,043.6
4,871.2
* Please refer to
restatement of other deposits and investments
in Note 1 for details of this restatement.
Net cash flows from operating activities of the Group include interest received of £3,371.3 million (2023: £2,964.5 million)
and interest paid of £2,348.1 million (2023: £1,534.1 million). Net cash flows from operating activities of the Society include
interest received of £4,264.4 million (2023: £3,921.1 million) and interest paid of £3,506.3 million (2023: £2,685.8 million).
The Notes on pages 136 to 216 form part of these financial statements.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
135134
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 2024.
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 the presentational currency of the YBS Group and the functional and
presentational currency of Yorkshire Building Society. 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 2025, and stress tests performed
throughout the period, they consider the Group has adequate resources to continue in existence at least 12 months from the
date the of approval of this report. 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 the same terms as the covered bond issuance. 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.
Accounting developments
Changes to accounting standards effective in the period
There have been a number of amendments made to existing accounting standards that are effective for the reporting period
commencing 1 January 2024:
IAS 1 Presentation of Financial Statements
IAS 1
Presentation of Financial Statements
received an amendment related to the classification of Liabilities as Current or
Non-current and Non-current liabilities with covenants. Under previous IAS 1 requirements, a liability could be classified as
current when they did not have an unconditional right to defer settlement for at least 12 months after the reporting date. The
IASB has removed the requirement for a right to be unconditional and instead now requires that a right to defer settlement
must exist at the reporting date and have substance. Therefore, you can classify a liability as non-current if it has a right to
defer settlement for at least 12 months after the reporting date. As permitted under IAS 1, the Group presents assets and
liabilities in order of liquidity rather than under the ‘current/non-current’ presentation, therefore this amendment does not
impact the Group’s reporting.
IFRS 16 Leases
IFRS 16
Leases
received amendments related to Lease Liability in Sale and Leaseback. The amendments introduce a new
accounting model for variable payments and will require lessees to reassess and potentially restate sale and leaseback
transactions entered into since 2019. These amendments will have no impact as the Group has not entered any sale and
leaseback transactions to date.
IAS 7 Statement of Cashflows and IFRS 7 Financial Instruments
IAS 7
Statement of Cashflows
and IFRS 7
Financial Instruments
received amendments related to Supplier Finance
Arrangements. The amendments require a company to provide information about its supplier finance arrangements that would
enable investors to assess the effects of these arrangements on the company’s liabilities and cash flows, and the company’s
exposure to liquidity risk. The Group don’t have any arrangements that meet the criterion set out in the amendments, so this
will not impact the Group’s reporting.
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.
Amendments to IFRS 7 and IFRS 9 – Classification and Measurement of Financial Instruments
The Classification and Measurement of Financial Instruments amendments were made to IFRS 9
Financial Instruments
and
IFRS 7
Financial Instruments: Disclosures
in May 2024 and will become effective for annual reporting periods beginning on or
after 1 January 2026. These amendments:
•
clarify when some financial assets and liabilities can be recognised and derecognised, with a new exception for certain
financial liabilities that are settled through an electronic cash transfer system;
•
provide clarification and additional guidance on assessing whether a financial asset satisfies the solely payments of
principal and interest (SPPI) criterion;
•
introduce new disclosure requirements for instruments with contractual terms that can change cash flows; and
•
revise the disclosures for equity instruments designated at fair value through other comprehensive income (FVOCI).
The Group do not expect these amendments to have an impact on its operations or financial statements.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
137136
Financial Statements > Notes to the Financial Statements
1. Statement of accounting policies (continued)
Accounting developments (continued)
Standards issued but not yet effective (continued)
Amendments to IAS 21 – Lack of Exchangeability
The Lack of Exchangeability amendments was made in August 2023 to IAS 21
The Effects of Changes in Foreign Exchange
Rates
and will become effective for annual reporting periods beginning on or after 1 January 2025. The amendment provided
additional guidance on how a spot exchange rate is determined when there is a lack of long term exchangeability. The Group
do not expect these amendments to have an impact on its operations or financial statements.
IFRS 19 Subsidiaries without Public Accountability: Disclosures
IFRS 19
Subsidiaries without Public Accountability: Disclosures
was issued in May 2024 and will become effective for annual
reporting periods beginning on or after 1 January 2027. The standard allows eligible subsidiaries to replace the disclosure
requirements of other IFRS Accounting standards with reduced disclosure requirements. The Group do not expect these
amendments to have an impact on its operations or financial statements given that the subsidiaries do not meet the
requirements set out in IFRS 19.
IFRS 18 Presentation and Disclosure in Financial Statements
IFRS 18
Presentation and Disclosure in Financial Statements
was issued in April 2024 and will become effective for annual
reporting periods beginning on or after 1 January 2027. IFRS 18 will replace IAS 1
Presentation of Financial Statements
.
A review is underway into all of the impacts of implementing the new standard, with some key areas already identified
including:
•
Structure of the statement of profit or loss.
As a result of adopting IFRS 18, the Group will have to include new categories and subtotals in the statement of profit or
loss. IFRS 18 requires entities to assess whether their main business activities include investing in assets and/or providing
financing to customers. If so, some specific income and expenses that would otherwise be outside of the operating category
are classified in the operating category. For entities such as banks and building societies for which investing in assets and
providing financing to customers are both main business activities, we expect that most of the income and expenses of
the business activities including providing financing and investing in assets (which includes income and expenses from
cash and cash equivalents for entities that invest in financial assets as a main business activity) will fall into the operating
income category. This allocation of income and expenses into new categories will impact where within the statement of
profit or loss they sit, and as a result, may impact on operating profit.
•
Disclosures related to management-defined performance measures.
Management might define its own measures of performance; the Group refer to these as ‘alternative performance measures’.
IFRS 18 defines a subset of these measures that relate to an entity’s financial performance as ‘management-defined
performance measures’ (‘MPMs’). Information related to these measures should be disclosed in the financial statements
in a single note, including a reconciliation between the MPM and the most similar specified subtotal in IFRS Accounting
Standards. As a result of this, a reconciliation of Core Operating Profit back to Profit Before Tax will need to be included in the
new note.
•
Aggregation and disaggregation.
IFRS 18 provides enhanced guidance on the principles of aggregation and disaggregation which focus on grouping items
based on their shared characteristics. There is a requirement to disclosure of expenses by nature, for entities that present
the statement of profit or loss by function. Given that the Group doesn’t currently present its accounts in this way, there is
no significant impact expected from this requirement.
•
Foreign exchange differences, derivatives and designated hedging instruments.
IFRS 18 requires foreign exchange differences to be classified in the same category as the income and expenses from the
items that resulted in the foreign exchange differences, unless doing so would involve undue cost or effort.
For derivatives used to manage identified risks (which includes economic hedges), gains and losses are classified in the
same category as the income and expenses affected by the risks that the derivatives are managing. Gains and losses on
derivatives that are not used to manage identified risks are typically classified in the operating category. However, there
are additional considerations for some transactions that relate to the raising of finance that might result in some gains and
losses being classified in the financing category. This allocation of income and expense into new categories will impact
where within the statement of profit or loss they sit, and as a result, may impact on operating profit.
As the Group will adopt IFRS 18 from the effective date of 1 January 2027, a comparative for the reporting period ending
31 December 2026 will need to be prepared as retrospective application is required.
Change in accounting policy
There were no changes to accounting policies during the year ended 31 December 2024, except for the change in
presentation of the current tax asset.
Change in presentation of current tax asset
The current tax asset was previously included within Other Assets in the balance sheets. It has now been separately presented
on the balance sheets. There has been a change in presentation for the comparative period to align with the current period
treatment due to the increase in current tax asset in the current year. The reclassification has no impact on previously
reported net assets, profit or loss of cash flows.
Material accounting policies
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 carrying value of the asset.
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.
Interest income and expense from clearing collateral agreements is presented within Interest revenue.
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.
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
139138
Financial Statements > Notes to the Financial Statements
1. Statement of accounting policies (continued)
Material accounting policies (continued)
Financial instruments (continued)
The table below summarises the Group’s financial instruments and the treatment adopted in these financial statements:
Financial instrument
Description
Subsequent measurement
Cash and balances with the Bank of England
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 controlled entities
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
Other deposits
Deposits made by non-members
Amortised cost
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
* 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.
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.
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 Building Society 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 instruments’ rating breaches the risk appetite
then an ECL assessment will take place on the individual asset basis.
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 Building
Society 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
shares
balances.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
141140
Financial Statements > Notes to the Financial Statements
1. Statement of accounting policies (continued)
Material accounting policies (continued)
Financial instruments (continued)
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.
Controlled entities
An entity is controlled where the Group is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control
ceases.
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
143142
Financial Statements > Notes to the Financial Statements
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 1.0% increase in the rate used to discount future liabilities from 5.45% to 6.45% would result in a decrease
of liabilities of 10.9% (a 1.0% decrease would increase liabilities by 13.3%). The impact of a 0.5% increase in inflation would
increase liabilities by 3.2% (a 0.5% decrease would decrease liabilities by 3.0%). The impact of a one-year increase in life
expectancy at age 60 would be to increase liabilities by around 3.0% (a one-year decrease would decrease liabilities by 3.0%).
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.
When compared to prior years, 2024 has been more stable and a more positive outlook is present in the economic
environment. Two positive HPI updates have been released by the Office of National Statistics (ONS) since June 2024 and
Bank of England Base rate has been reduced by 0.5% to 4.75% in two cuts seen since August 2024 and cuts have continued
into 2025.
1. Statement of accounting policies (continued)
Material accounting policies (continued)
Taxation including deferred tax (continued)
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.
Offsetting
Financial assets and liabilities are offset and the net amount reported in the balance sheets when there is a legally
enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or realise the asset and
settle the liability simultaneously. The Group’s loans and advances to customers include mortgage offset products that do not
qualify for netting under the requirements described above as transactions are settled on a gross basis.
The Group offers offset mortgage products which allows any money held in the offset savings account to be deducted from
the mortgage loan balance before calculating the interest on the loan. As there is a legally enforceable right to determine the
interest income on a net basis, the interest income is presented as single net amount in the income statement.
The Group enters into derivative contracts, which 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.
Also, the Group has various Credit Support Annexes (CSAs) with counterparties which define how collateral will be exchanged
with a counterparty to mitigate market risk.
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 cash flow statement, cash and cash equivalents comprise cash and non-restricted balances with less
than three months maturity from the date of acquisition, included within cash and loans and advances to banks and similar
institutions on the balance sheet. The statement of cash flows has been prepared using the indirect method.
Restatement of other deposits and investments
Other deposits and Investments
in the Society’s financial statements have been restated to correct the recognition of savings
accounts in relation to Accord’s offset mortgage products.
The comparative financial statements for the year to 31 December 2023 have been restated to move the recognition of the
savings accounts from the subsidiary Accord Mortgages Ltd to the Society, that had previously been represented as a deduction
of amounts owed from group undertakings within Investments of the Society. This has previously reduced the interest income
on amounts due from group undertakings. The reduction in the interest income has been grossed up and recognised as
interest payable by Society to Accord in lieu of interest receivable on mortgage offset accounts recognised in Accord’s financial
statements.
Society
•
Increased the “Investments” by £582.4 million (2022: £442.9 million) from £37,462.6 million to £38,045.0 million.
•
Increased the “Other Deposits” by £582.4 million (2022: £442.9 million) from £14,080.2 million to £14,662.6 million.
•
Increased the “Interest revenue calculated using the effective interest rate method” by £23.4 million from £2,905.0 million
to £2,928.4 million.
•
Increased the “interest expense” by £23.4 million from £3,308.6 million to £3,332.0 million.
There is no impact to the Group. Notes to the financial statements have been updated to reflect this correction (Note 3, Note
4, Note 8, Note 20, Note 27, Note 32 and Note 34). Amendments to the statements of cash flows are reflected in Note 35.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
145144
Financial Statements > Notes to the Financial Statements
3. Interest revenue
Group
Society
2024
2023
2024
Restated
2023
£m
£m
£m
£m
Calculated using the effective interest rate method:
Loans secured on residential property
1,867.7
1,366.2
400.8
346.7
Loans secured on connected undertakings
–
–
1,749.3
1,372.4*
Loans secured on commercial property
46.6
44.7
46.5
44.7
Other interest expense**
(41.7)
(61.5)
(41.7)
(61.5)
Liquid assets
304.5
364.0
295.0
352.6
Debt securities
319.4
241.2
951.0
873.5
Interest revenue calculated using the effective interest rate method
2,496.5
1,954.6
3,400.9
2,928.4
Other:
Derivatives in hedge relationships
808.1
926.4
808.1
926.4
Derivatives not included in hedge relationships
70.1
82.7
70.1
82.5
Investments held at fair value
1.7
2.6
1.6
2.6
Other interest revenue
879.9
1,011.7
879.8
1,011.5
Total interest revenue
3,376.4
2,966.3
4,280.7
3,939.9
* Interest revenue on Loans secured on connected undertakings has been restated for the recognition of savings accounts in relation to the Accord offset mortgage
product. This has increased by £23.4 million from £1,349.0 million to £1,372.4 million.
** Includes net interest income on clearing collateral agreements.
4. Interest expense
Group
Society
2024
2023
2024
Restated
2023
£m
£m
£m
£m
Shares held by individuals
2,022.3
1,509.6
2,022.3
1,509.6
Owed to credit institutions
48.5
126.8
48.5
126.8
Deposits from connected undertakings**
–
–
1,195.9
1,205.5)
Other deposits
22.5
24.2
22.5
24.2
Debt securities in issue
174.3
164.6
205.5
186.8
Subordinated liabilities
74.0
51.5
74.0
51.5
Other interest payable
0.1
0.2
0.1
0.2
Derivatives in hedge relationships
193.2
174.4
126.4
105.7
Derivatives not included in hedge relationships
104.5
128.4
102.4
121.1
Interest expense for leasing arrangements
0.5
0.6
0.5
0.6
Total interest expense
2,639.9
2,180.3
3,798.1
3,332.0
* Interest expense on deposits from connected undertakings has been restated for the recognition of savings accounts in relation to the Accord offset mortgage product.
This has increased by £23.4 million from £1,182.1 million to £1,205.5 million.
** This includes £35.6m (2023: £23.4m) charged by Accord to the Society in lieu of interest receivable on mortgage offset accounts recognised in Accord’s financial
statement. This was due to the interest offset in respect of interest due on savings accounts held by the Society.
2. Critical accounting judgements and key sources of estimation uncertainty (continued)
Impairment of loans and advances to customers (continued)
Economic scenarios and weightings (continued)
Whilst there have been positive aspects to 2024 some uncertainty remains as there are still loans coming to the end of
their fixed term that have so far been unaffected by interest rate rises. 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 (PMA) 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. A higher weighting has been applied to the Core and Upside scenarios
and moved away from Downturn and Severe scenarios to reflect the more positive economic outlook. 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 5% from core and downside to severe downturn
resulting in a £5.7 million increase in ECL. The least severe shifted 10% from downside and severe downturn to core resulting
in a £5.6 million decrease in ECL. These changes in weightings have been fully modelled and been allowed to impact staging
but impact on PMA has been excluded.
In terms of sensitivity to changes in key economic variables within the model, the ECL model was ran 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 £6.8 million and
£23.1 million (2023: £5.3 million and £28.4 million). Below is the percentage change in HPI forecast for both downturn
scenarios for the next 5 years in relation to the Core scenario.
2024
Scenario (% change)
HPI
2025
2026
2027
2028
2029
Downturn
(7.0)
(2.0)
(2.5)
(1.8)
(1.8)
Severe Downturn
(17.3)
(12.5)
(4.6)
3.1
(2.5)
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)
The key in-year impact of changes to economic variables came from applying quarterly Office of National Statistics (ONS) HPI
updates, which accounted for £0.3 million of impairment charge over 2024 (2023: £0.7 million charge).
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 £1.4 million (2023: £2.2 million) increase in ECL
(excluding 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% (2023: 26%) of these customers
and so there is a risk that the full amount due at maturity (average maturity being 2031) will not be collected to compensate
customers for potential future claims. 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 8.3% (2023: 8.1%). Out of the total
ECL of £8.2 million (2023: £7.9 million), £7.1 million (2023: £6.4 million) relates to potential remediation.
Two alternative probability of default (PD) estimates are applied, one for those customers that the Group 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 £4.0 million (2023: £3.8 million).
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
147146
Financial Statements > Notes to the Financial Statements
5. Net gains/(losses) from financial instruments held at fair value
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Equity investments held at fair value
(1.7)
0.5
(1.7)
0.5
Hedge accounting ineffectiveness
21.2
(29.1)
31.1
(29.0)
Derivatives and debt securities not included in hedge relationships
16.7
23.1
15.0
18.8
Net gains/(losses) from financial instruments held at fair value
36.2
(5.5)
44.4
(9.7)
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 in to 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).
Interest rates used to determine fair values which are linked to BoE base rate have fluctuated throughout the year, following
bank rate cuts, the UK general election and the budget in Q4 2024. Since May 2024, rates have been gradually decreasing
giving rise to gains across the Group’s designated and unmatched portfolios.
During 2024, the Group designated two new hedges; a fair value savings macro hedge and a cash flow mortgage pipeline
(floating rate debt securities issued) hedge, these two hedges were implemented to mitigate volatility and reduce the Group’s
exposure within its unmatched swaps portfolio. See Note 26 Derivative financial instruments for further information.
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 refer to the fair value gains and losses on equity shares investment.
6. Administrative expenses
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Staff costs
Salaries and wages
157.4
138.2
157.4
138.2
Social security costs
16.5
14.2
16.5
14.2
Pension costs – defined benefit plans
2.1
1.1
2.1
1.1
Pension costs – defined contribution plans
13.2
11.4
13.2
11.4
Contractor staff costs
31.0
30.4
31.0
30.4
Other staff costs
1.8
1.6
1.8
1.6
Professional consultancy costs
5.9
6.1
5.9
6.1
Regulatory fees
15.2
6.2
15.2
6.2
Premises costs
17.5
15.6
17.5
15.6
IT costs
47.1
47.8
47.2
47.8
Marketing
10.2
15.5
10.2
15.5
Other expenses
25.2
24.2
25.0
24.0
Total administrative expenses
343.1
312.3
343.0
312.1
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:
2024
2023
Full time
Part time
Full time
Part time
Central administration
2,390
429
2,145
428
Branches
380
340
383
344
Total staff numbers
2,770
769
2,528
772
Remuneration of the auditors
Group
Society
2024
2023
2024
2023
£000
£000
£000
£000
Audit fees for the Group and Society statutory audit*
1,420.0
783.5
1,420.0
783.5
Audit fee for the statutory audit of controlled entities
486.0
449.5
–
–
Audit related assurance services required by law or regulation
137.0
129.5
137.0
129.5
Total audit and audit related assurance services
2,043.0
1,362.5
1,557.0
913.0
Other permitted non-audit services
277.8
232.5
277.8
232.5
Total remuneration of the auditors
2,320.8
1,595.0
1,834.8
1,145.5
* 2024 audit fees include overruns of £0.3 million related to the prior year.
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
2024
2023
2024
2023
£m
£m
£m
£m
Impairment charge/(release) on loans and advances to customers
1.1
4.5
(1.4)
0.2
Recoveries relating to loans and advances previously written off
(0.6)
(0.8)
(0.3)
(0.5)
Impairment (release)/charge of other financial assets
(0.3)
0.3
(0.3)
0.3
Impairment charge/(release) of financial assets
0.2
4.0
(2.0)
–
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
149148
Financial Statements > Notes to the Financial Statements
8. Investments
Income from investments
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Dividend income from subsidiaries
–
–
75.0
50.0
Dividend income from equity investments
–
–
–
–
Income from investments
–
–
75.0
50.0
During 2024, the Society received dividends from Accord of £75.0 million (2023: £50.0 million).
Investments
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Equities
1.6
3.3
1.6
3.3
Equity in controlled entities
–
–
104.0
104.9
Loans with controlled entities
–
–
41,327.4
37,936.8*
Total investments
1.6
3.3
41,433.0
38,045.0*
* Loans with controlled entities has been restated for the recognition of savings accounts in relation to the Accord offset mortgage product. This has increased by
£582.4 million from £37,354.4 million to £37,936.8 million.
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. 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 (LBS) Limited
Mortgage finance
Norwich and Peterborough Insurance Brokers Limited Subsidiary is In liquidation
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
Yorkshire Insurance Services Limited
Chelsea Mortgage Services Limited
Yorkshire Life Assurance Services Limited
YBS Limited
Yorkshire Mortgage Services Limited
Yorkshire Direct Limited
Yorkshire Personal Financial Services Limited
YBS Group Limited
Yorkshire Property Services Limited
YBS Pension Trustees Limited
Yorkshire Services Limited
Yorkshire Group 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 (2023: £nil).
Brass No.8 PLC
Brass No.11 PLC
Brass No.8 Mortgage Holdings Limited*
Brass No.11 Mortgage Holdings Limited*
Brass No.9 PLC
Tombac No.3 PLC
Brass No.9 Mortgage Holdings Limited*
Tombac No.3 Mortgage Holdings Limited*
Brass No.10 PLC
YBS Covered Bonds Finance Limited
Brass No.10 Mortgage Holdings Limited*
YBS Covered Bonds Finance (Holdings) Limited*
White Rose Master Issuer PLC (incorporated in 2024)
Yorkshire Building Society Covered Bonds LLP
White Rose Master Holdings Limited* (incorporated in 2024)
All these entities, with the exceptions of the Holding Companies*, are subject to audit and have a 31 December year end.
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 had a 22.2% joint venture investment in Arkose Funding Limited, which entered liquidation on 24 September
2024. The carrying value of the investment as at 31 December 2024 is £nil (2023: £nil).
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
151150
Financial Statements > Notes to the Financial Statements
9. Tax expense
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Corporation tax – current year charge
79.1
95.9
44.4
78.0
Corporation tax – adjustment in respect of prior periods
0.1
0.6
0.1
0.6
Total current tax
79.2
96.5
44.5
78.6
Deferred tax – current year
22.3
22.5
22.6
22.8
Deferred tax – adjustment in respect of prior periods
0.5
(0.6)
0.5
(0.6)
Deferred tax – impact of rate change
–
0.2
–
0.2
Total tax expense in the income statement
102.0
118.6
67.6
101.0
On 1 April 2023, the UK corporation tax rate increased from 19% to 25%. The Group has an effective tax rate for the year
of 26.6% (2023: 26.3%), which is higher than the average UK statutory corporation tax rate for the year of 25.0% (2023:
23.5%). 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
2024
2023
2024
2023
£m
£m
£m
£m
Profit before tax
383.7
450.3
324.5
417.4
Tax calculated at a tax rate of 25% (2023: 23.5%)
95.9
105.8
81.1
98.1
Effects of:
Income not subject to tax
(0.4)
(0.3)
(21.6)
(12.1)
Fair value movements on securitisation
(0.4)
(1.0)
–
–
Expenses not deductible for tax purposes
1.8
0.9
3.0
1.9
Banking surcharge
4.5
13.1
4.5
13.1
Adjustment to tax charge in respect of prior periods
0.6
–
0.6
–
Change in tax rate
–
0.1
–
–
Total tax expense in income statement
102.0
118.6
67.6
101.0
Tax (credit)/expense recognised directly in equity:
Tax on financial instruments held at fair value through other comprehensive
income
(3.5)
(4.7)
(3.5)
(4.7)
Tax on remeasurement of net retirement benefit obligations
(1.2)
(3.1)
(1.2)
(3.1)
Deferred tax on cash flow hedges
2.6
(3.7)
2.6
(3.7)
Total tax recognised directly in equity
(2.1)
(11.5)
(2.1)
(11.5)
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 2024 and at 31 December 2023 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 2024 and at 31 December 2023 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 Pillar Two 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 UK rate of corporation tax is
25% and based on a full assessment of the UK’s implementation of the rules and calculation of their application to the Group,
the tax expense arising from Pillar Two is £nil for the years ended 31 December 2024 and 31 December 2023.
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
2024
2023
2024
2023
£m
£m
£m
£m
Cash in hand
8.7
9.9
8.7
9.9
Unencumbered deposits with the Bank of England
5,601.0
4,652.7
5,601.0
4,652.7
Cash in hand and unencumbered deposits
5,609.7
4,662.6
5,609.7
4,662.6
Cash ratio deposit with the Bank of England
–
176.5
–
176.5
Cash and balances with the Bank of England
5,609.7
4,839.1
5,609.7
4,839.1
Cash ratio deposits were mandatory requirements of the Bank of England. The deposits were repaid in the year as the Bank of
England Cash Ratio Deposit Scheme was replaced by the Bank of England Levy.
11. Debt securities
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Debt securities issued by:
UK public bodies
2,414.8
852.4
2,414.8
852.4
Other public bodies
1,105.2
958.9
1,105.2
958.9
Other
4,901.3
5,750.6
4,901.3
5,750.6
Group companies
–
–
10,567.7
11,792.4
Total debt securities
8,421.3
7,561.9
18,989.0
19,354.3
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
153152
Financial Statements > Notes to the Financial Statements
11. Debt securities (continued)
Debt securities issued by Group companies comprise retained investments in the Group’s securitisation vehicles.
Group
Fair value
Fair value Amortised Total
through profit through 0ther cost
and loss comprehensive
Income
£m
£m
£m
£m
Movements in debt securities during the year were:
At 1 January 2024
27.3
5,195.7
2,338.9
7,561.9
Additions
–
3,141.2
628.2
3,769.4
Disposals and repayments
–
(988.8)
(1,866.4)
(2,855.2)
Exchange translation
–
(25.2)
(22.0)
(47.2)
Other changes in value
0.3
(20.3)
12.4
(7.6)
At 31 December 2024
27.6
7,302.6
1,091.1
8,421.3
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
Society
Fair value
Fair value Amortised Total
through profit through other cost
and loss comprehensive
Income
£m
£m
£m
£m
Movements in debt securities during the year were:
At 1 January 2024
27.3
5,195.7
14,131.3
19,354.3
Additions
–
3,141.2
1,593.1
4,734.3
Disposals and repayments
–
(988.8)
(4,037.7)
(5,026.5)
Exchange translation
–
(25.2)
(22.0)
(47.2)
Other changes in value
0.3
(20.3)
(5.9)
(25.9)
At 31 December 2024
27.6
7,302.6
11,658.8
18,989.0
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
12. Loans and advances to customers
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Loans secured on residential property:
Loans fully secured on residential property
47,813.2
45,126.4
8,653.0
9,208.5
Other loans secured on residential property
5.1
6.1
–
–
Loans secured on commercial property
1,945.8
1,743.4
1,945.3
1,742.8
Gross loans and advances to customers
49,764.1
46,875.9
10,598.3
10,951.3
Impairment
(39.2)
(37.7)
(7.3)
(8.4)
Fair value credit adjustment
(19.4)
(22.3)
(19.4)
(22.3)
Expected credit losses (ECL)
(58.6)
(60.0)
(26.7)
(30.7)
Total loans and advances to customers
49,705.5
46,815.9
10,571.6
10,920.6
The following tables analyse the changes in ECL impairment and fair value credit adjustments.
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Opening impairment
37.7
33.1
8.4
7.8
Amounts written off in the year
(1.4)
(1.3)
(0.9)
(0.6)
Discounting recognised in net interest income
1.8
1.4
1.2
1.0
Charge/(release) for the year recognised in the income statement
1.1
4.5
(1.4)
0.2
Impairment
39.2
37.7
7.3
8.4
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Opening fair value credit adjustment
22.3
25.3
22.3
25.3
Release recognised in the income statement through net interest
(2.3)
(2.3)
(2.3)
(2.3)
Amounts written off in the year
(0.6)
(0.7)
(0.6)
(0.7)
Fair value credit adjustment
19.4
22.3
19.4
22.3
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
155154
Financial Statements > Notes to the Financial Statements
13. Intangible assets
Group and Society
Development
Software
Internally
Other
Total
costs generated
assets
£m
£m
£m
£m
£m
Cost:
At 1 January 2024
–
67.6
12.6
7.1
87.3
Additions
4.9
0.4
–
–
5.3
Disposals
–
(5.9)
(0.4)
–
(6.3)
Transfers
0.5
(0.5)
–
–
–
At 31 December 2024
5.4
61.6
12.2
7.1
86.2
Amortisation:
At 1 January 2024
–
49.4
12.5
7.1
69.0
Charged in year
–
7.4
0.1
–
7.5
Disposals
–
(5.9)
(0.4)
–
(6.3)
At 31 December 2024
–
50.9
12.2
7.1
70.2
Net book value at 31 December 2024
5.4
10.7
–
–
16.1
Cost:
At 1 January 2023
4.1
59.8
13.6
7.1
84.6
Addition
(4.1)
10.5
–
–
6.4
Disposals
–
(2.7)
(1.0)
–
(3.7)
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
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.
14. Investment property
Group and Society
2024
2023
£m
£m
Cost:
At 1 January
21.7
22.0
Additions
0.4
0.3
Disposals
(0.1)
(0.6)
At 31 December
22.0
21.7
Depreciation:
At 1 January
6.0
6.0
Charged in year
0.4
0.4
Impairment
4.6
–
Disposals
(0.1)
(0.4)
At 31 December
10.9
6.0
Net book value at 31 December
11.1
15.7
Fair value
12.7
12.2
Investment properties are generally flats and offices ancillary to branch premises and not used by the Group. Rental income of
£1.0 million on investment properties has been included within other operating income (2023: £1.1 million).
The fair value of the Group’s investment properties at 31 December 2024 is based predominantly on external valuations. The
Group recognised an impairment charge of £4.6 million (2023: £nil) due to changes in the fair value of investment properties
as at 31 December 2024.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
157156
Financial Statements > Notes to the Financial Statements
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 2024
101.9
59.2
22.6
1.3
185.0
Additions
6.6
6.0
0.6
–
13.2
Disposals
(3.4)
(11.3)
–
–
(14.7)
Lease modification
–
–
0.1
–
0.1
Assets transferred to held for sale
–
(0.7)
–
–
(0.7)
At 31 December 2024
105.1
53.2
23.3
1.3
182.9
Depreciation:
At 1 January 2024
34.2
42.2
8.0
1.1
85.5
Charged in year
3.6
4.9
2.6
0.1
11.2
Disposals
(3.4)
(11.3)
–
–
(14.7)
Asset transferred to held for sale
–
(0.5)
–
–
(0.5)
At 31 December 2024
34.4
35.3
10.6
1.2
81.5
Net book value at 31 December 2024
70.7
17.9
12.7
0.1
101.4
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
16. Deferred tax
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
At 1 January
22.5
11.9
21.1
10.2
Income statement expense (Note 9)
22.8
22.1
23.1
22.4
Tax credit recognised directly in equity
(2.1)
(11.5)
(2.1)
(11.5)
At 31 December
43.2
22.5
42.1
21.1
Deferred tax assets and liabilities are attributable to the following items:
Deferred tax assets
Other temporary differences
(0.4)
(0.1)
(0.4)
(0.1)
Deferred remuneration
(4.0)
(3.6)
(4.0)
(3.6)
Transitional adjustment arising following implementation of IFRS 9
(0.5)
(0.7)
(0.5)
(0.7)
Transitional adjustment arising following change in accounting treatment
(0.3)
(0.4)
(0.3)
(0.4)
Pensions and other post-retirement benefits
(2.1)
(2.3)
(2.1)
(2.3)
Financial instruments held at fair value through other comprehensive
income
(7.5)
(4.0)
(7.5)
(4.0)
Capital losses
(0.2)
(0.2)
(0.2)
(0.2)
Total deferred tax assets
(15.0)
(11.3)
(15.0)
(11.3)
Deferred tax liabilities
Pensions and other post-retirement benefits
9.2
10.8
9.2
10.8
Capital allowances in excess of depreciation
2.4
1.2
2.4
1.2
Other temporary differences
0.7
0.7
0.6
0.7
Fair value movements on external swap on intercompany loan
42.0
19.2
42.0
19.2
Financial Instruments held at fair value through profit and loss
0.2
0.4
0.2
0.4
Cash flow hedging
2.7
0.1
2.7
0.1
Transitional adjustment arising following implementation of IFRS 9
0.8
1.1
–
–
Transitional adjustment arising following change in accounting treatment
0.2
0.3
–
–
Total deferred tax liabilities
58.2
33.8
57.1
32.4
Net deferred tax liabilities
43.2
22.5
42.1
21.1
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
159158
Financial Statements > Notes to the Financial Statements
16. Deferred tax (continued)
The deferred tax expense/(credit) in the income statement comprise the following temporary differences:
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Pensions and other post-retirement benefits
(0.2)
0.1
(0.2)
0.1
Capital allowances in excess of depreciation
1.2
0.3
1.2
0.3
Fair value movements on external swap on intercompany loan
22.9
22.9
22.9
22.9
Deferred remuneration
(0.4)
(1.4)
(0.4)
(1.4)
Financial instruments held at fair value through profit and loss
(0.2)
0.1
(0.2)
0.1
Transitional adjustment arising following implementation of IFRS 9
(0.1)
(0.1)
0.2
0.2
Transitional adjustment arising following change in accounting treatment
–
–
0.1
0.1
Other temporary differences
(0.4)
0.2
(0.5)
0.1
Total deferred tax expense/(credit) in the income statement
22.8
22.1
23.1
22.4
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 former members of staff. The
present value at 31 December 2024 of the defined benefit obligation (DBO) in relation to these schemes was £7.4 million
(2023: £8.1 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 2024 the defined benefit asset was £33.0 million (2023: £38.6 million), a decrease of £5.6 million from
31 December 2023.
Pensioner buy-in
In mid-November 2018 the Scheme entered into a pensioner buy-in with Pension Insurance Corporation (PIC). The premium
of £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 2024, the Society 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 £140.7 million
(2023: £155.8 million) was calculated using a methodology consistent with the approach used to calculate the total pension
benefit. Benefits paid over 2024 in respect of the buy-in members totalled £9.5 million (2023: £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 2024, the total Society contribution into the
pension scheme in respect of DC benefits was £12.8 million (2023: £11.9 million). In addition to this the Society also paid
£1.0 million (2023: £1.0 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 13 years (2023: 14 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
2024
2023
2024
2023
£m
£m
£m
£m
Deferred in service liability
31.0
36.5
–
–
Deferred liability
146.8
166.3
–
–
Pensioner liability
331.5
369.7
7.4
8.1
Total liabilities
509.3
572.5
7.4
8.1
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:
•
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.
•
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.
•
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.
•
Unanticipated improvements in the longevity of members leading to an increase in the Scheme’s liabilities.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
161160
Financial Statements > Notes to the Financial Statements
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.
Funded DB scheme
2024
2023
%
%
Equities
1
1
Index-linked bonds
41
53
Corporate and other bonds
27
7
Cash and other
6
13
Swaps
(1)
1
Pensioner buy-in insurance contract
26
25
100
100
Approximately 69% (2023: 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 (“DB”) 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 of the Scheme Actuary 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 and derivatives.
•
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.
In 2024, the Trustees worked with its investment advisor and undertook a full strategy review of the Scheme following the
completion of the triennial actuarial valuation in November 2023 (effective date of 31 December 2022). During this review,
the Trustees assessed whether the current journey plan remained appropriate and reviewed the risk and return characteristics
of the DB Scheme.
As a result of the review, the Trustees increased the allocation to synthetic equities. In addition, there were a few changes to
how the Scheme’s assets were monitored to better reflect the buy and hold nature of the Scheme’s portfolio and to therefore
better assess whether the strategy is performing as expected. Most specifically the Trustees decided to exclude the buy-
in from the monitoring of the Scheme’s assets, given the illiquidity of the asset. Hence, the Trustees agreed to adjust the
investment strategy to seek to generate returns between 0.90% pa and 1.20% pa above the return of the Scheme’s liabilities
in the long term, excluding the buy-in.
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 as to monitor and the challenge the Covenant, Investment and Funding risk linked to the Scheme.
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 Trustees, 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.
Virgin Media Ltd v NTL Pension Trustees II Ltd
The Trustees of the Scheme have engaged legal advisors to consider the potential impact of the Virgin Media Ltd legal
judgement of June 2023 which was appealed in July 2024. As at the date of signing, the Trustees have commenced a
sample-based review of historic rule changes. Whilst at this stage the review has not identified any matters which indicate an
increased risk of non-compliance with Section 37 of the Pension Schemes Act 1993, the review is still in its early stages.
Summary of assumptions
2024
2023
% pa
% pa
Retail prices index (RPI) inflation
3.3
3.2
Consumer price index (CPI) inflation
2.7
2.5
Discount rate
5.5
4.5
Salary increases
3.9
3.8
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
3.7
In line with RPI, subject to a min of 0% and a max of 5% pa
3.2
3.1
In line with RPI, subject to a min of 0% and a max of 2.5% pa
2.2
2.1
In line with CPI, subject to a min of 0% and a max of 3% pa
2.2
2.2
* 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.
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.
2024
2023
Years
Years
For a current 60 year old male
27.7
27.8
For a current 60 year old female
29.7
29.7
For a current 45 year old male
28.9
28.9
For a current 45 year old female
30.8
30.7
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).
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
163162
Financial Statements > Notes to the Financial Statements
17. Retirement benefit obligations (continued)
Reconciliation of funded status
Group and Society
2024
2023
£m
£m
Present value of defined benefit obligation
(509.3)
(572.5)
Assets at fair value
542.3
611.1
Funded status/defined benefit asset
33.0
38.6
Reconciliation of unfunded status
Group and Society
2024
2023
£m
£m
Present value of unfunded defined benefit scheme
(7.4)
(8.1)
Present value of unfunded defined benefit scheme
(7.4)
(8.1)
Statement of comprehensive income
Group and Society
Funded DB scheme
Unfunded DB scheme
2024
2023
2024
2023
£m
£m
£m
£m
Cumulative actuarial (loss)/gains recognised at 1 January
(41.2)
(30.8)
15.6
16.4
Gain/(loss) due on change in financial assumptions
61.8
(4.0)
0.8
(0.1)
Gain due to demographic assumptions
0.9
12.2
–
0.1
Gain/(loss) due to experience
0.8
13.2
(0.1)
(0.8)
Loss due to investment return different from return implied by the discount
(68.4)
(31.8)
–
–
rate
Total actuarial (loss)/gain recognised in SCI
(4.9)
(10.4)
0.7
(0.8)
Cumulative actuarial (losses)/gains recognised at 31 December
(46.1)
(41.2)
16.3
15.6
Components of pension expense as shown in the income statement
Group and Society
Funded DB scheme
Unfunded DB scheme
2024
2023
2024
2023
£m
£m
£m
£m
Administrative expenses
2.4
2.1
–
–
Interest on net defined benefit surplus
(1.7)
(2.3)
0.4
0.3
Total pension expense
0.7
(0.2)
0.4
0.3
Reconciliation of present value of defined benefit obligation
Group and Society
Funded DB scheme
Unfunded DB scheme
2024
2023
2024
2023
£m
£m
£m
£m
Present value of defined benefit obligation at 1 January
572.5
593.4
8.1
7.4
Administrative expenses
2.4
2.1
–
–
Interest cost
25.2
27.8
0.4
0.3
Actuarial (gain)/loss
(63.5)
(21.4)
(0.7)
0.8
Defined benefit actual benefits and costs paid
(27.3)
(29.4)
–
–
Disbursements directly paid by the employer
–
–
(0.4)
(0.4)
Present value of defined benefit obligation at 31 December
509.3
572.5
7.4
8.1
Movement in defined benefit fair value of assets
Group and Society
Funded DB scheme
2024
2023
£m
£m
Fair value of assets at 1 January
611.1
642.2
Interest income on scheme asset
26.9
30.1
Return on plan assets less than discount rates
(68.4)
(31.8)
Defined benefit actual benefits and costs paid
(27.3)
(29.4)
Fair value of plan assets at 31 December
542.3
611.1
The defined benefit obligation has reduced over the period, this is primarily driven by an increase in the discount rate
assumption to 5.5% (2023: 4.5%). The discount rate is closely linked to bond yields, which have increased to year highs at
the end of 2024.
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 2024
516.7
542.3
25.6
Change in defined benefit obligation/assets given the following change in assumption:
Discount rate:* 1.00% pa increase
(56.4)
(65.3)
(8.9)
Discount rate:* 1.00% decrease
68.9
77.4
8.5
Salary Escalation: 0.75% increase
1.0
–
(1.0)
Salary Escalation: 0.75% decrease
(0.9)
–
0.9
Inflation:** 0.50% increase
16.6
18.4
1.8
Inflation:** 0.50% decrease
(15.7)
(15.7)
–
Life expectancy: 1 year average increase
15.4
4.8
(10.6)
Life expectancy: 1 year average decrease
(15.4)
(4.8)
10.6
* 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.
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 assets increase by more than the liabilities, resulting in an
improvement in the accounting balance sheet position.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
165164
Financial Statements > Notes to the Financial Statements
18. Other assets
Group
Society
2024
2023
2024
Restated*
2023
£m
£m
£m
£m
Prepayments and accrued interest
29.7
23.0
29.7
23.0
Due from controlled entities
–
–
74.7
93.6
Current tax assets*
–
–
–
–
Other assets
6.7
12.1
4.8
10.2
Total other assets
36.4
35.1
109.2
126.8
* Please refer to
reclassification of current tax asset
in Note 1 for details of change in presentation.
Included in the Group and Society’s other assets are finance lease receivables of £0.9 million (2023: £1.3 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 rewards 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 2024 has been £20k (2023: £19k).
19. Shares
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Shares comprising balances held by individuals
52,044.4
47,056.7
52,044.4
47,056.7
Acquisition fair value adjustments
1.0
–
1.0
–
Total shares
52,045.4
47,056.7
52,045.4
47,056.7
20. Other deposits
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Amounts owed to:
Subsidiary undertakings
–
–
12,842.6
13,679.0
Other customers
1,196.8
983.6
1,196.8
983.6*
Total other deposits
1,196.8
983.6
14,039.4
14,662.6*
*
Amounts owed to
other customers
has been restated to correct the recognition of savings accounts in relation to the Accord offset mortgage product. This has
increased by £582.4 million from £401.2 million to £983.6 million.
21. Debt securities in issue
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Covered bonds
2,960.0
2,968.4
4,195.9
4,254.9
Medium-term notes
1,258.1
1,262.7
1,258.1
1,262.7
Residential mortgage backed securities
801.2
688.3
–
–
Total debt securities in issue
5,019.3
4,919.4
5,454.0
5,517.6
Debt securities in issue include amounts secured on certain loans and advances to customers in Group £3.8 billion (2023:
£3.7 billion) and Society £4.2 billion (2023: £4.3 billion).
22. Other liabilities
Group Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Accruals and deferred income
43.4
43.3
43.4
43.3
Finance lease liabilities
14.9
17.3
14.9
17.3
Other
16.9
9.9
45.4
58.6
Total other liabilities
75.2
70.5
103.7
119.2
The lease liabilities are secured by the related underlying assets. The underlying maturity analysis of lease liabilities at
31 December 2024 for the Group is as follows:
Buildings Finance NPV
lease charges
payments
£m
£m
£m
Within 1 year
3.4
(0.4)
3.0
1–2 years
2.6
(0.3)
2.3
2–3 years
2.4
(0.2)
2.2
3–4 years
2.1
(0.2)
1.9
4–5 years
1.9
(0.1)
1.8
5–10 years
2.7
(0.1)
2.6
10–15 years
0.5
(0.1)
0.4
Over 15 years
0.9
(0.2)
0.7
Total at 31 December 2024
16.5
(1.6)
14.9
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
167166
Financial Statements > Notes to the Financial Statements
23. Provisions for liabilities and charges
Group
Customer
Restructuring
Property
Other
Total
redress related
provision
£m
£m
£m
£m
£m
At 1 January 2024
1.0
0.2
2.7
0.1
4.0
Amounts utilised during the year
(0.2)
(0.1)
(0.8)
–
(1.1)
Provision (release)/charge
(0.1)
0.8
(0.2)
0.8
1.3
At 31 December 2024
0.7
0.9
1.7
0.9
4.2
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
Society
Customer
Restructuring
Property
Other
Total
redress related
provision
£m
£m
£m
£m
£m
At 1 January 2024
0.9
0.2
2.7
0.1
3.9
Amounts utilised during the year
(0.1)
(0.1)
(0.8)
0.0
(1.0)
Provision (release)/charge
(0.1)
0.8
(0.2)
0.8
1.3
At 31 December 2024
0.7
0.9
1.7
0.9
4.2
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
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 2024, the Group holds customer redress provisions of £0.7 million (2023: £1.0 million) and the Society of
£0.7 million (2023: £0.9 million) in respect of various potential customer claims and represent management’s best estimate
of the likely costs.
Restructuring provisions of £0.9 million (2023: £0.2 million) are held in relation to business and organisational changes
announced during 2024 and earlier periods.
Property related provisions of £1.7 million (2023: £2.7 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.
24. Subordinated liabilities
Group and Society
Maturity date
2024
2023
£m
£m
Senior non-preferred:
3% Senior non-preferred bonds 2025
18 April 2025
–
141.4
1½% Senior non-preferred bonds 2029
15 September 2029
249.6
249.2
3.511% Senior non-preferred bonds 2030
11 October 2030
301.6
301.5
63/8% Senior non-preferred bonds 2028
15 November 2028
352.0
351.8
73/8% Senior non-preferred bonds 2027
12 September 2027
305.5
305.2
Subordinated notes:
63/8% Subordinated Bonds 2024
26 April 2024
–
4.1
33/8% Subordinated Bonds 2028
13 September 2028
302.2
301.9
13½% Convertible Tier 2 Capital Notes 2025
01 April 2025
26.5
26.5
Fair value hedging adjustments
(84.1)
(59.9)
Total subordinated liabilities
1,453.3
1,621.7
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 giving fifteen to thirty days’ notice
to the holders. 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%. The Society redeemed the notes on the
optional call date of 18 April 2024.
•
Redemption of the 1½% Notes at par on the optional call date of 15 September 2028 after giving fifteen to thirty days’
notice to the holders. 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 giving 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 to the holders. 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 3.65%.
•
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
169168
Financial Statements > Notes to the Financial Statements
25. Financial commitments
Group and Society
2024
2023
£m
£m
Committed undrawn standby facilities
105.8
136.1
Other financial commitments
–
2.8
Total financial commitments
105.8
138.9
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.
The Society has a contractual commitment of £nil (2023: £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
Interest rate swaps and 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 hedge accounting is
not required. The Group only designates accounting hedges where a high degree of effectiveness can be achieved.
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 savings
Shares
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 or debt security.
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. To mitigate this risk, the Group enters into and tears up swap
agreements with external counterparties. These interest rate swaps and the mortgage portfolio are then designated in to a fair
value hedge to 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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
171170
Financial Statements > Notes to the Financial Statements
26. Derivative financial instruments (continued)
Interest rate risk on fixed rate savings (fair value)
The Society holds a portfolio of fixed rate savings. The Group manages this risk exposure by entering into receive fixed/pay
floating interest rate swaps. Depending on availability of hedged items some of these swaps are then designated into a fair
value hedge relationship along with the issued savings balance.
Only the interest rate risk element is hedged and therefore other risks are managed but not hedged by the Group. The interest
rate risk component is determined as the change in fair value of the fixed rate savings 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 savings balance) 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:
•
difference in timing of cash flows between the savings balance and the interest rate swaps;
•
difference in the designated coupon rate % of the hedged liability and the interest rate swaps; and
•
interest rate swaps with a non-zero fair value at the date of initial designation.
Foreign Exchange and Interest rate risk on fixed rate debt issuance and purchased debt securities
(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 debt securities issued (cash flow hedge)
The Group has applied a macro cash flow hedge in relation to a portion of its floating rate issuances, this is to hedge part of
its fixed rate mortgages. These swaps are transacted prior to the mortgages completing and being recognised on the balance
sheet. Until the mortgage completes the swaps are entered into macro cash flow hedges against the Group’s floating rate debt
securities issued.
Any movements in fair value of the swaps arising due to movements in interest rates are recognised in other comprehensive
income to the extent that the hedge relationship is effective. This hedge relationship is updated on a monthly basis for
changes in the portfolio. This hedge is terminated and incepted monthly to allow for new derivatives to enter the hedge and
for derivatives to enter the macro fair value hedge once the mortgages have completed and are recognised on the balance
sheet.
Ineffectiveness
All ineffectiveness is recorded in the income statement in
Net gains/(losses) 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
2024
2023
2024
2023
£m
£m
£m
£m
Fair value hedges
Fixed rate mortgages
40.8
(27.3)
40.8
(27.3)
Fixed rate debt securities held
1.2
2.7
1.2
2.7
Fixed rate savings
(21.0)
–
(21.0)
–
Fixed rate debt securities issued
0.7
(4.4)
10.6
(4.3)
Cash flow hedges
Floating rate debt securities issued
(0.5)
(0.1)
(0.5)
(0.1)
Total
21.2
(29.1)
31.1
(29.0)
Interest rates used to determine fair values which are linked to BoE base rate have fluctuated throughout the year due to
key UK economic events, this has elevated ineffectiveness of the fixed rate mortgage hedge because of increased fair value
movements in the underlying swaps and hedged items. Subsequently, changes in fair values can result in corresponding
deterioration in the offset as well as higher amortisation of mortgage fair value balance sheet adjustments.
During 2024, the Group designated two new hedges; a fair value savings macro hedge and a cash flow mortgage pipeline
(floating rate debt securities issued) hedge, these two hedges were implemented to mitigate volatility and reduce the Group’s
exposure within its unmatched swaps portfolio.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
173172
Financial Statements > Notes to the Financial Statements
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 2024
Interest rate risk
Interest rate swaps designated as fair value hedges
44,890.8
1,273.7
206.9
(103.7)
Interest rate swaps designated as cash flow hedges
1,530.0
18.3
–
8.8
Interest rate and FX risk
Cross currency interest rate swaps designated as fair value hedges
2,964.6
100.7
262.4
58.4
Derivatives not designated as hedges:
Interest rate swaps
14,341.0
66.5
86.5
n/a
Foreign exchange
92.9
7.7
–
n/a
Total derivative financial instruments
63,819.3
1,466.9
555.8
(36.5)
Society
At 31 December 2024
Interest rate risk
Interest rate swaps designated as fair value hedges
44,890.8
1,273.7
206.9
(103.7)
Interest rate swaps designated as cash flow hedges
1,530.0
18.3
–
8.8
Interest rate and FX risk
Cross currency interest rate swaps designated as fair value hedges
1,721.7
100.7
136.2
22.9
Derivatives not designated as hedges:
Interest rate swaps
22,593.0
66.5
86.5
n/a
Foreign exchange
83.0
6.8
–
n/a
Total derivative financial instruments
70,818.5
1,466.0
429.6
(72.0)
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 the Group’s 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 2023
Interest rate risk
Interest rate swaps designated as fair value hedges
27,894.4
1,548.1
269.9
(949.1)*
Interest rate swaps 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
102.5*
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
(949.1)*
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
32.6*
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 allocation of changes in fair value used for calculating ineffectiveness between interest rate swaps and cross currency interest rate swaps has been reclassified.
The reclassification has no impact on the previous reported total derivative financial instruments.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
175174
Financial Statements > Notes to the Financial Statements
The following table shows the average price/rate of the hedging instruments by maturity used in the Group’s hedging
strategies:
Group and Society
2024
2023
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)
2.66
3.91
2.44
1.65
2.56
1.50
Interest rate swaps (receive fixed)
4.45
2.69
–
3.69
3.19
3.51
Cross currency interest rate swaps
0.66
0.63
2.66
0.70
0.44
0.86
Average fixed interest rate – Cash flow hedges
Interest rate swaps (pay fixed)
3.85
3.60
3.60
–
–
–
Average EUR:GBP FX rate – Fair value hedges
Cross currency interest rate swaps
1.11
1.17
1.16
1.13
1.15
1.14
Average JPY:GBP FX rate – Fair value hedges
Cross currency interest rate swaps
156.41
–
–
156.41
–
–
Average USD:GBP FX rate – Fair value hedges
Cross currency interest rate swaps
1.25
–
–
–
1.19
–
26. Derivative financial instruments (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 2024
Interest rate swaps (pay fixed)
1,095.0
150.0
285.0
1,530.0
Total cash flow hedges
1,095.0
150.0
285.0
1,530.0
At 31 December 2023
Interest rate swaps (pay fixed)
–
–
–
–
Total cash flow hedges
–
–
–
–
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 2024
Interest rate swaps (pay fixed)
24,778.6
6,395.1
1,246.5
32,420.2
Interest rate swaps (receive fixed)
11,880.6
590.0
–
12,470.6
Cross currency interest rate swaps
1,390.3
1,081.2
493.1
2,964.6
Total fair value hedges
38,049.5
8,066.3
1,739.6
47,855.4
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
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 2024
Interest rate swaps (pay fixed)
24,778.6
6,395.1
1,246.5
32,420.2
Interest rate swaps (receive fixed)
11,880.6
590.0
–
12,470.6
Cross currency interest rate swaps
976.0
666.9
78.8
1,721.7
Total fair value hedges
37,635.2
7,652.0
1,325.3
46,612.5
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
177176
Financial Statements > Notes to the Financial Statements
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 £9.1 million (2023: £3.3 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 2024
Floating rate debt securities issued
–
1,530.0
(9.3)
–
26.4
At 31 December 2023
Floating rate debt securities issued
–
–
(5.7)
–
(0.5)
Floating rate liabilities
–
–
3.2
–
–
For Society the exposure to floating rate debt includes those within White Rose Master Issuer PLC as this exposure is
transferred via an intercompany loan that mirrors the underlying debt security in this entity.
The following table shows the movements in the cash flow hedge reserve during the year:
Group and Society
2024
2023
£m
£m
At 1 January
0.4
9.9
Effective portion of changes in fair value of interest rate swaps:
Floating rate debt securities issued
5.7
–
Floating rate liabilities
–
–
Amounts reclassified from reserves to income statement:
Floating rate debt securities issued
3.5
(0.9)
Floating rate liabilities
–
(12.3)
Taxation
(2.6)
3.7
At 31 December
7.0
0.4
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 2024
Fixed rate mortgages (interest rate risk)
29,161.9
–
(454.7)
–
160.7
Fixed rate debt securities held (interest rate and FX risk)
3,706.7
–
(287.4)
–
(35.7)
Fixed rate savings (interest rate risk)
–
10,493.7
–
1.0
(1.0)
Fixed rate debt securities issued (interest rate and FX risk)
–
4,096.6
–
195.0
(60.0)
Society*
At 31 December 2024
Fixed rate mortgages (interest rate risk)
29,161.9
–
(454.7)
–
160.7
Fixed rate debt securities held (interest rate and FX risk)
3,706.7
–
(287.4)
–
(35.7)
Fixed rate savings (interest rate risk)
–
10,493.7
–
1.0
(1.0)
Fixed rate debt securities issued (interest rate and FX risk)
–
2,844.9
–
147.3
(14.6)
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 risk and FX risk)
2,693.2
–
(254.6)
–
104.6
Fixed rate savings (interest rate risk)
–
–
–
–
–
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 risk and FX risk)
2,693.2
–
(254.6)
–
104.6
Fixed rate savings (interest rate risk)
–
–
–
–
–
Fixed rate debt securities issued (interest rate and FX risk)
–
3,035.0
–
161.9
(140.2)
* 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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
179178
Financial Statements > Notes to the Financial Statements
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
2024
Liquid assets
1,514.2
13,106.8
14,621.0
Loans and advances to customers
5,714.8
43,990.7
49,705.5
Fair value adjustment for hedged risk on loans and advances to customers
–
(454.7)
(454.7)
Other assets
–
1,672.6
1,672.6
Total assets
7,229.0
58,315.4
65,544.4
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
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 2024, the Society had in issue
£1,750 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. In 2024, a new Master Issuer securitisation structure was
established, issuing £350 million A1 notes publicly. As at 31 December 2024, the Group had in issue £10,617 million of
securitisation notes, of which £9,816 million were retained.
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 with 202.7% reported for December 2024 month end. For comparison, as at 31 December 2023 this was
156.2%. These ratios are unaudited.
•
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 2024 was 152.39%
(2023: 148.80%) and was therefore in excess of the regulatory minimum of 100%. These ratios are unaudited.
•
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 complementary 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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
181180
Financial Statements > Notes to the Financial Statements
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 than In more than Over five Total
on demand three three months one year but years
months but not more not more
than one than five
year years
£m
£m
£m
£m
£m
£m
As at 31 December 2024
Financial assets
Cash and balances with the Bank of England
5,609.7
–
–
–
–
5,609.7
Loans and advances to credit institutions
590.0
–
–
–
–
590.0
Debt securities
–
1,234.9
1,183.4
4,114.7
1,888.3
8,421.3
Loans and advances to customers
–
12.6
73.7
1,289.4
48,329.8
49,705.5
Fair value adjustment for hedged risk on loans and
advances to customers
–
574.9
640.1
(1,650.2)
(19.5)
(454.7)
Derivative financial instruments
–
54.6
161.7
994.9
255.7
1,466.9
Total financial assets
6,199.7
1,877.0
2,058.9
4,748.8
50,454.3
65,338.7
Financial liabilities
Shares
32,548.7
6,130.7
11,358.2
1,988.7
18.1
52,044.4
Fair value adjustment for hedged risk on shares
–
127.4
1,012.6
(1,139.0)
–
1.0
Amounts owed to credit institutions
708.9
450.0
10.0
–
–
1,168.9
Other deposits
842.6
348.7
5.5
–
–
1,196.8
Debt securities in issue
–
(6.1)
393.0
3,385.2
1,247.2
5,019.3
Derivative financial instruments
–
19.8
87.7
445.2
3.1
555.8
Subordinated liabilities
–
–
26.5
1,125.2
301.6
1,453.3
Total financial liabilities
34,100.2
7,070.5
12,893.5
5,805.3
1,570.0
61,439.5
As at 31 December 2023
Financial assets
Cash 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 liabilities
–
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
* 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)
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 2024
Shares
38,679.4
11,358.2
1,988.7
18.1
52,044.4
Amounts owed to credit institutions
1,158.9
10.1
–
–
1,169.0
Other deposits
Society
1,191.3
5.6
–
–
1,196.9
Subsidiaries
–
–
–
–
–
Debt securities in issue
23.7
424.8
3,556.9
1,543.8
5,549.2
Subordinated liabilities
–
97.1
1,323.9
312.1
1,733.1
Derivative financial liabilities
113.8
661.2
876.1
130.4
1,781.5
Total
41,167.1
12,557.0
7,745.6
2,004.4
63,474.1
As at 31 December 2023 as restated
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
971.4*
12.9
–
–
984.3*
Subsidiaries
–*
–
–
–
–*
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
*
Other deposits
has been restated to correct the recognition of savings accounts in relation to the Accord offset mortgage product. £582.4 million has been
moved from
Subsidiaries
to
Society
, reducing
Subsidiaries
by £582.4 million from £582.4 million to £nil and increasing the
Society
by £582.4 million from
£401.9 million to £984.3 million.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
183182
Financial Statements > Notes to the Financial Statements
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. The Society’s existing non-sterling liquidity portfolio and wholesale
funding exposures are swapped back into sterling. The maximum month end position in 2024 represented less than
0.02% of total assets.
Actual exposures were:
Group and Society
2024
2023
£m
£m
Year end
7.2
5.2
Maximum
7.8
5.2
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 in 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
2024
Central Bank and Sovereigns
8,082.3
219.9
–
–
–
–
8,302.2
Financial Institutions
5,708.5
868.6
229.3
–
–
–
6,806.4
Supranationals
979.3
–
–
–
–
–
979.3
Total
14,770.1
1,088.5
229.3
–
–
–
16,087.9
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
* The composite rating is derived from an average external rating.
28. Market risk
Market risk is the potential change to earnings and capital arising from movements in interest rates, foreign currency
exchange rates, and the pricing of financial instruments.
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 sheets 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. 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.
All market risk is managed in the Society on behalf of the Group. PV01 is presented for the Treasury book and PV100 with
respect to the full balance sheet.
Year end
Average
Maximum
Minimum
£m
£m
£m
£m
2024
PV01 sensitivity (Treasury)
0.0
0.0
0.0
0.0
PV100 sensitivity
(14.9)
9.3
21.9
(14.9)
2023
SONIA basis
1.3
1.4
1.5
1.2
PV01 sensitivity
0.0
0.1
0.2
0.0
PV100 sensitivity
1.3
10.6
28.3
(0.3)
Treasury VaR
1.5
3.2
5.7
1.3
Greater than Greater than Greater than
one year five years ten years
£m
£m
£m
2024
Repricing gap (Treasury)
590
133
–
2023
Repricing gap (Treasury)
289
(30)
–
Detail of how the Society manages its interest rate risk is included in the Strategic Report on pages 8 – 146.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
185184
Financial Statements > Notes to the Financial Statements
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
2024
United Kingdom
8,024.5
4,370.3
–
12,394.8
Australia
–
609.5
–
609.5
Canada
–
1,111.2
–
1,111.2
France
57.8
49.0
–
106.8
Germany
288.1
–
–
288.1
Japan
219.9
196.6
–
416.5
Netherlands
–
164.4
–
164.4
Norway
–
71.2
–
71.2
Spain
–
71.2
–
71.2
Sweden
–
62.6
–
62.6
Switzerland
–
0.3
–
0.3
United States
–
100.1
–
100.1
International
–
–
691.2
691.2
Total
8,590.3
6,806.4
691.2
16,087.9
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
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 £5,609.7 million (2023: £4,839.1 million) to the Bank of England and £2,414.8 million (2023: £852.4 million) in
UK Government bonds.
None of the wholesale exposures are 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 on page 147.
Wholesale credit risk is recorded in the following balance sheets as below:
Group
2024
2023
£m
£m
Cash and balances with the Bank of England
5,609.7
4,839.1
Loans and advances to credit institutions
590.0
397.4
Debt securities
8,421.3
7,561.9
Derivative financial instruments
1,466.9
1,755.0
Total wholesale credit risk
16,087.9
14,553.4
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
2024 are described below.
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Gross contractual exposures
49,758.5
46,868.6
10,645.7
11,001.1
EIR and other adjustments
29.7
39.4
(23.8)
(17.6)
Fair value rate adjustment
(24.1)
(32.2)
(24.1)
(32.2)
Gross loans and advances to customers
49,764.1
46,875.8
10,597.8
10,951.3
Impairment
(39.2)
(37.7)
(7.3)
(8.5)
Fair value credit adjustment
(19.4)
(22.3)
(19.4)
(22.3)
ECL
(58.6)
(60.0)
(26.7)
(30.8)
Loans and advances to customers
49,705.5
46,815.8
10,571.1
10,920.5
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
187186
Financial Statements > Notes to the Financial Statements
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.
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 economic and political environment experienced significant change in 2024. Heightened domestic and geopolitical
uncertainty was a key theme throughout, with ongoing conflict in Ukraine and the Middle East, and elections in both the UK
and the US.
Progress was made towards the inflation target, with headline inflation ending the year at 2.5%. Wage pressures and services
inflation remain elevated, despite this, the Bank of England started cutting interest rates in August, from 5.25%, to 4.75% by
the end of 2024. These cuts have continued in to 2025.
The combination of falling interest rates and positive real wage growth eased affordability pressures and increased
confidence in the housing market. Property transactions and gross lending increased versus 2023, alongside house prices.
This trend is expected to continue into 2025, as interest rates are expected to fall gradually, and wage growth is expected to
continue to outperform inflation.
That said, interest rate expectations remain volatile and there are risks to both sides of the interest rate forecast. If inflation
remains higher than anticipated both domestically and globally, there could be fewer interest rate cuts in 2025. Conversely,
if growth is slower than anticipated and labour market loosening accelerates, the Bank of England may increase the pace of
interest rate cuts in the second half of 2025.
Despite the Bank of England reducing interest rates in 2024, there will still be many customers remortgaging onto higher
interest rates in 2025, which could lead to affordability challenges. The credit performance of our mortgage book forms
a key measure as part of our established risk management processes and will continue to be monitored closely. We will
continue, where possible, to work with borrowers who are facing difficulties and support them as they navigate their
individual circumstances.
Upside
High business confidence and strong investment lead to strong growth. Domestic inflationary pressures fall quickly, and
consumer confidence rises. The BoE note the slowdown of inflation and cut rates to more sustainable levels. Strong consumer
confidence and lower interest rates encourage housing market activity and house price growth.
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.
Modest growth is forecast over the period. The BoE cut interest rates gradually throughout 2025. Inflation returns to target in
2026. Unemployment rises slowly, peaking in 2026. Housing market activity rebounds from 2023 levels with house prices
grow moderately throughout the planning period.
Downturn
This can be described as a stagflation scenario. Growth plateaus and is sluggish throughout the plan. Domestic inflationary
pressures persist, including wage growth, with ongoing public sector wage demands spilling into the private sector. BoE keep
rates higher for longer as a result. The labour market and housing market weaken, with rising unemployment and negative
house price growth.
Severe Downturn
Geopolitical tensions escalate such that oil prices spike alongside material supply chain difficulties.
This leads to another round of inflation and further interest rate hikes. A deep recession ensues, with unemployment rising and
house prices falling significantly.
Macroeconomic assumptions
The following table shows the values of the key economic variables used by each economic scenario for the period until
December 2029. 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.
2024
Scenario
2023
Scenario
2025
2026
2027
2028
2029
2024
2025
2026
2027
2028
HPI
Upside
6.0
5.5
4.0
4.0
4.0
2.0
3.0
3.5
4.0
4.5
Core
3.0
3.0
3.0
3.0
3.0
(4.0)
2.0
3.0
3.5
4.0
Downturn
(4.0)
1.0
0.5
1.2
1.2
(7.5)
(4.0)
2.5
0.5
1.2
Severe Downturn
(14.3)
(9.5)
(1.6)
6.1
0.5
(12.0)
(12.5)
(6.0)
(1.0)
0.5
GDP
Upside
1.9
2.0
2.4
2.2
2.2
1.5
1.8
2.0
1.9
1.9
Core
1.3
1.5
1.6
1.6
1.7
0.3
0.8
1.0
1.2
1.3
Downturn
0.5
0.7
1.0
1.2
1.2
(0.1)
0.1
0.1
0.2
0.3
Severe Downturn
(4.5)
(1.5)
0.5
0.8
0.8
(4.5)
(1.5)
–
0.5
1.0
Unemployment
Upside
4.2
4.2
4.2
4.2
4.2
4.0
4.0
4.0
4.0
4.0
Core
4.6
4.7
4.6
4.5
4.5
5.0
4.8
4.6
4.4
4.0
Downturn
6.0
5.8
5.5
5.0
4.8
6.5
6.0
5.8
5.5
5.0
Severe Downturn
8.0
8.4
7.0
6.5
6.0
7.0
9.0
8.0
7.0
6.5
Bank base rate
Upside
3.5
3.5
3.5
3.3
3.3
4.8
4.0
3.5
3.5
3.3
Core
4.0
3.8
3.8
3.8
3.5
5.0
4.5
4.3
4.3
4.0
Downturn
4.8
4.3
4.3
4.3
4.3
6.0
5.5
5.5
4.0
3.5
Severe Downturn
6.5
5.5
5.0
5.0
4.5
7.0
6.0
5.5
5.0
5.0
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
189188
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (continued)
Expected Credit Losses (ECL) (continued)
Economic scenarios (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
2024
2023
2024
2023
2024
2023
2024
2023
5 year average
GDP
2.1
1.8
1.5
1.0
0.9
0.2
(0.8)
(0.8)
HPI
4.7
3.4
3.0
1.7
–
(1.5)
(3.8)
(6.4)
Unemployment
4.2
4.0
4.6
4.6
5.4
5.8
7.2
7.6
Bank base rate
3.4
4.0
3.8
4.5
4.4
5.1
5.3
5.8
Peak to trough
GDP
–
–
–
(4.7)
–
0.9
(5.9)
(1.8)
HPI
–
–
–
(14.1)
(5.1)
5.2
(26.4)
(26.1)
Unemployment
4.2
4.2
4.7
5.0
6.0
6.5
9.0
9.0
Weightings
The following table shows the expected credit loss under each of the 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
2024
2023
Weighting
ECL
Weighting
ECL
Scenario
%
£m
%
£m
Upside
10
39.1
5
35.3
Core
60
41.4
40
38.7
Downturn
20
83.7
35
63.9
Severe Downturn
10
130.2
20
102.1
Weighted scenario
100
58.6
100
60.0
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.
Weighting has been moved from Downturn and Severe scenarios to both Core and Upside to reflect the more positive
economic outlook, updates to the Gen 4 model, predicted BOE base rate cuts and HPI increases.
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 which includes 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 2024 are as follows:
2024
2023
£m
£m
Affordability
1.2
7.1
Model Performance
10.6
10.0
Other
0.9
(1.5)
Total PMA
12.7
15.6
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 Group 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 2024 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.
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 the Group progresses through the year and will be held until a sufficient reduction in inflation and cost of living pressures
is observed.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
191190
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (continued)
Expected Credit Losses (ECL) (continued)
Post model adjustments (continued)
Model Performance
PD Underprediction
The Society’s 4th generation (Gen 4) models were implemented in 2023 for the first time. A level of underprediction, also
present within the previous models, has been observed since implementation. A PMA to adjust PD estimates upwards is
therefore considered necessary to ensure model outputs reflect the level of risk experienced. 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.
Recalibration of the existing model will be evaluated in 2025. Longer-term, the underlying scorecards and IRB models are
being redeveloped with enhancements to be incorporated into redeveloped IFRS 9 models when complete. These changes
would be expected to result in the removal or reduction in this PMA.
Sensitivity of Models to Economic Stresses
The fourth generation IFRS 9 PD model has displayed limited sensitivity to the different economic scenarios because 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 model was used to inform this PMA. The results of the model across all scenarios were established
and outcomes from the Core scenario compared to the Upside, Downside and Stress. Adjustments were then applied to these
non-Core scenarios to produce adjusted PD estimates for each individual scenario.
The Core scenario and PD were chosen as it is the nearest approximation to the actual macro-economic factors. The ratios
obtained are applied to the weighted IFRS 9 PDs to produce adjusted PD estimates for each individual scenario.
The scalars are applied to each individual account PD to obtain the adjusted PDs at account level. EAD, LGD and discount rate
are combined with the adjusted PDs to obtain the adjusted ECL.
As with the PD Underprediction PMA, this could be expected to drive a change in staging as there will be accounts where
the probability weighted PD at observation will now be above the SICR threshold associated with a transfer to stage 2. While
this was ultimately considered an appropriate treatment for the under-prediction PMA as this reflected a deterioration in the
performance of the model, there are different considerations for this adjustment as it is driven by a fundamental weakness in
the PD model that has been inherent since its development. As this means origination PDs will be as affected as current PDs,
restaging all accounts in the same manner as the underprediction PMA was not considered appropriate as accounts could
meet the SICR criteria more due to misalignment in the methodology between initial recognition and current PDs.
Other
Climate risk
The Group has 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 £0.9 million (2023: £0.7 million).
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 £290.4 million of POCI loans (2023: £339.7 million). Of these, 84% (2023: 85%) 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
%
%
2024
Stage 1
44,489.2
89.4
2.8
7.8
–
52.1
Stage 2
4,458.8
9.0
9.6
23.5
0.5
39.3
Stage 3
520.1
1.0
0.3
16.7
3.2
44.5
POCI
290.4
0.6
–
10.6
3.7
38.6
Total
49,758.5
100.0
12.7
58.6
0.1
50.9
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
The cost of risk measure has been calculated using the impairment charge for the year divided by the average balance over
the period, which is 0.0% for 2024. Problem loans represent the total of the Group’s stage 3 balances and the non-performing
portion of our POCI loans.
2024
2023
£m
%
£m
%
Gross exposures
Stage 1
44,489.2
89.4
41,597.7
88.8
Stage 2
4,458.8
9.0
4,521.8
9.6
Stage 3
520.1
1.0
409.4
0.9
POCI
290.4
0.6
339.7
0.7
Total gross exposures
49,758.5
100.0
46,868.6
100.0
Problem loans
566.9
1.1
458.9
1.0
Cost of risk
–
–
–
–
ECL and Coverage ratios
Stage 1
7.8
–
8.5
–
Stage 2
23.5
0.5
26.5
0.6
Stage 3
16.7
3.2
13.8
3.4
POCI
10.6
3.7
11.2
3.3
Total ECL
58.6
0.1
60.0
0.1
Of which impairment
39.2
66.9
37.7
62.8
Of which fair value credit adjustment
19.4
33.1
22.3
37.2
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
193192
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (continued)
Expected Credit Losses (ECL) (continued)
Staging and POCI (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
2024
2023
2024
2023
2024
2023
2024
2023
£m
£m
£m
£m
£m
£m
£m
£m
Stage 1
44,489.2
41,597.7
44,487.0
41,596.3
7.8
8.5
–
–
Stage 2
4,458.8
4,521.8
4,458.2
4,521.4
23.0
25.3
0.5
1.2
Less than 30 days past due
4,279.8
4,331.4
4,279.2
4,331.1
20.5
22.6
0.4
0.9
More than 30 days past due
179.0
190.4
179.0
190.3
2.5
2.7
0.1
0.3
Stage 3
520.1
409.4
519.0
409.1
12.8
10.0
3.9
3.8
Less than 30 days past due
234.7
161.1
234.7
161.1
2.6
2.2
0.5
0.5
30-90 days past due
96.4
83.8
96.4
83.8
1.1
1.1
0.2
0.5
More than 90 days past due
189.0
164.5
187.9
164.2
9.1
6.7
3.2
2.8
POCI
290.4
339.7
289.8
339.1
(4.4)
(6.1)
15.0
17.3
Less than 30 days past due
254.5
294.5
253.9
293.9
(4.9)
(6.1)
12.9
14.6
30-90 days past due
20.5
29.4
20.5
29.4
0.3
0.3
0.9
1.2
More than 90 days past due
15.4
15.8
15.4
15.8
0.2
(0.3)
1.2
1.5
Total
49,758.5
46,868.6
49,754.0
46,865.9
39.2
37.7
19.4
22.3
Society
Gross exposure
Collateral
Impairment
Fair value credit
adjustment
2024
2023
2024
2023
2024
2023
2024
2023
£m
£m
£m
£m
£m
£m
£m
£m
Stage 1
9,087.3
9,233.4
9,085.0
9,232.0
2.2
2.8
–
–
Stage 2
1,128.9
1,294.3
1,128.4
1,294.0
8.1
10.1
0.5
1.3
Less than 30 days past due
1,083.5
1,236.5
1,083.0
1,236.2
7.1
9.1
0.4
1.0
More than 30 days past due
45.4
57.8
45.4
57.8
1.0
1.0
0.1
0.3
Stage 3
139.1
133.8
138.3
133.8
1.5
1.7
3.9
3.7
Less than 30 days past due
62.9
55.8
62.9
55.8
0.3
0.4
0.6
0.5
30-90 days past due
25.6
24.2
25.6
24.2
0.1
0.2
0.2
0.5
More than 90 days past due
50.6
53.8
49.8
53.8
1.1
1.1
3.1
2.7
POCI
290.4
339.6
289.8
339.0
(4.5)
(6.1)
15.0
17.3
Less than 30 days past due
254.5
294.4
253.9
293.8
(4.9)
(6.1)
12.9
14.6
30-90 days past due
20.5
29.4
20.5
29.4
0.3
0.3
0.9
1.2
More than 90 days past due
15.4
15.8
15.4
15.8
0.1
(0.3)
1.2
1.5
Total
10,645.7
11,001.1
10,641.5
10,998.8
7.3
8.5
19.4
22.3
All accounts in stage 1 are less than 30 days past due.
Lending by type
Group
2024
2023
Percentage split of gross contractual exposure
%
%
Residential Prime
79.9
79.8
Residential Sub-Prime/Self-Cert
0.3
0.4
Retail Buy-To-Let
15.2
15.4
Social Housing
0.2
0.4
Commercial lending (exc. Social Housing)
4.4
4.0
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
2024
2023
Retail
Commercial
Retail
Commercial
Arrears
%
%
%
%
No arrears
98.0
98.8
97.6
98.7
Less than three months
1.7
1.1
2.1
0.8
Equal to or more than three months, less than six months
0.2
–
0.2
0.3
Equal to or more than six months, less than twelve months
0.1
–
0.1
0.1
Twelve months or more
–
–
–
0.1
Property in possession
–
0.1
–
–
Total gross exposure (contractual amounts)
100.0
100.0
100.0
100.0
Number of properties in possession at the year end
111
–
67
–
The percentage of retail mortgages with arrears of three months or more (as a % of outstanding balances, including
possessions) has increased during 2024 from 0.39% to 0.43%.
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% (2023: 0.50%) is below the comparable UK Finance ratio
0.97% (2023: 0.87%). 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 0.27% (2023: 0.23%) with an average
LTV of 60% (2023: 57%) for this cohort.
Society
2024
2023
Arrears
%
%
No arrears
97.5
97.0
Less than three months
1.8
2.3
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
0.2
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
67
48
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
195194
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (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
2024
2023
2024
2023
Retail Mortgage Customer Type
%
%
%
%
First-time buyer
23.8
23.6
24.1
23.5
Other buyers e.g. movers
34.6
35.5
32.5
29.6
Re-mortgage
25.6
24.8
31.8
32.5
Buy-to-let
16.0
16.1
11.6
14.4
Other
–
–
–
–
100.0
100.0
100.0
100.0
2024
2023
Retail Mortgage Geographical Distribution
%
%
Scotland
6.6
6.6
North East
3.2
3.2
Yorkshire & Humberside
8.0
8.4
North West
10.2
10.4
Midlands
13.1
13.2
East
11.0
10.8
South West
7.5
7.5
Greater London
18.2
18.1
South East
18.0
17.6
Wales & Northern Ireland
4.2
4.2
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.
Group
Book
New lending
2024
2023
2024
2023
Loan-to-value distribution of retail mortgages
%
%
%
%
100% or greater
–
–
–
–
95 to 100%
0.4
0.3
0.9
–
90 to 95%
2.8
1.6
6.8
4.6
85 to 90%
6.2
4.2
19.8
17.2
80 to 85%
7.9
5.9
19.1
15.7
75 to 80%
8.0
7.4
9.9
9.4
70 to 75%
9.7
9.5
12.1
13.0
60 to 70%
19.2
21.0
10.4
12.3
Less than 60%
45.8
50.1
21.0
27.8
100.0
100.0
100.0
100.0
Average LTV (all retail)
50.9
49.0
71.4
67.2
Average LTV (buy-to-let)
55.4
54.8
59.8
58.9
Group
2024
2023
Not impaired
Impaired
Not impaired
Impaired
Loan-to-value distribution of retail mortgages
%
%
%
%
100% or greater
–
–
–
–
95 to 100%
0.4
–
0.3
–
90 to 95%
2.8
–
1.6
–
85 to 90%
6.2
–
4.2
–
80 to 85%
7.9
0.1
5.9
–
75 to 80%
7.9
0.1
7.4
–
70 to 75%
9.6
0.1
9.4
0.1
60 to 70%
18.9
0.3
20.8
0.2
Less than 60%
44.6
1.1
48.9
1.2
98.3
1.7
98.5
1.5
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 de-recognition.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
197196
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (continued)
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
2024
2023
Average loan to value (%)
58.3
55.8
Average loan size (£m)
0.8
0.7
Value of security held (£m)
3,641.3
3,213.0
Balance of loans >100% LTV (£m)
28.2
21.9
Largest exposure to a single counterparty (£m)
20.0
20.0
At the year end 0.54% (2023: 0.54%) 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 £69.3 million in 2024 (2023: £46.9 million).
Corporate buy-to-let loans increased to £1,632.8 million (2023: £1,207.3 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.
Group and Society
2024
2023
Commercial mortgage balances by geographical region
%
%
Scotland
–
–
North East
0.5
0.5
Yorkshire & Humberside
2.1
2.5
North West
4.6
4.2
Midlands
5.9
5.8
East
2.8
3.1
South West
6.5
7.1
Greater London
49.6
49.8
South East
26.9
25.8
Wales & Northern Ireland
1.1
1.2
100.0
100.0
Commercial mortgage balances by lending type
Commercial owner occupied
1.9
2.6
Commercial investment property*
22.9
29.7
Corporate Buy-To-Let*
70.9
59.0
Social Housing
4.3
8.7
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 2024 this loan book was £97.6 million (2023: £177.9 million). The Group has written further undrawn
Term Loan/Revolving Credit facilities in the region of £105.8 million (2023: £136.1 million) and these are expected to
draw down over the next 5 years.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
199198
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (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
2024
2023
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%
27,885.1
1,373.3
–
–
29,258.4
0.8
28,671.7
1.0
0.15%–<0.25%
4,415.2
288.7
–
–
4,703.9
0.5
3,919.7
0.5
0.25%–<0.50%
1,374.7
157.0
–
–
1,531.7
0.3
1,286.9
0.4
0.50%–<0.75%
850.9
170.7
–
–
1,021.6
0.3
891.5
0.3
0.75%–<1.00%
700.8
341.7
–
–
1,042.5
0.5
868.3
0.6
1.00%–<2.50%
392.3
1,003.9
–
–
1,396.2
2.7
1,237.5
3.2
2.50%–<10.0%
28.7
335.6
–
–
364.3
2.4
313.7
2.8
10.0%–<100%
14.3
158.9
–
–
173.2
2.5
175.5
2.5
Default
–
–
502.1
39.0
541.1
17.2
430.0
14.8
Accord buy-to-let
6,720.6
429.6
9.4
–
7,159.6
4.8
6,715.4
3.6
Commercial
2,012.7
176.8
8.6
7.7
2,205.8
7.4
1,867.3
9.3
Other
93.9
22.6
–
243.7
360.2
7.9
491.1
9.0
PMAs
–
–
–
–
–
11.3
–
12.0
Total
44,489.2
4,458.8
520.1
290.4
49,758.5
58.6
46,868.6
60.0
Society
2024
2023
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%
5,644.9
384.1
–
–
6,029.0
0.2
6,551.0
0.2
0.15%–<0.25%
721.2
79.8
–
–
801.0
0.2
772.6
0.2
0.25%–<0.50%
211.1
42.2
–
–
253.3
0.1
254.8
0.2
0.50%–<0.75%
145.4
47.9
–
–
193.3
0.1
203.0
0.1
0.75%–<1.00%
124.3
70.9
–
–
195.2
0.2
212.1
0.2
1.00%–<2.50%
116.3
180.7
–
–
297.0
0.7
335.7
0.9
2.50%–<10.0%
20.1
65.4
–
–
85.5
0.7
87.6
0.8
10.0%–<100%
10.0
47.5
–
–
57.5
0.9
64.7
0.9
Default
–
–
130.5
39.0
169.5
6.4
161.8
6.8
Commercial
2,000.6
188.4
8.6
7.7
2,205.3
7.4
1,866.8
9.3
Other
93.4
22.0
–
243.7
359.1
8.2
491.0
8.9
PMAs
–
–
–
–
–
1.6
–
2.3
Total
9,087.3
1,128.9
139.1
290.4
10,645.7
26.7
11,001.1
30.8
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
2024
2023
Stage 1
Stage 2
Stage 3
POCI
Total
ECL
Total
ECL
exposure exposure
Origination Year
£m
£m
£m
£m
£m
£m
£m
£m
2024
8,956.1
518.7
26.4
–
9,501.2
4.6
–
–
2023
7,901.1
602.0
39.3
–
8,542.4
7.3
9,199.2
6.5
2022
7,528.3
616.3
47.0
–
8,191.6
7.3
9,570.7
8.2
2021
5,699.4
547.8
55.0
–
6,302.2
5.6
7,010.6
6.3
2013 – 2020
12,577.3
1,357.8
167.4
–
14,102.5
12.2
17,348.5
14.2
2009 – 2012
650.5
75.6
9.7
–
735.8
0.3
884.1
0.4
Pre-2009
545.8
463.8
106.0
–
1,115.6
3.8
1,335.6
5.8
Acquired loans
630.7
276.8
69.3
290.4
1,267.2
17.5
1,519.9
18.6
Total
44,489.2
4,458.8
520.1
290.4
49,758.5
58.6
46,868.6
60.0
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%.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
201200
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (continued)
Movement analysis
The tables on pages 202 to 205 detail the movement in the gross exposures and ECL from the beginning to the end of the
reporting period split by stage.
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.
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 2023
41,597.7
4,521.8
409.4
339.7
46,868.6
Transfers from stage 1 to 2
(2,828.0)
2,828.0
–
–
–
Transfers from stage 1 to 3
(118.7)
–
118.7
–
–
Transfers from stage 2 to 1
605.9
(605.9)
–
–
–
Transfers from stage 2 to 3
–
(128.8)
128.8
–
–
Transfers from stage 3 to 1
30.9
–
(30.9)
–
–
Transfers from stage 3 to 2
–
57.0
(57.0)
–
–
Changes to carrying value
561.9
(1,977.9)
20.4
(10.8)
(1,406.4)
New financial assets originated or purchased
9,401.9
–
–
–
9,401.9
Financial assets derecognised during the year
(4,762.4)
(235.4)
(62.0)
(36.8)
(5,096.6)
Write-offs
–
–
(7.3)
(1.7)
(9.0)
Gross exposure at 31 December 2024
44,489.2
4,458.8
520.1
290.4
49,758.5
ECL at 31 December 2023
8.5
26.5
13.8
11.2
60.0
Transfers from stage 1 to 2
(0.2)
7.1
–
–
6.9
Transfers from stage 1 to 3
–
–
3.4
–
3.4
Transfers from stage 2 to 1
0.5
(3.8)
–
–
(3.3)
Transfers from stage 2 to 3
–
(1.7)
4.5
–
2.8
Transfers from stage 3 to 1
–
–
(0.5)
–
(0.5)
Transfers from stage 3 to 2
–
0.3
(0.9)
–
(0.6)
Changes in PDs/LGDs/EADs
(1.8)
3.6
2.1
1.1
5.0
New financial assets originated or purchased
2.9
–
–
–
2.9
Changes to model assumptions and methodologies
(1.6)
(3.6)
(3.2)
(0.7)
(9.1)
Unwind of discount
–
–
0.5
0.3
0.8
Financial assets derecognised during the year
(0.3)
(1.4)
(2.4)
(1.2)
(5.3)
Write-offs
–
–
(1.3)
(0.1)
(1.4)
PMA
(0.2)
(3.5)
0.7
–
(3.0)
ECL at 31 December 2024
7.8
23.5
16.7
10.6
58.6
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
203202
Financial Statements > Notes to the Financial Statements
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 2023
9,233.4
1,294.3
133.8
339.6
11,001.1
Transfers from stage 1 to 2
(654.3)
654.3
–
–
–
Transfers from stage 1 to 3
(23.9)
–
23.9
–
–
Transfers from stage 2 to 1
148.3
(148.3)
–
–
–
Transfers from stage 2 to 3
–
(35.2)
35.2
–
–
Transfers from stage 3 to 1
10.2
–
(10.2)
–
–
Transfers from stage 3 to 2
–
15.0
(15.0)
–
–
Changes to carrying value
(8.6)
(566.5)
(1.4)
(10.7)
(587.2)
New financial assets originated or purchased
1,306.2
–
–
–
1,306.2
Financial assets derecognised during the year
(924.0)
(84.7)
(22.5)
(36.8)
(1,068.0)
Write-offs
–
–
(4.7)
(1.7)
(6.4)
Gross exposure at 31 December 2024
9,087.3
1,128.9
139.1
290.4
10,645.7
ECL at 31 December 2023
2.8
11.4
5.4
11.2
30.8
Transfers from stage 1 to 2
(0.2)
7.6
–
–
7.4
Transfers from stage 1 to 3
–
–
3.4
–
3.4
Transfers from stage 2 to 1
0.2
(3.8)
–
–
(3.6)
Transfers from stage 2 to 3
–
(1.8)
4.5
–
2.7
Transfers from stage 3 to 1
–
–
(0.5)
–
(0.5)
Transfers from stage 3 to 2
–
0.3
(0.9)
–
(0.6)
Changes in PDs/LGDs/EADs
(2.8)
1.2
(2.4)
0.7
(3.3)
New financial assets originated or purchased
2.9
–
–
–
2.9
Changes to model assumptions and methodologies
(0.4)
(1.3)
(1.0)
(0.8)
(3.5)
Unwind of discount
–
–
0.4
0.7
1.1
Financial assets derecognised during the year
(0.3)
(1.4)
(2.4)
(1.2)
(5.3)
Write-offs
–
–
(1.3)
(0.1)
(1.4)
PMA
–
(3.6)
0.2
–
(3.4)
ECL at 31 December 2024
2.2
8.6
5.4
10.5
26.7
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
205204
Financial Statements > Notes to the Financial Statements
31. Credit risk on loans and advances to customers (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
2024
Probation
43.8
0.1
3.7
–
48.6
–
6.8
–
Stage 1
8.8
–
1.5
–
29.6
–
2.7
–
Stage 2
35.0
0.1
2.2
–
19.0
–
4.1
–
Non-performing
236.1
7.7
17.7
0.8
54.4
0.5
15.3
0.6
Stage 3
212.6
6.2
15.8
0.7
46.1
0.5
13.4
0.2
POCI
23.5
1.5
1.9
0.1
8.3
–
1.9
0.4
Total
279.9
7.8
21.4
0.8
103.0
0.5
22.1
0.6
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
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 2024 there were 4 accounts (2023: 3) in the
commercial loans portfolio subject to forbearance with a total balance of £2.3 million (2023: £1.6 million). There has been no
underlying increase in the risk of the portfolio.
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 67.5% (2023: 69.4%) of balances have been fully up to date for the last
24 months and only 16.1% (2023: 14.6%) 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
2024
Gross exposure
195.9
47.7
46.8
290.4
ECL
5.6
2.7
2.3
10.6
2023
Gross exposure
235.9
54.3
49.5
339.7
ECL
6.1
2.7
2.4
11.2
2024
LTV Split
Less than 60%
177.6
40.2
36.6
254.4
From 60 to 70%
11.6
4.7
6.6
22.9
From 70 to 80%
3.5
1.8
2.3
7.6
From 80 to 90%
1.0
0.4
0.6
2.0
90% or greater
2.2
0.6
0.7
3.5
Total
195.9
47.7
46.8
290.4
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
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
207206
Financial Statements > Notes to the Financial Statements
32. Fair values
Fair value is the price that would be paid upon the purchase of an asset or received upon the sale of a liability in an arm’s
length transaction between two entities at a specific measurement date.
Where external market prices are available these are used to determine the fair value. When these are not available internal
pricing models using external market data are used. The following hierarchy is used when measuring fair value:
Level 1: Quoted prices are available for identical assets or liabilities in active markets, these are unadjusted.
Level 2: Significant inputs to the calculated fair values are taken from observable market data, other than those in Level 1.
This may include direct inputs (i.e., prices) or indirect inputs (i.e., derived from prices).
Level 3: Fair value is derived from non-observable inputs and not solely based on external market data.
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.
2024
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
590.0
–
590.0
–
590.0
Loans and advances to customers
2
49,705.5
–
–
49,119.8
49,119.8
Debt securities – amortised cost
1,091.1
1,094.2
–
–
1,094.2
Liabilities
Shares
3
52,044.4
–
51,938.3
–
51,938.3
Amounts due to credit institutions
1,168.9
–
1,168.9
–
1,168.9
Other deposits
1,196.8
–
1,196.8
–
1,196.8
Debt securities in issue
5,019.3
4,218.8
806.8
–
5,025.6
Subordinated liabilities
4
1,453.3
1,464.6
26.8
–
1,491.4
Society
Assets
Loans and advances to credit institutions
1
433.9
–
433.9
–
433.9
Loans and advances to customers
2
10,571.6
–
–
10,516.3
10,516.3
Debt securities – amortised cost
11,658.8
11,622.3
–
–
11,622.3
Liabilities
Shares
3
52,044.4
–
51,938.3
–
51,938.3
Amounts due to credit institutions
1,168.9
–
1,168.9
–
1,168.9
Other deposits
14,039.4
–
14,039.4
–
14,039.4
Debt securities in issue
5,454.0
5,422.8
–
–
5,422.8
Subordinated liabilities
4
1,453.3
1,464.6
26.8
–
1,491.4
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*
14,662.6
–
14,662.6
–
14,662.6
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
* Please refer to
restatement of other deposits and investments
in Note 1 for details of this restatement.
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 carrying 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 £585.7 million
(2023: £1,517.4 million lower), which arises primarily due to the fair value losses being calculated on a lifetime basis for all
mortgage accounts.
3. All the Group’s non-derivative financial liabilities are initially recorded at fair value less directly attributable costs and are
subsequently measured at amortised cost. The only exception is 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 2024, the estimated fair value of share balances, using a Level 2 method, is
lower than the carrying value by £106.1 million (2023: £80.0 million lower).
4. The Society’s 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 volatility in market rates over the course of the year.
5. The Society’s accounts include investments in controlled entities and amounts owed to subsidiary undertakings, for which the
carrying value is deemed a reasonable approximation of fair value.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
209208
Financial Statements > Notes to the Financial Statements
32. Fair values (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
2024
Assets
Debt securities
27.6
–
–
27.6
Debt securities – fair value through OCI
7,302.6
–
–
7,302.6
Derivative financial instruments
–
1,466.0
0.9
1,466.9
Investments
–
–
1.6
1.6
Liabilities
Derivative financial instruments
–
555.8
–
555.8
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
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 techniques as Level 2 derivatives, namely present value calculations using interest rate curves, but these valuations
are not solely based on market observable data.
The interest rate swap notionals are tracked and projected in line with the underlying mortgage portfolios. The movements
in fair value of these instruments related to Level 3 parameters will largely offset across the interest rate swaps as the Group
is effectively hedged across these positions. Sensitivity analysis to the individual Level 3 parameters is not disclosed as the
Group is not significantly exposed.
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. This is 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 comprehensive income reserve are transferred to the income statement upon the disposal
of debt securities. During the year a gain of £1.1 million (2023: £1.2 million gain) was recognised in net realised gains and losses.
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:
2024
2023
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
1,466.9
(321.6)
(1,160.0)
(14.7)
1,755.0
(479.7)
(1,254.5)
20.8
instruments
Total financial assets
1,466.9
(321.6)
(1,160.0)
(14.7)
1,755.0
(479.7)
(1,254.5)
20.8
Financial liabilities
Derivative financial
555.8
(321.6)
(107.1)
127.1
697.4
(479.7)
(103.5)
114.2
instruments
Total financial liabilities
555.8
(321.6)
(107.1)
127.1
697.4
(479.7)
(103.5)
114.2
Society
Financial assets
Derivative financial
1,466.0
(321.6)
(1,160.0)
(15.6)
1,751.9
(479.7)
(1,254.5)
17.7
instruments
Total financial assets
1,466.0
(321.6)
(1,160.0)
(15.6)
1,751.9
(479.7)
(1,254.5)
17.7
Financial liabilities
Derivative financial
429.6
(321.6)
(107.1)
0.9
584.3
(479.7)
(103.5)
1.1
instruments
Total financial liabilities
429.6
(321.6)
(107.1)
0.9
584.3
(479.7)
(103.5)
1.1
* As recognised in the balance sheet.
** Collateral is restricted by the value of the related financial asset or liability.
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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
211210
Financial Statements > Notes to the Financial Statements
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 £23.5 million to the pension schemes (2023: £19.3 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 £25,313 (2023: £24,345).
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 2024 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:
2024
2023
£000
£000
Short-term employee benefits*
4,788.5
6,286.5
Post-employment benefits
173.0
162.0
Total key management personnel compensation
4,961.5
6,448.5
* Includes bonus of £1.4 million for the year.
Key management compensation in 2024 includes amounts paid to key management personnel who both retired and joined the
Society during 2024. The number of key management personnel at 31 December 2024 totalled 12 (31 December 2023: 12).
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.
2024
2023
No. of key Amounts in No. of key Amounts in
management respect of key management respect of key
personnel management personnel management
personnel and personnel and
their close family their close family
£000
£000
Deposit accounts and investments
At 1 January
12
1,136.6
9
1,462.5
Net movements in the year
–
211.2
3
(325.9)
At 31 December
12
1,347.8
12
1,136.6
There were £nil mortgage loan transactions or balances key management personnel and their close family members in 2024
(2023: £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 2024
were £nil (2023: £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 (2023: £nil), received interest totalling
£40,846.87 (2023: £27,054.53), and paid no fees and commissions during the year 2024. Interest paid includes amounts
relating to ‘offset’ mortgages where savings balances are used to reduce the interest-bearing balance of mortgage loans.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
213212
Financial Statements > Notes to the Financial Statements
34. Related parties (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 as entities
restated
£m
£m
£m
At 1 January 2024 (as restated)
104.9
37,936.8
(13,672.3)
Net movements
(0.9)
3,390.6
871.6
At 31 December 2024
104.0
41,327.4
(12,800.7)
At 1 January 2023
104.9
36,075.0
(15,137.3)
Net movements
–
1,861.8*
1,465.0
At 31 December 2023
104.9
37,936.8
(13,672.3)
The value of related party transactions income and expense for the financial year is as follows:
2024
Restated
2023
£m
£m
Interest revenue on loans**
1,749.3
1,372.4
Interest expense on deposits**
(1,195.9)
1,205.5
Fees and expenses revenue
101.1
87.6
Fees and expenses expense
–
–
Dividends received
75.0
50.0
* Please refer to restatement of other deposits in Note 1 for details of this restatement.
** This includes £35.6 million (2023: £23.4 million) charged by Accord to the Society in lieu of interest receivable on mortgage offset accounts recognised in Accord’s
financial statement. This was due to the interest offset in respect of interest due on savings accounts held by the Society.
Other
The Society had a joint-venture investment in Arkose Funding Limited, which entered liquidation on 24 September 2024.
In 2014, a loan of £4.0 million to Arkose Funding Limited was fully impaired. The carrying value of the investment at
31 December 2024 is £nil (2023: £nil).
35. Notes to the cash flow statements
Group
Society
2024
2023
2024
2023
£m
£m
£m
£m
Non-cash or non-operating items included in profit before tax:
Depreciation and amortisation
23.7
20.4
23.7
20.4
Loss/(profit) on sale of assets
–
0.3
–
0.3
Interest on subordinated liabilities
76.7
51.5
76.7
51.5
Impairment charge/(release) for the year
0.2
4.0
(2.0)
–
Provision (release)/charge for the year
1.3
(0.6)
1.3
(0.6)
Non-cash movements on subordinated liabilities
(25.8)
73.0
(25.8)
73.0
Loss/(gain) on realisation of debt securities
1.5
(1.6)
1.5
(1.6)
Non-cash or non-operating items included in profit before tax
77.6
147.0
75.4
143.0
(Increase)/decrease in operating assets:
Loans and advances to credit institutions
–
–
–
–
Change in loans and advances to customers and related fair value
(3,050.6)
(2,509.0)
190.2
(574.5)
adjustments for hedged risk, excluding impairment
Investments
–
(0.5)
(3,389.7)
(1,722.8)
Derivative financial assets
297.3
588.3
295.1
558.6
Decrease/(increase) in cash ratio deposit, other assets and non-OCI
176.0
(16.0)
194.9
(182.1)*
element of retirement benefit surplus
Net increase in operating assets
(2,577.3)
(1,937.2)
(2,709.5)
(1,920.8)*
Increase/(decrease) in operating liabilities:
Shares and related fair value adjustments for hedged risk
4,988.7
5,048.5
4,988.7
5,048.5
Amounts owed to credit institutions
(717.4)
(3,274.6)
(717.4)
(3,274.6)
Non cash movements on debt securities
(14.3)
84.6
(63.1)
23.1
Other deposits
213.2
(154.5)
(623.2)
(1,616.6)*
Derivative financial liabilities
(141.6)
31.1
(154.7)
77.3
Cash movements in other liabilities and provisions
5.9
9.6
(14.3)
25.2
Net increase in operating liabilities
4,334.5
1,744.7
3,416.0
282.9*
* Net increase in operating assets and operating liabilities for the Society have been restated to correct the recognition of savings accounts in relation to the Accord
offset mortgage product. Please refer to Note 1 for details.
• Other assets within “net increase in operating assets” has increased by £139.5 million from £42.6 million to £182.1 million.
• Other deposits within “net increase in operating liabilities” has decreased by £139.5 million from £1,756.1 million to £1,616.6 million.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
215214
Financial Statements > Notes to the Financial Statements
35. Notes to the cash flow 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
2024 – Group
£m
£m
£m
£m
£m
£m
£m
Debt securities in issue
4,919.4
(1,429.4)
1,543.6
(104.7)
5.9
84.5
5,019.3
Subordinated liabilities
1,621.7
(142.6)
–
–
(3.0)
(22.8)
1,453.3
Total
6,541.1
(1,572.0)
1,543.6
(104.7)
2.9
61.7
6,472.6
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
2024 – Society
Debt securities in issue
5,517.6
(1,194.1)
1,193.6
(104.6)
6.5
35.0
5,454.0
Subordinated liabilities
1,621.7
(142.6)
–
–
(3.0)
(22.8)
1,453.3
Total
7,139.3
(1,336.7)
1,193.6
(104.6)
3.5
12.2
6,907.3
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
36. Non-adjusting post balance sheet events
In January 2025, Yorkshire Building Society issued a 5 year Euro Covered Bond of €600 million. The bond will mature on
28 January 2030.
Other
Information
Annual Business Statement 218
Country-by-Country Report 220
Glossary 223
Introduction Strategic Report Governance Financial Statements Other Information
217216
Introduction Strategic Report Governance Financial Statements Other Information
216
1. Statutory percentages
2024 2023 Statutory
limit
% % %
Lending limit 6.2 6.4 25.0
Funding limit 12.4 14.2 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 1986
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
2024 2023
% %
As a percentage of shares and borrowings
Gross capital 9.13 9.70
Free capital 8.92 9.46
Liquid assets 24.60 23.34
Profit after taxation for the financial year as a percentage of mean total assets 0.45 0.55
Management expenses as a percentage of mean total assets 0.58 0.56
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
3. Information relating to the directors at 31December 2024
Director name and
date of birth
Business
occupation
Date of appointment Other
Directorships
A V F Durbin, BComm LLB MSc
9 October 1963
Chair of the Board 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
TheCityUK
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
71-72 Oakley Street Limited
P D Bole, MA Chartered
Accountant
16 October 1969
Non-Executive Director 1 September 2024 esure Group Plc
esure Broker Limited
esure Finance Limited
esure Holdings Limited
esure Insurance Limited
esure Property Limited
esure Services Limited
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
D Matta, BSc, BA
15 May 1962
Non-Executive Director 27 April 2021 Fat Fractal Inc
M A Parsons, BA, FCMA
24 October 1961
Non-Executive Director 20 October 2020 Fairstone Capital Group Limited
Fairstone Private Wealth Limited
J E Pope BSc Econ, MSc
Economics, MBA
2 September 1960
Non-Executive Director 29 October 2024 CAF Bank Limited
Foundation for Credit Counselling
T A Ranger BA Hons
20 November 1977
Chief Financial Officer and
Executive Director
18 June 2024 Accord Mortgages Limited
J L Tilling, BBus, BA*
19 June 1969
Non-Executive Director 1 November 2021 Marketing with Insight Limited
Guide Dogs for the Blind Association (The)
* Stepped down from the Board on 31 December 2024.
Mr T A Ranger entered into a contract on 15 February 2024 and was appointed to the Board on 18 June 2024 and his mutual
contractual notice period is 12 months.
Ms Allen entered into a contract on 5 August 2022 and was appointed to the Board on 2 March 2023 and her mutual
contractual notice period is 12 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.
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
219218
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 3,540 751.8 383.7 80.6
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 2024.
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 2024, which are prepared in accordance with IFRS.
Corporation tax paid
Corporation tax paid represents the net cash taxes paid during 2024. 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 Report
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 2024 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 2024 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
Society 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, as
applicable to listed public interest
entities, 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 country-by-country
report 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 Society’s ability to
continue to adopt the going concern
basis of accounting included:
•
performing a risk assessment
to identify factors that could
impact the going concern basis of
accounting, including the current
and forecast financial performance;
•
understanding and evaluating
management’s going concern
assessment, including consideration
of the impact of current economic
environment;
•
understanding and evaluating
management’s forecasts and the
stress testing of liquidity and
regulatory capital performed by
management;
•
evaluating management’s ability
to accurately forecast financial
performance by comparing
budgeted financial information with
historical actual results; and
•
reviewing regulatory
correspondence, and relevant
reports provided to governance
forums.
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 Society’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 Society’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 country-by-country information,
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
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 Society or to
cease operations, or have no realistic
alternative but to do so.
Independent auditors’ report to the directors of Yorkshire Building Society
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
221220
Responsibilities for
the country-by-country
information and the audit
(continued)
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 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 Society and the industry, we
identified that the principal risks
of non-compliance with laws
and regulations related to the
Financial Conduct Authority’s (‘FCA’)
regulations, the Prudential Regulation
Authority’s (‘PRA’) regulations and UK
tax legislation, 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 the posting of
inappropriate manual journal entries
that could be used to manipulate
financial performance and the
potential for management bias in
accounting estimates.
Audit procedures performed included:
•
Review of correspondence with the
PRA, FCA and HMRC;
•
Challenging estimates and
judgements made by management
in forming significant accounting
estimates;
•
Identifying and testing journals that
meet the higher risk criteria;
•
Incorporation of an element of
unpredictability in our testing
through altering the nature, timing
and/or extent of work performed;
•
Discussions with management and
those charged with governance
in relation to known or suspected
instances of noncompliance with
laws and regulation; and
•
Review of internal audit reports
in so far as they related to the
country-by-country information.
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
Society’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.
The engagement partner responsible
for this audit is Michael Whyte
PricewaterhouseCoopers LLP
Chartered Accountants and
Statutory Auditors
Leeds
26 February 2025
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.
Expected credit losses An estimate of the potential losses on current exposures due to potential defaults.
Glossary
Other Information > Country-by-Country Report
Independent auditors’ report (continued)
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
223222
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.
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.
High Quality Liquid Assets (HQLA) Assets which can be easily and immediately converted into cash at little or no loss of value.
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).
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.
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.
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 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.
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 capital A measure of regulatory capital that includes subordinated liabilities and provisions for
collective impairment, less regulatory adjustments.
Other Information > Glossary
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
225224
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 Corporate Governance Code (the Code), first 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 which applies for the 2024 financial year
(with the most recent Code published in January 2024 beginning to apply from accounting years
after 1 January 2025, with the exception of Provision 29 which will apply from January 2026)
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.
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
balance sheets.
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 balance sheets.
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 balance
sheets.
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.
Other Information > Glossary
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
227226
APM Calculation of Measure Reconciling items to statutory measure Definition and purpose
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.
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 balance sheets.
Borrowings comprise amounts owed to
credit institutions, other deposits and
debt securities in issue, also as shown
in the balance sheets.
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 balance sheets.
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 balance sheets.
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 balance
sheets.
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.
APM Calculation of Measure Reconciling items to statutory measure Definition and purpose
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.
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.
Other Information > Glossary
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
229228
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.
Notes
Introduction Strategic Report Governance Financial Statements Other Information Introduction Strategic Report Governance Financial Statements Other Information
231230
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.
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.
Small Change Big Difference® is a registered trademark of Yorkshire Building Society.
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.
Arniston Ltd (t/a) Snugg is authorised and regulated by the Financial Conduct Authority. FRN: 999500. Registered in Scotland. Company Number: SC707743.
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
YBM 0019 26 02 25