Vanquis Banking Group plc Annual Report and Financial Statements 2022
Helping everyday people
Annual Report and
Financial Statements 2022
Our strategic roadmap
Our Purpose is to help put people
on a path to a better everyday life.
We do this by providing customers with opportunities to borrow in a transparent,
We want to be the best and most trusted provider of finance to customers not well served by traditional lenders. Our customers who are
in the mid cost and near prime markets access our broad range of credit cards, unsecured personal loans and vehicle finance products
through the Vanquis and Moneybarn brands, across multiple distribution channels.
Our aim is to put our customers at the centre of everything we do, and we do this by using our strategic drivers of ‘People & Culture’,
‘Growth & Sustainability’ and ‘Customer & Community’ to deliver for them, our colleagues, shareholders and the wider UK community.
People and Culture Growth and Sustainability Customer and Community
Delivering financial inclusion
Putting the customer at
the heart of everything we
do, whether we’re growing
our range of products,
reaching new audiences or
interacting with everyday
people at every stage of their
journey with us
Our people
and culture
Creating a positive, inclusive
and rewarding culture where
everyone feels empowered
and supported to learn, grow
and succeed
Supporting social mobility
Working with our community
partners to improve the
lives of children and young
people by providing them
with access to education,
social and financial inclusion,
and economic development
opportunities
Meeting our climate
responsibilities
Playing our part in tackling
climate change and
supporting the UK’s transition
to a low carbon economy by
understanding the risks and
opportunities that climate
change presents to our
business and key stakeholders
Read more on pages 22 to 23
Read more on pages 36 to 49
Our Purpose
We’re here…
Our Vision
When we succeed, we imagine a world where…
Our Mission
To make this happen, we need to become…
Our Strategy
To achieve this, our strategic focus area are…
Our ESG Priorities
And our ESG priorities are…
To help put people on the path to a better everyday life
Read more on pages 20 to 21
Everyday people are able to access the financial services they need from us,
no matter where they are on their journey
The first-choice bank for the UK population who are excluded from
accessing financial services from traditional lenders
Read more on pages 20 to 21
Read more on pages 20 to 21
Strategic report
1 Highlights
2 Vanquis Banking Group at a glance
5 Investment case
6 Chairman’s statement
8
10
16
18
20 Business model
22 Strategy
24 Key performance indicators
26 Credit Card Division
30 Vehicle Finance Division
33 Personal Loans Division
36 Sustainability
50 Section 172(1) statement
52
54 Risk management and principal risks
66
67 Viability statement
Governance
69 Board leadership and Company Purpose
69 Chairman’s introduction
to governance
71 Our Board
74 Setting our strategy
76 Promoting long-term sustainable
success: Board focus areas
during 2022
79 The Board: our culture
82 Stakeholders
82 Stakeholder engagement
and decision making
87
shareholders and stakeholders:
investor relations
88 Division of responsibilities
91 Composition, succession and evaluation
91 Board composition
92 Director induction and training
93 Assessing Board performance
- annual Board evaluation
95 Nomination Committee Report
100 Customer, Culture and Ethics
Committee Report
103 Audit, risk and internal control
103 Audit Committee Report
108 Risk Committee Report
112 Directors’ Report
Directors’ Remuneration Report
119 Annual Statement by the Chair
of the Remuneration Committee
123 Remuneration at a glance
127 Annual Report on Remuneration
Financial statements
153 Consolidated income statement
153 Consolidated statement
of comprehensive income
153 Earnings/(loss) per share
154 Dividends per share
154 Balance sheets
155 Statements of changes
in shareholders’ equity
157
158 Statement of accounting policies
165 Financial and capital risk management
170
220 Independent auditor’s report
229 Alternative performance measures
Shareholder information
235 Glossary
236 Information for shareholders
Vanquis Banking Group plc Annual Report and Financial Statements 2022
1
Highlights
Customer numbers
1.7m
0.1m
(2021: 1.6m)
Amounts receivable from customers
£1.9bn
£0.2bn
(2021: £1.7bn)
Regulatory capital
£678.8m
£27.7m
(2021: £706.5m)
Adjusted profit before tax –
continuing operations
£126.6m
£41.2m
(2021: £167.8m)
Operational carbon
footprint offset
1
100%
(2021: 100%)
Statutory profit before tax –
continuing operations
£110.1m
£32.1m
(2021: £142.2m)
Liquidity
£478.2m
£228.7m
(2021: £706.9m)
Visit: vanquisbankinggroup.com
View: Sustainability Report at
www.vanquisbankinggroup.com/
sustainability/sustainability-report-2022
1 Not including scope 3 emissions
financed vehicle emissions.
Certain alternative performance
measures (APMs) have been used
in this report (see pages 229 to 234)
Vanquis Banking Group plc Annual Report and Financial Statements 2022
2
1.54m
Customers*
£150-
£4,000
Credit
card limits
Funded through:
Retail deposits
(fixed term deposits)
Securitisation
24.7%-
39.9%
Representative
APR
Vanquis Banking Group meets the needs of its customers through three products: credit cards, vehicle finance and unsecured
finance business offers secured finance on a range of vehicle types, including cars, motorbikes and light commercial vehicles.
* Customer numbers as at 2022 year end.
Credit cards
Read more on pages 26 to 28
Decline/unable to lend
APR
>20%
APR
>100%
APR
>50%
Over-
drafts
Buy
now,
pay
later
Lines
of credit
Decreasing APRs
Prime/mainstream
We will continue to evolve our
product offering through 2023,
enabling us to support more
consumers on their credit
journey. In particular:
– We will continue to develop
our unsecured loans
product offering via Vanquis
Bank to customers in the
open market, including
broadening the range of
APRs offered and broadening
our loan sizes and terms.
– Within vehicle finance,
we continue to review
our product proposition,
including loan sizes, terms,
APRs and asset classes. For
example, today we cover
cars, motorbikes and LCVs,
but we aspire to broaden this
to enable us to support more
customers’ needs.
Personal loans
and retail
point-of-
sale finance
Guarantor
loans
Salary
finance
Product spectrum for the markets we operate in
Credit card,
store card
and retail
credit accounts
1st and
2nd
charge
mort-
gages
Vehicle
finance
Salary
Advance
Revolving credit
Unsecured loans
Our market-leading
products
Vanquis Banking Group at a glance
Our Mission is to become the first-choice bank for the UK population
who are excluded from accessing financial services from traditional lenders
34,400
Customers*
£1,000-
£5,000
Loan range
1-4
years
Loan terms
18.0%-
39.3%
Representative APR
Personal loans
Read more on pages 33 to 34
100,000
Customers*
£4,000-
£25,000
Loan range
3-5
years
Loan terms
15.9%-
49.9%
Representative APR
Vehicle finance
Read more on pages 30 to 31
Secured loans
Vanquis Banking Group plc Annual Report and Financial Statements 2022
3
Strategic report
Supporting and understanding
our customers
Personal loansVehicle finance
The Group is a leading specialist banking group focused on the mid-cost and near-prime parts of the market in the UK.
savings, meaning
unforeseen expenses
can be challenging
Have variable incomes
(e.g. self-employed, on a
zero-hours contract, have
multiple part-time jobs)
Experienced a
significant life event
(e.g. job loss, ill
health, divorce)
the UK and therefore have
little or no credit history
Looking to build or
rebuild their credit rating
Value a more tailored
product and service
Our customers’ typical characteristics
Full or part-time salaried (66%)
or self-employed (16%)
Full-time salaried (77%)
or self-employed (15%)
Full or part-time salaried (77%)
or self-employed (6%)
20% hold a mortgage
1
10% hold a mortgage
1
16% hold a mortgage
1
Limited savings
Circa half have material savings
(enough to cover emergencies or
anything unexpected)
Circa half have material savings
(enough to cover emergencies or
anything unexpected)
Income
source
Income
level
Housing
Savings
Typical
age
Credit
score
Read our market overview on pages 18 to 19
46–65 years old 36–55 years old 26–45 years old
Mid-cost/near prime Mid-cost/near prime Mid-cost/near prime
2
Source: BoxClever survey of 3,510 non-prime consumers and 2,929 Vanquis Banking Group customers, December 2019.
2 Customer credit scores based on TransUnion Gauge 2 score.
In addition, our customers sit across a broad range of risk profiles. It is therefore important that a range of price points can
be offered, increasing financial inclusion. Finally, our customers’ needs and circumstances are often more fluid than those
of consumers served by mainstream providers, requiring us to provide a more flexible approach.
Credit cards
Vanquis Banking Group plc Annual Report and Financial Statements 2022
4
Vanquis Banking Group at a glance continued
from traditional lenders
Market compositionMarket overview
We specialise in supporting the one in five adults (10 to 12
million people) in the UK, in the mid-cost and near-prime
mainstream lenders. These consumers’ needs and
circumstances typically change over time, resulting
in the market being relatively fluid; circa 1 to 2 million
consumers move in and out of the market each year.
There are three main categories of products
in our market:
– revolving credit accounts, including credit cards;
–
for the loan; and
– unsecured loans, including personal loans.
How our business has transformed
Over the last few years, the Group has repositioned itself
towards the mid-cost and near-prime parts of the market,
which has resulted in the Group’s credit risk more than
halving. The repositioning has involved closing down our
Consumer Credit Division (CCD) in 2021 and focusing on
lower risk customers. We have also sought to diversify our
product offering, and thereby our credit risk profile further,
through the launch of our personal loans and second
charge mortgage businesses.
Where the business is now
Today, our business is fully repositioned in the mid-cost
and near-prime parts of the market. The business is
pursuing a customer-led strategy, with a fully embedded
Purpose and Mission, which will build on our increasingly
digital foundations to deliver attractive and sustainable
returns to shareholders over the medium term.
Our awards
Submitted for Best Marketing Campaign
and Changing Lives in the Community at
Shortlisted in the Social, Sustainable and
Responsible Banking category at The Banker:
LOQBOX partnership.
Read more about our awards at www.vanquisbankinggroup.com/media/awards/
Winner of the Credit Builder Card Provider
Read our market overview on pages 18 to 19
Vanquis Banking Group plc Annual Report and Financial Statements 2022
5
Strategic report
We operate in
growing addressable markets
We are well positioned in the large and growing
market segments across credit cards, vehicle finance
and personal loans
In the UK, there are between 10 and 12 million working adults who are underserved
by mainstream lenders. With our broad range of products and services, we
are well positioned to be the credit provider of choice for these customers.
In aggregate our addressable market is 13.6m customers. We also recently
launched a pilot phase for a new secured product strategy of second charge
mortgages.
We have a Purpose-driven strategic Blueprint,
which sets us up for sustainable growth
Our Blueprint brings together why Vanquis Banking Group exists as an
organisation, framed in the context of the role our business plays in the lives
of our customers. It also sets out the strategic focus and key priorities that
will drive both competitive advantage and commercial success for the whole
Group. From our recent colleague survey 83% of colleagues care about the
future of Vanquis Banking Group.
We have a customer-centric, responsible culture
While our customers share many similarities with mainstream credit
customers, there are important differences arising from their individual
circumstances. Our customers need a tailored approach and a wider range
of suitable and sustainable credit solutions to best serve their needs. We aim
to put the customer on the team. We have invested in a brand-new IT platform
that in the future will support all of our products.
Improving customer insights is driving our
customer-led strategy
Vanquis Banking Group aims to understand its customer better all the time.
This customer insight is crucial for us to shape our product strategy, making
sure that our customers have the products they need from us. This allows us
to target more effectively our approach to marketing and spend; to tailor new
products and services specifically for our customers and to help our customers
build a better financial future for themselves.
Sustainable growth over the medium term
To support the delivery of our Purpose, we have a financial model founded on
investing in customer-centric businesses with attractive returns, which aligns
an appropriate capital structure with the Group’s dividend policy and future
growth plans. We will operate with a progressive dividend policy and our
dividend policy is to pay out c.40% of our adjusted earnings.
13.6m
customers
Read more on
pages 18 to 19
83%
Read more on
pages 22 to 23
New IT
platform
Read more on
pages 18 to 23
New products
and services
Read more on
pages 20 to 21
c.40%
Read more on
pages 36 to 49
Vanquis Banking Group is a leading specialist banking group with a focus on the mid-cost and near-prime parts of the credit
market. We aim to deliver attractive and sustainable returns for our shareholders through our strong market positions, robust
balance sheet and competitive advantages. Our investment case is based on five key areas:
Investment case
Vanquis Banking Group plc Annual Report and Financial Statements 2022
6
Introduction
I am delighted to introduce our Annual Report and Accounts
corporate name – Vanquis Banking Group. The Group can
offered by traditional lenders. Today, the Group offers credit
cards, vehicle finance and personal loans in the mid-cost and
near-prime segments of the market and the Board deemed
the previous corporate name to no longer represent the
Group’s interests accurately.
sought to cement itself as a leading specialist banking group
focused on underserved markets. The Board and executive
management team built on the strategic accomplishments
Authority (PRA).
CEO succession
McLaughlin as Group Chief Executive Officer (CEO), subject to
regulatory approval. Further information on Ian is available
in the Nomination Committee Report at page 95. I cannot
overstate the contribution that Malcolm has made to the
Group over the last nine years, initially as an Independent
Non-Executive Director and subsequently as Executive
Chairman and, for the last five years, as Group CEO.
the considerable stresses in 2017 and has led the subsequent
today: a specialist banking group focused on customers in
the mid-cost and near-prime parts of the market. On behalf
his contribution.
Governance
The primary responsibility of the Board is the effective
oversight of the Group and to determine its strategic direction
and objectives. We remain committed to the highest possible
standards of corporate governance and to delivering long-term,
the substantial alignment of the Vanquis Bank and Group
Boards to enable full alignment. In November, the Group’s
a fully-fledged specialist banking group.
Shareholders
2022 marked the return of face-to-face interactions
institutional shareholders.
Chairman’s statement
We are a specialist banking group
focused on the mid-cost
and near-prime sectors
2022 was the year in which we
successfully repositioned the Group
towards new markets, products
and customers and I am proud
of what we achieved collectively.
Patrick Snowball
Chairman
Vanquis Banking Group plc Annual Report and Financial Statements 2022
7
Strategic report
Group, the strategic outlook and ESG (Environmental, Social
and Governance). Please see our Corporate Responsibility
Our people
heartfelt thanks and gratitude to everyone across Vanquis
Banking Group, including colleagues and the executive team,
existing customers and communities.
experience across credit cards and personal banking from
senior roles at HSBC, Barclaycard and Mastercard. She has
made an invaluable contribution to the business already and
In August, Melanie Barnett joined the Group’s Board as General
Counsel and Company Secretary, having served as Deputy
me at the Board table.
People Officer (CPO) and a member of the Group’s Executive
HR Director for Vanquis Bank. Nicola has already introduced a
the Group’s approach to HR.
Outlook
these achievements, the Board and I remain enthusiastic
and confident about the outlook for the Group,
remain our primary focus, enabling us to deliver our social
us to generate long-term attractive and sustainable returns
through the current macroeconomic conditions in the UK.
business across credit cards, vehicle finance, personal loans
and our recently announced second charge mortgage
clear strategic ambition is underpinned by a strong and liquid
balance sheet and an aligned governance and harmonised
Patrick Snowball
Chairman
30 March 2023
Read more in our Sustainability Report at
www.vanquisbankinggroup.com/sustainability/
sustainability-report-2022
Delivering
positive change
Throughout 2022, the Board has engaged with
management on an ongoing basis to ensure that
the Group continues to maintain a strong focus on
the environmental, social and governance (ESG)
agenda. Through the updates that have been
provided to the Board during the year and by the
engagement that takes place with management via
the Customer, Culture and Ethics (CCE) Committee,
I have been pleased with the progress that has been
made in ensuring that the Group is maintaining its
commitment to the ESG agenda. Highlights include:
Managing climate risk
The work undertaken by the Group
to better understand the potential
financial impacts of the climate-related
risks and opportunities that are material
to its business activities and key
stakeholders, and account for all
operational carbon emissions, as well
as the scope 3 emissions in the Group’s
value chain, put the business in a good
position to make progress in delivering
on its net zero ambitions.
Our new Foundation
It has also been pleasing to see that the
Group is going to build on the great work
it already delivers in the communities it
serves by establishing a new community
investment programme – the Vanquis
Banking Group Foundation – which will
be launched later in 2023. The mission of
this programme is to improve the lives of
children and young people by providing
them with access to education, social
and financial inclusion, and economic
development opportunities.
School uniform project
The Group has started work on a
new project that will become a key
Foundation activity, and launched a
free school uniform scheme to help
families with the cost of living crisis in
Bradford, Liverpool, Manchester and
Blackpool. The Group has allocated
£100,000 of funding to longstanding
community partner School-Home
Support and the Dixons Academies Trust
which has to date supported over 1,000
school pupils to get access to items of
uniform including blazers, shoes, coats
and PE kits.
By continuing to focus on the ESG agenda, the
Group continues to underline the importance of its
Purpose and Mission and ensure that it delivers on
its Strategic Priorities of People and Culture, Growth
and Sustainability, and Customer and Community.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
8
Introduction
balance sheet, access to retail deposit funding and a stable
net interest margin. The collective efforts of all people and
teams across the organisation has enabled the Group to build
like to thank them all for their efforts during the year.
The continued focus of the Board and executive management
team on repositioning the Group in the mid-cost and near-prime
segments of the credit market has enabled the Group to
macroeconomic backdrop. During 2022, credit card receivables
by 170%, illustrating its strong competitive position and
underlying demand for credit from its target customers.
The FY’22 results represent my last set of full year accounts as
CEO before I hand over to my successor, Ian McLaughlin, during
the summer, subject to regulatory approval. I am immensely
years, firstly as an Independent Non-Executive Director and
Executive Chairman, before becoming CEO five years ago. I
the future.
Group financials
Turning to the financial results for 2022, the Group’s
£110.1m (2021: £142.2m) reflecting higher central cost items
year-on-year. The Group reported an adjusted profit before
tax from continuing operations of £126.6m (2021: £167.8m),
finance and personal loans. Whilst total income remained
charges year-on-year, and the continued investment in the
Group’s IT, Operations and Change & Transformation agenda
inflated costs relative to 2021.
Group central costs increased to £30m (2021: £18m) during the
period reflecting the roll out of the shared services model,
transformation & change spend increased to £35m (2021: £8m)
includes the first full 12 months of Tier 2 interest. This strategic
investment and centralisation of functions is designed to make
the Group’s future cost base more scalable and better able to
capture the benefits of operational leverage. The investments
are also designed to enhance the Group’s strategic competitive
personal loans for FY’22 amounted to 294k (2021: 249k) and, as
a result, the Group had 1,675k customers (2021: 1,655k) at the end
books during the second half of the year, particularly in vehicle
finance and personal loans and, as a result, total receivables
stood at £1,904m (2021: £1,678m) at the end of December.
Well positioned to support customers and
deliver sustainable
growth to shareholders
Vanquis Banking Group remains
committed to delivering long-term,
sustainable and attractive returns
to its shareholders as we target the
growing mid-cost and near-prime
segments of the market.
Malcolm Le May
Chief Executive Officer
Vanquis Banking Group plc Annual Report and Financial Statements 2022
9
Strategic report
At the end of December 2022, the Group’s capital position remained
to a total capital ratio of 37.5% (2021: 40.6%). This equates to a
surplus of £284m (2021: £344m) pre C-SREP release of capital
above the Group’s TCR and regulatory combined buffer.
Product update
receivables to approximately £76m as of 31 December 2022 and
product for our customers.
As recently announced, the Group has launched another pilot
recognise the loans on its balance sheet as customer receivables.
If the pilot phase is successful, the Group intends to start to
customers. The second charge mortgage market in the UK is a
charge mortgages have the potential to improve customer
attractive and sustainable returns to its shareholders.
Updated capital requirements
the Prudential Regulation Authority (PRA) had concluded its
capital requirements, based on the Internal Capital Adequacy
Assessment Process (ICAAP) undertaken during 2022. The
outcome is that the Group’s Total Capital Requirement (TCR) has
reduced by more than a third, from 18.3% to 11.9%. Including the
current regulatory combined buffers of 3.5% (capital conservation
buffer of 2.5% and countercyclical buffer of 1.0%), the Group’s
overall capital requirement has reduced by 6.4% from 21.8% to
enabling the use of retail deposit funding across the Group.
Environmental, Social and Corporate
Governance (ESG)
During the course of 2022, the Group redefined its Mission and
Priorities of People and Culture, Customers and Community,
approach to managing and reporting our ESG performance,
please refer to our 2022 Sustainability Report.
During 2022, the Group continued to deliver on its commitment
to tackle climate change and its net zero by 2040 ambition. This
includes the Group accounting for all its material Scope 3
greenhouse gas (GHG) emissions and business activities and
making good progress in agreeing carbon reduction targets
September 2023.
The Group remains committed to investing in the communities
improve the lives of children and young people by providing
and economic development opportunities. In 2022, Vanquis
partners School-Home Support and the Dixons Academies
including blazers, shoes, coats and PE kits.
its quest to be named the UK City of Culture in 2025. Vanquis
development of the cultural programme and ensure that
it leaves a legacy for years to come.
Outlook
Vanquis Banking Group demonstrated strong momentum
across its loan books during the fourth quarter of 2022. This
the credit card business, customer bookings tracked in-line
Similarly, the personal loans business has had a strong
year-on-year.
macroeconomic backdrop, supported by its strong competitive
deposit funding. The Group also plans to deliver a stable NIM
profile in FY’23 versus FY’22 as more expensive legacy funding is
plans to invest a similar amount in FY’23 as it did in FY’22 in
customer experiences and journeys. As a result, the Group
plans to incur total costs in FY’23 that are broadly flat year-
The Board remains committed to delivering attractive and
sustainable returns to its shareholders over the medium-term.
includes a customer-led digital strategy to offer a diverse
includes a CET1 ratio target of c.20% overtime (prior to any
optimisation of the capital stack), strong organic receivables
of c.40% of adjusted earnings, and the potential for selective
bolt-on opportunities or one-off returns of any ongoing
surplus capital to shareholders.
Malcolm Le May
Chief Executive Officer
30 March 2023
Vanquis Banking Group plc Annual Report and Financial Statements 2022
10
Building a more
sustainable business
performance in 2022 with our capital
and funding position remaining ahead
of expectations, bolstered by the PRA
approved lower capital requirement,
and the increased competitive
advantage of funding all products
using retail deposits.
Neeraj Kapur
Chief Finance Officer
Income statement
2022
£m
2021
£m
Interest income 486.9 473.9
Interest expense (58.8) (49.1)
Net interest income 428.1 424.8
Net fee and commission income 44.2 57.4
Other income 8.4 0.4
Total income 480.7 482.6
Impairment charges (66.1) (50.4)
Risk-adjusted income 414.6 432.2
Operating costs (288.0) (264.4)
Adjusted profit before tax –
continuing operations 126.6 167.8
Amortisation of acquisition intangibles (7.5) (7.5)
Exceptional items – continuing operations (9.0) (18.1)
Statutory profit before tax –
continuing operations 110.1 142.2
Loss for discontinued operations (10.7) (138.1)
Group profit before tax 99.4 4.1
Tax – continuing operations (27.8) (7.6)
Tax – discontinued operations 5.8 (28.6)
Profit/(loss) after tax 77.4 (32.1)
group, the Group has taken the decision in the current year to
change the presentation of our statutory income statement
have been retrospectively re-presented. This change does
not constitute a change in accounting policy and there is no
impact on recognition, measurement or profit and loss in any
period presented in the financial statements.
alternative performance measures (APMs). The changes
to APMs are summarised on pages 229 to 234 including an
Certain alternative performance measures (APMs) have
been used in this report. See pages 229 to 234 for an
Vanquis Banking Group plc Annual Report and Financial Statements 2022
11
Strategic report
Trading performance
Detailed analysis of the trading results of the Group’s three
operating divisions can be found on pages 26 to 28 for
credit cards, 30 and 31 for vehicle finance and 33 and 34
for personal loans.
Profit before tax
The Group reported adjusted profit before tax from continuing
Higher costs arising from investment in the transformation
adjusted profit before tax by £41.2m. The Group continued to
release Covid-19-related impairment provisions no longer
delinquency trends remaining stable. The Group’s statutory
profit before tax from continuing operations, including
amortisation of acquisition intangibles and exceptional
This includes:
– corporate costs incurred centrally (£3.8m);
– additional Scheme costs (£3.7m); and
– redundancy costs (£1.5m).
This compares to an exceptional cost in 2021 of £18.1m as
a result of: (i) corporate costs including CCD closure (£11.5m);
(ii) CCD Scheme of Arrangement costs (£5.0m); and (iii) costs
in respect of the redemption of bonds (£3.9m); offset by
a pension credit (£2.3m).
Discontinued operations
Discontinued operations represent the home credit and
criteria for classifying as discontinued operations in 2021
and high-cost short-term credit markets entirely and close
those businesses. Discontinued operations reported a loss
after tax of £4.9m (2021: loss after tax of £166.7m) reflecting
by provision releases of £4.6m no longer required.
Earnings per share (EPS)
The £109.5m increase in the Group’s profit after tax has
the discontinued operations and from higher costs, as the
the Scheme of Arrangement.
As a result, basic earnings per share from continuing operations
has decreased from 53.7p in 2021 to 32.8p in 2022. The adjusted
basic earnings per share from continuing operations decreased
from 57.5p per share in 2021 to 38.7p in 2022.
Asset yield
Asset yield represents interest income as a percentage of
increase of 2.7% from 2021 (2021: £473.9m). Credit card asset
yield improved from 23.8% in 2021 to 25.0%, reflecting the
balances. In vehicle finance, the asset yield has increased
year. Personal loans asset yield has reduced from 28.1% in 2021
the period.
Interest expense
The Group’s interest expense arises from retail deposits and
additional incentives for Small and Medium-sized Enterprises
cost increased from £49.1m in 2021 to £58.8m in 2022. Market
year. This rising rate environment has impacted on the Group’s
funding cost. In addition, there is an increase due to the full
year impact of the Tier 2 debt capital raised in 2021.
Net interest margin (NIM)
The Group’s NIM, net interest income as a percentage of
average gross receivables, increased by 0.5% from 20.5% in
2021 to 21.0% in 2022, reflecting the higher asset yield offset
by increased funding costs.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
12
continued
Group total
capital ratio
(%)
37.5%
21 22
Years
Cost:income ratio –
continuing operations
(%)
21 22
Years
Adjusted RORE –
continuing operations
(%)
21 22
Years
Receivables –
continuing operations
(£bn)
21 22
Years
Cost of risk
The Group’s cost of risk, defined as impairment charges as
a percentage of average gross receivables, has increased
from 2.4% in 2021 to 3.2% in 2022. Both years benefited from a
release of impairment provisions no longer required in credit
of Covid-19. Whilst there has been further releases in 2022
charge this year.
longer required, and refreshed SICR threshold parameters
in credit cards, are the predominant reasons for release
of provision. Underlying asset quality remained high and
delinquency trends remained stable, and the refocus onto
coverage ratio for credit cards from 25% at December 2021
to 19% at December 2022.
The vehicle finance impairment coverage ratio has increased
from 30% at December 2021 to 34% at December 2022 due to
the absence of debt sale activity.
Risk-adjusted margin
The risk-adjusted margin, defined as risk-adjusted income as
a percentage of average gross receivables, has decreased
from 20.8% in 2021 to 20.3% in 2022 as a result of higher
Cost:income ratio
The cost:income ratio has increased from 54.8% in 2021 to 59.9%
in 2022 as a result of the continued investment in the Group’s
has remained broadly in line year-on-year. The temporary
inflation of the cost base includes the additional investment
to continue a significant transformation programme including
Returns
Investing in capital-generative businesses remains central
to the Group’s business model.
The Group’s adjusted return on required equity (RORE) for
continuing operations has decreased from 32.3% in 2021 to
22.2% in 2022. The average required equity has decreased by
continuing adjusted PBT in 2022.
on tangible equity (ROTE) has decreased from 32.2% in 2021
to 22.2% in 2022. The average tangible equity has reduced
by 4.9% year-on-year.
Dividend policy
The Group’s dividend policy is to pay out approximately 40%
of its adjusted earnings to shareholders subject to market
conditions. As a result the Board has proposed a final ordinary
dividend of 10.3p per share in respect of 2022 (2021: interim
dividend of 5.0p per share paid in September 2022, this brings
the total proposed ordinary dividend to be paid in respect of
the financial year ended 31 December 2022 to 15.3p per share.
Tax
The tax charge for 2022 represents an effective tax rate of
charge of £27.8m being recognised in the year for continuing
– the mainstream corporation tax rate of 19.0% on the
Group’s profit before tax from continuing operations
generating a tax charge of £29.4m (2021: tax charge
of £23.7m);
– the mainstream corporation tax rate of 19.0% on Group
exceptional items from continuing operations generating
a tax credit of £0.2m (2021: tax credit of £15.3m); and
– the mainstream corporation tax rate of 19.0% on the
amortisation of acquisition intangibles generating a tax
credit of £1.4m (2021: tax credit of £0.8m).
The effective tax rate is principally the result of:
– the adverse impact of the bank corporation tax surcharge
of £8.4m (2021: £12.2m);
– an adverse impact of £3.2m (2021: £nil) of revaluing
deferred tax assets and liabilities in credit cards and
tax surcharge rate from 8% to 3% and increase the bank
from £25m to £100m. In 2021, the revaluation of deferred tax
assets and liabilities for the increase in the mainstream
1 April 2023 gave rise to a beneficial impact on the tax
charge of £5.0m;
– the beneficial impact of tax losses of discontinued
operations being surrendered as group relief to continuing
credit of £3.3m (2021: tax credit of £6.5m);
– an adverse impact of £0.9m in respect of non-deductible
expenses, principally exceptional project related costs
(2021: adverse impact of £0.5m);
40.6% 54.8% 32.3%
59.9% 22.2% £1.9bn
£1.7bn
Vanquis Banking Group plc Annual Report and Financial Statements 2022
13
Strategic report
– the beneficial impact of adjustments in respect of prior
of historic tax liabilities net of a tax charge of £0.8m in
may not be available. In 2021, the adverse impact of £0.5m
related to adjustments to prior year deferred tax on share
– an adverse impact of £1.0m (2021: beneficial impact of
£7.8m) related to prior year transfer pricing adjustments
group relief to the continuing operation at a discounted
price; and
– in 2021, the beneficial impact of the release of the
Summarised balance sheet
2022
£m
2021
£m
Assets
Cash and balances at central banks 464.9 717.7
Amounts receivable from customers
1
1,896.1 1,677.7
Pension asset 30.7 112.2
134.5 123.5
Other assets 129.6 93.9
Discontinued operations — 0.3
2,655.8 2,725.3
Liabilities
Retail deposits 1,100.6 1,018.5
2
815.4 845.2
Trade and other payables 62.6 77.1
Other liabilities 69.8 121.5
Discontinued operations 0.2 31.8
2,048.6 2,094.1
1 Amounts receivable from customers in 2022 are presented net of £7.9m
fair value adjustment for portfolio hedged risk. Underlying receivables
from customers are £1,904.0m (2021: £1,677.7m).
£820.0m (2021: £845.2m).
Assets have decreased by 3% to £2,655.8m driven by the
73% reduction in the pension asset due to the volatility in
in September 2022, and cash balances reflecting more
in the receivables book during 2022 has also driven the
utilisation of cash from operating activities.
The pension asset has reduced from £112.2m at the end of 2021
to £30.7m at the end of 2022, liabilities reduced by 38% as the
discount rate increased from 1.85% to 4.80% and long-term
fall in value of the pension asset, including tax, has reduced
it has not impacted the ability to pay dividends in the year.
The distributable reserves of the Company are set out
in note 31.
Liabilities have decreased by 2% to £2,048.6m. Retail
deposits increased by 8%, offset by non-bank group funding
decreasing by 4% as the Group took the decision to early
repay the revolving credit facility in March 2022.
Amounts receivable from customers
– Group amounts receivable from customers increased
by £226.3m (13.5%) in the year from £1,677.7m in 2021 to
£1,904.0m in 2022.
– Credit card receivables increased by 11.1% to £1,181.6m
(2021: £1,063.4m) as a result of higher customer spending,
and payments remaining stable.
–
increased by 10.2% to £646.1m (2021: £586.2m) largely as
– Personal loans receivables increased by £48.2m to £76.3m
the successful launch of the pilot during the second
half of 2021.
The Group’s coverage ratio has reduced from 27% at
December 2021 to 24% at December 2022 reflecting the current
nature of the macroeconomic environment, the release of
provision no longer required, and the strong underlying credit
quality of our portfolios.
Credit cards
H2’21
25%
24%
19%
Vehicle finance
30%
33%
34%
Personal loans Group
17%
27%
13%
27%
11%
24%
Coverage ratios
H1’22 H2’22 H2’21 H1’22 H2’22 H2’21 H2’21H1’22 H1’22H2’22 H2’22
Vanquis Banking Group plc Annual Report and Financial Statements 2022
14
Liquidity and funding
sufficient available funds and committed facilities to pre-fund
the Group’s liquidity and funding requirements for at least the
next 12 months. On 1 November 2022, the Group received notice
from the PRA that it has approved the Group’s application
Moneybarn No.1 Limited, the Group’s vehicle finance subsidiary,
immediate effect. This enables the transition to a traditional
diversified sources of funding comprising: (i) retail deposits;
(ii) securitisation of the cards and vehicle finance books;
(iii) liquidity and funding facilities at the Bank of England;
capital via its EMTN programme.
In 2022, the Group delivered on a number of its
funding objectives:
–
on revolving credit facilities (RCF) as a source of funds
the Group took the decision to repay the RCF early on
30 March 2022 (the Group did not require the funding
–
the Bank of England via Vanquis Bank.
– The £70m loan from Vanquis Bank to Vanquis Banking
contractual maturity.
– Vanquis Bank extended a £70m loan to Moneybarn
– The Group completed the annual update of the Euro
Medium-Term Note (EMTN) programme in October 2022.
– The Group received approval from the Prudential
to fund Moneybarn No.1 Limited.
(2021: £1,863.7m), including £20.2m (2021: £17.7m) of interest
£4.3m (2021: £6.9m) of amortising fees and £4.6m (2021: £nil)
fair value adjustment for hedged risk. Vanquis Bank accepts
retail deposits and, at 31 December 2022, had retail deposit
funding of £1,100.6m (2021: £1,018.5m). The Bank’s retail deposit
the required funding base at an attractive cost compared
increased during the year, reflecting a funding level relative to
lending and liquidity requirements.
The Group continues to adopt a prudent approach to
available to the Group.
regulatory requirements, and at least annually assesses the
robustness of the liquidity requirements as part of the Group’s
Internal Liquidity Adequacy Assessment Process (ILAAP).
The Group uses a number of measures to manage liquidity.
These include:
–
the Internal Liquidity Adequacy Assessment Process
(ILAAP) at the Vanquis Bank solo level. Liquid resources
must be maintained above the OLAR. The Group is in the
process of enhancing the ILAAP to include a consolidated
Group OLAR; and
–
a proportion of high-quality liquid assets (HQLA).
As at 31 December 2022, the HQLA amounted to £420.5m
(2021: £414.8m). HQLA have been in significant surplus to the
minimum regulatory requirements throughout 2022. Vanquis
Bank currently holds its liquid assets buffer, including other
liquid resources, solely in a Bank of England reserve account.
As at 31 December 2022, the Group, on a consolidated basis,
and Vanquis Bank, on an individual basis, had an LCR of 1,139%
(2021: 2,073%) and 348% (2021: 587%) respectively.
Capital
The Group is subject to supervision by the PRA on a
consolidated basis, as a group containing an authorised bank
(Vanquis Bank Limited). The PRA sets requirements for Vanquis
Bank as an individual entity and the consolidated Group in
respect of capital adequacy, liquidity and large exposures.
The Group’s regulatory capital currently consists of CET1 and
Tier 2 debt capital. CET1 comprises shareholders’ funds, after
adding back the IFRS 9 transitional adjustment, and deducting
the defined benefit pension asset and intangible assets
CET1 decreased from £507m to £479m during 2022 and total
decrease in regulatory capital predominantly reflects the
regulatory capital. The continuing operations of the Group
The leverage ratio is defined by the Capital Requirements
Regulation as Tier 1 capital divided by on and off-balance
sheet asset exposure values, expressed as a percentage.
of 3.25%. The Group’s leverage ratio at 31 December 2022
of 21.0% (2021: 18.1%) remains comfortably above the
minimum requirement.
continued
Strategic report
15
Capital resources
The Group elected to phase in the impact of adopting IFRS
9 over a five-year period ending 31 December 2022, as
back factors of 95%, 85%, 70%, 50% and 25% for years one to
five respectively to the initial IFRS 9 transition adjustment (net
of attributable deferred tax) plus any subsequent increase in
expected credit losses (ECL) in the non-credit-impaired book
from transition to the end of the reporting period. The PRA
ratified additional capital mitigation proposed by the Basel
the increase in ECL in the non-credit-impaired book arising
after 31 December 2019 to be fully added back in 2020 and
2021 (the ‘quick-fix’ measures). This relief is then phased out
31 December 2024 (2022: 75%, 2023: 50%, 2024: 25%).
The Group’s capital headroom, at 31 December 2022, does
not include any benefit as a result of the quick fix measures
levels. Further information on the impact of the IFRS 9
transitional arrangements is provided in the Group’s
Capital and capital resources
31 December
2022
31 December
2021
CET1 ratio 26.4% 29.1%
Total capital ratio 37.5% 40.6%
Leverage ratio 21.0% 18.1%
CET1 £478.8m £506.5m
Tier 2 capital £200.0m £200.0m
Total regulatory capital £678.8m £706.5m
£1,810.8m £1,740.6m
Capital requirements
The Group operates the standardised approach to credit risk,
those stipulated in the Capital Requirements Regulation (CRR).
The Group’s Individual Capital Adequacy Assessment Process
(ICAAP) includes a summary of the capital required to mitigate
the identified risks across the Group and the amount of
capital that the Group has available. The Group has complied
requirements. The overall capital requirement, set by the PRA,
includes both the calculated requirement derived using the
standardised approach and the additional capital derived in
In addition, CET1 capital must also cover the buffers
required by the ‘Capital Buffers’ part of the PRA Rulebook,
the UK Countercyclical Capital Buffer (CCyB) and the Capital
Conservation Buffer (CCoB). These apply to all firms and are
CCoB remained at 2.5%, its long-term rate, throughout the
year (2021: 2.5%). The UK CCyB increased to 1% on 13 December
2022, as previously announced by the Bank of England’s
This requirement for additional capital in the future has been
factored into the Group’s capital planning.
capital position to ensure that planned capital resources are
sufficient for planned changes in the balance sheet.
Pillar 3 disclosures
As part of the regulatory supervision by the PRA, the Group,
information on the Group’s regulatory capital, risk exposures
and risk management processes. A considerable amount of
the information required by the Pillar 3 disclosures is included
Group’s full Pillar 3 disclosures can be found on the Group’s
Neeraj Kapur
Chief Finance Officer
30 March 2023
Vanquis Banking Group plc Annual Report and Financial Statements 2022
16
Sustainability overview
Ensuring that we take
positive action on ESG matters
delivering products and services that help put
our customers on a path to a better everyday
that the Group plays in society and the ESG
issues that matter to our key stakeholders.
Purpose of helping to put people
on a path to a better everyday life, and delivering the Mission
and Strategic Priorities that relate to our people and culture,
– acting on our Mission of becoming the first-choice bank
lenders by enabling them to access responsible and
affordable products and services;
– focusing on our People and Culture and creating a great
– delivering Growth and Sustainability by making our
business as effective and efficient as possible so that
control and reducing our impact on the environment; and
– supporting our Customers and Community by providing
community partners to help address financial exclusion
and support social mobility.
S
o
c
i
a
l
E
n
v
i
r
o
n
m
e
n
t
a
l
G
o
v
e
r
n
a
n
c
e
We help put people on a path to
a better everyday life by offering
everyday people in the UK who
are excluded by other lenders.
We combine our wealth of
experience with accessible and
responsibly designed products,
and a commitment to addressing
social mobility in our communities.
Malcolm Le May
Chief Executive Officer
Vanquis Banking Group plc Annual Report and Financial Statements 2022
17
Strategic report
Read more about the Group’s sustainability strategy on pages 36 to 37, our TCFD report on pages 40 to 49 and visit
www.vanquisbankinggroup.com to access our 2022 Sustainability Report for further information on our ESG activities
Taken together, our Purpose, Mission and Strategic Priorities
It also underlines our commitment to responding to the
needs of our stakeholders and managing and reporting
our ESG performance.
environment that is healthy, safe and meritocratic; collaborate
serve to thrive; and support the UK to transition to a cleaner,
net zero economy.
By delivering on our Purpose, Mission and Strategic Priorities,
To contribute to reducing inequality by building our
their economic status is.
Take urgent action to combat climate change and
its impacts by achieving our net zero carbon dioxide
emissions target by 2040.
Reduced inequalities
By 2030, to contribute to ending poverty in all its forms
cost-effective, responsible and appropriate products for
their needs and supporting them and the communities
To assist in ensuring inclusive and equitable quality
education and promote lifelong learning opportunities
No poverty Quality education
To contribute to achieving gender equality and
female representation in the Group’s senior management
population by 2024 and supporting community projects
To support the promotion of sustained, inclusive and
for all generations and protecting and promoting labour
rights in both our business and supply chains.
Gender equality
Decent work and
economic growth
Climate action
View: Sustainability Report at
www.vanquisbankinggroup.com/
sustainability/sustainability-report-2022
18
Market overview
Trends in
our market
We have a vital role to play in providing
the right products, services and support
as more consumers potentially find their
access to mainstream lending restricted
due to adverse macroeconomic
conditions, cost of living and affordability
pressures, and the continued reduced
risk appetite from mainstream
lenders. These consumers’ needs and
circumstances typically change over
time, and circa 1 to 2 million move in and
out of the market each year. Our market
is robustly regulated, primarily by the FCA
and PRA, with regulation subject to ongoing
evolution.
There are three main categories
of products in our market:
– Credit Cards;
– Unsecured Loans, including personal
loans; and
– Vehicle Finance (Hire Purchase).
We will continue to evolve our product
offering through 2023, enabling us to
support more consumers on their credit
journey. In particular:
– developing our loans products,
including broadening the range of
APRs, loan sizes and terms; and
– reviewing our vehicle finance
proposition, including loan sizes, terms,
APRs and asset classes. We cover cars,
motorbikes and Light Commercial
Vehicles (LCVs), but we aspire to
broaden this further.
We continually analyse trends in our
industry, using these insights to determine
our strategic priorities. The digital
revolution, further propelled by Covid-19,
is changing how customers expect to
be served, while we also need to adapt
quickly to macroeconomic changes, the
evolving competitive landscape, and
the impact of cost of living pressures.
Sustainability is of increasing importance
to our stakeholders, and we continually
review our business model to ensure our
lending remains suitable and affordable
for customers, in line with our regulatory
and social responsibilities.
Digital revolution
Inflationary pressure
– cost of living
Competitive
landscape
Sustainability
Regulatory
environment
Key trends
– A consumer shift in buying patterns
– Consumer expectations of a
frictionless digital experience.
–
such as digital-first lending and
mobile banking applications.
– Increased demand for contactless
payment methods and the use of
Key trends
– The UK has been experiencing a
higher than targeted rise in the
cost of living. The Bank of England
typically targets inflation of up to
2% per annum, but CPI Inflation in
December 2022 stood at 10.7% (ONS
& Bank of England, 15 December 2022).
Inflation has been expected to fall
– In particular, energy bills have risen
sharply and may increase further,
fuelled by the current geo-political
situation. This is squeezing household
incomes, including those of our
to keep pace.
– The affordability challenges
consumers faced through
2022 and continue to face as
inflation hits hard has led some
mainstream lenders to tighten their
assessments, increasing the size of
the non-prime lending market.
– Customers may begin to
experience difficulties in
repayments as a consequence of
the rising cost of living.
Key trend
– A number of competitors in our
sector have been constrained
by funding due to an inability to
adapt to evolving regulation, thus
reducing supply in the market.
– The higher interest rate
restricted supply, has seen some
competitors passing on higher
interest rates to customers. We
have minimised this during 2022.
Key trend
– There is increasing consumer,
investor and political expectation
operations in a sustainable manner.
Key trend
– Firms need to adapt as the
regulatory environment continues
to evolve, for example, to the
introduction of the Consumer Duty
regulations coming into force in
2023-2024.
– The regulators’ focus is on ensuring
all lending is sustainable, suitable
and affordable.
How we are responding
–
investing in our mobile app and
Digital Wallet proposition, enabling
smoother digital experiences
for customers.
–
considerable improvements to
our customer onboarding journey,
removing friction and making the
process clearer and simpler.
– There is a programme of
ongoing channel investment
enable the unification of our
product proposition.
How we are responding
– We have significant experience
be excluded from mainstream
lenders and carry out specialist
affordability and credit risk
assessments.
– We offer products across a range
of price points, increasing financial
inclusion across the market.
– We monitor our customers’
indicators to highlight changing
support may be required.
–
adapting our affordability
approach to ensure our lending
remains suitable, affordable,
appropriate and sustainable.
How we are responding
– We have a strong balance sheet
deposit funding through Vanquis
Bank. The PRA has approved our
application to enable us to utilise
this deposit funding more broadly
across the Group.
– We are constantly exploring
opportunities to diversify our retail
offering and continuously assess
our funding options.
– A reduction in supply presents
an opportunity for us to meet
consumers’ unmet credit needs in
a sustainable, suitable, appropriate
and affordable manner.
How we are responding
–
on sustainability and engage in
Corporate Responsibility, making a
positive contribution to our society.
–
the recommendations of the
Task Force on Climate-related
Financial Disclosures (TCFD),
enabling us to consider the
impact of climate-relate risks
and opportunities.
–
address issues such as debt advice,
financial education and other
consumer vulnerability matters.
How we are responding
– We support regulation that
protects consumers and maintains
a fair and effective market. We
model to ensure our products
remain sustainable, suitable
and affordable for customers.
– We have an ongoing transparent
have built a good relationship
– A programme of activity
has been established to meet
the requirements of the FCA’s
Consumer Duty regulations coming
into force in 2023-2024. The Board
and Risk Committee are provided
their oversight.
Annual Report reference
– Pages 26-29: Vanquis Credit Cards
– Pages 30-32: Moneybarn
Vehicle Finance
– Pages 33-35: Vanquis
Personal Loans
Annual Report reference
– Pages 163-164, 182, 184, 186: Cost
Annual Report reference
– Pages 26-29: Vanquis Credit Cards
– Pages 30-32: Moneybarn
Vehicle Finance
– Pages 33-35: Vanquis
Personal Loans
Annual Report reference
– Pages 16-17: Environmental, Social
and Governance (ESG)
– Pages 36-49: Sustainability Report
Annual Report reference
– Page 66: Relations With Regulators
2 23 3P9 P4
Vanquis Banking Group plc Annual Report and Financial Statements 2022
19
Strategic report
Digital revolution
Inflationary pressure
– cost of living
Competitive
landscape
Sustainability
Regulatory
environment
Key trends
– A consumer shift in buying patterns
– Consumer expectations of a
frictionless digital experience.
–
such as digital-first lending and
mobile banking applications.
– Increased demand for contactless
payment methods and the use of
Key trends
– The UK has been experiencing a
higher than targeted rise in the
cost of living. The Bank of England
typically targets inflation of up to
2% per annum, but CPI Inflation in
December 2022 stood at 10.7% (ONS
& Bank of England, 15 December 2022).
Inflation has been expected to fall
– In particular, energy bills have risen
sharply and may increase further,
fuelled by the current geo-political
situation. This is squeezing household
incomes, including those of our
to keep pace.
– The affordability challenges
consumers faced through
2022 and continue to face as
inflation hits hard has led some
mainstream lenders to tighten their
assessments, increasing the size of
the non-prime lending market.
– Customers may begin to
experience difficulties in
repayments as a consequence of
the rising cost of living.
Key trend
– A number of competitors in our
sector have been constrained
by funding due to an inability to
adapt to evolving regulation, thus
reducing supply in the market.
– The higher interest rate
restricted supply, has seen some
competitors passing on higher
interest rates to customers. We
have minimised this during 2022.
Key trend
– There is increasing consumer,
investor and political expectation
operations in a sustainable manner.
Key trend
– Firms need to adapt as the
regulatory environment continues
to evolve, for example, to the
introduction of the Consumer Duty
regulations coming into force in
2023-2024.
– The regulators’ focus is on ensuring
all lending is sustainable, suitable
and affordable.
How we are responding
–
investing in our mobile app and
Digital Wallet proposition, enabling
smoother digital experiences
for customers.
–
considerable improvements to
our customer onboarding journey,
removing friction and making the
process clearer and simpler.
– There is a programme of
ongoing channel investment
enable the unification of our
product proposition.
How we are responding
– We have significant experience
be excluded from mainstream
lenders and carry out specialist
affordability and credit risk
assessments.
– We offer products across a range
of price points, increasing financial
inclusion across the market.
– We monitor our customers’
indicators to highlight changing
support may be required.
–
adapting our affordability
approach to ensure our lending
remains suitable, affordable,
appropriate and sustainable.
How we are responding
– We have a strong balance sheet
deposit funding through Vanquis
Bank. The PRA has approved our
application to enable us to utilise
this deposit funding more broadly
across the Group.
– We are constantly exploring
opportunities to diversify our retail
offering and continuously assess
our funding options.
– A reduction in supply presents
an opportunity for us to meet
consumers’ unmet credit needs in
a sustainable, suitable, appropriate
and affordable manner.
How we are responding
–
on sustainability and engage in
Corporate Responsibility, making a
positive contribution to our society.
–
the recommendations of the
Task Force on Climate-related
Financial Disclosures (TCFD),
enabling us to consider the
impact of climate-relate risks
and opportunities.
–
address issues such as debt advice,
financial education and other
consumer vulnerability matters.
How we are responding
– We support regulation that
protects consumers and maintains
a fair and effective market. We
model to ensure our products
remain sustainable, suitable
and affordable for customers.
– We have an ongoing transparent
have built a good relationship
– A programme of activity
has been established to meet
the requirements of the FCA’s
Consumer Duty regulations coming
into force in 2023-2024. The Board
and Risk Committee are provided
their oversight.
Annual Report reference
– Pages 26-29: Vanquis Credit Cards
– Pages 30-32: Moneybarn
Vehicle Finance
– Pages 33-35: Vanquis
Personal Loans
Annual Report reference
– Pages 163-164, 182, 184, 186: Cost
Annual Report reference
– Pages 26-29: Vanquis Credit Cards
– Pages 30-32: Moneybarn
Vehicle Finance
– Pages 33-35: Vanquis
Personal Loans
Annual Report reference
– Pages 16-17: Environmental, Social
and Governance (ESG)
– Pages 36-49: Sustainability Report
Annual Report reference
– Page 66: Relations With Regulators
1 2 12 3 2P2 P6 P5P9 P9
Links to strategy
1
People and Culture
2
3
Customer and Community
Find our full list of key risks on pages 54-65
Links to risks
P
Read more on our Strategy on pages 22-23
Vanquis Banking Group plc Annual Report and Financial Statements 2022
20
Communities
Our community investment strategy
is aligned to our social purpose
and seeks to invest in activities
and initiatives which address the key
factors that tend to reduce access
to credit. We have continued to work
with charities and specialist partners
to address key barriers to social and
financial inclusion, and have played
a role in helping children, young people
and adults to boost their education.
– In 2022, we disbursed over
£260,000 in grants to 27 voluntary
organisations focusing on
inequality, exclusion, disadvantage
and mental health issues.
– Our CEO is an active member of
the National Numeracy Leadership
Council, which aims to grow the
network of organisations and
individuals actively addressing the
issue of poor numeracy and elevate
the understanding and importance
of the issue at a national level.
Suppliers
Our suppliers are essential to provide
our product lines with the goods
and services required to enable us
to continue to meet our customers’
needs. They play a vital role in our
operations so it is important that
we develop strong relationships
with them.
– We have previously launched
a new Supplier Management
Framework to engage with
suppliers effectively, including
having executive sponsorship
for our key relationships.
– We have signed up to the Prompt
Payment Code and are committed
to paying the majority of our
suppliers within 30 days.
Equity and debt investors
We secure long-term, lower-rate
funding through strong relationships
with our lending banks, depositors
and investors. We engage in
discussions with our equity and debt
investors to understand their needs
and expectations leading to better
outcomes over the long term and
improving our sustainability.
– We interact with debt investors
and shareholders through
half-yearly results presentations,
regular trading updates and
management meetings.
– Our Board and ExCo receive regular
updates from IR on market activity
and investor sentiment.
Regulators
and government
We believe maintaining an open,
constructive and trusting dialogue
with policymakers and regulators such
as the Prudential Regulation Authority
(PRA) and the Financial Conduct
Authority (FCA), is critical. We work
closely with our regulators to ensure
we meet all regulatory standards
and contribute to a safe and robust
banking system.
– Our application to the PRA allowing
us to use retail deposits to fund
different parts of the Group has
been approved.
– During the Scheme of Arrangement,
we worked collaboratively and
openly with the FCA to deliver the
best outcome for customers.
Colleagues
Our 2,000 colleagues are critical to
delivering our business model. The
success of the Group is dependent
upon having motivated colleagues
with the right expertise and skills to
help deliver our strategy.
– We conduct an annual colleague
survey to register sentiment and
continually focus on making
improvements for the betterment
of our colleagues.
– We have diversity and inclusion
working groups (focusing on gender,
race, disability and LGBTQ+) that
meet regularly and focus on ensuring
the work environment is inclusive.
– We offer support to colleagues
through our Employee Assistance
Programme (EAP) and through
the provision of the Thrive app
to all colleagues.
Customers
Our 1.7 million customers are at the
heart of what we do; they are the
people in the UK who at any given
time are looking for something that
mainstream lenders do not offer.
– We have developed tailored
products to meet their requirements
through a detailed understanding
of their needs and challenges.
– We carefully assess affordability
and creditworthiness and are
specialists in supporting customers
in financial difficulty, promoting
financial inclusion.
– Our CCE Committee is focused
on ensuring the best outcomes
for customers across all our
customer interactions.
Business model
We are driven by our Purpose
to create value
for our stakeholders
At our core, we focus on acting responsibly and sustainably in all our stakeholder relationships:
We respond to the needs of our stakeholders by creating a fair, inclusive and diverse workplace,
supporting our local communities, responding to climate change, treating suppliers fairly,
and engaging with them on ESG matters.
Read more on pages 16 and 17
Vanquis Banking Group plc Annual Report and Financial Statements 2022
21
Strategic report
1
We develop tailored products
to meet customers’ needs.
We focus on the UK credit market,
developing simple, transparent
products with flexibility to help
customers manage life despite
not being well served by
mainstream lenders.
4
We lend responsibly.
We tend to lend smaller amounts
over shorter periods and only
lend when customers
demonstrate suitability.
5
We collect payments due.
We offer many ways for customers
to pay or get in touch to discuss their
payments. We maintain frequent
customer contact and stay close to
customers through our call centres
and digital communications
(including texts, emails and
mobile app notifications).
3
We carefully assess
customer affordability
and creditworthiness.
We use internal and external
data, taking into account both
the current situation and the
likely future.
6
We manage arrears and
customer difficulties.
We establish early contact and
ensure an ongoing dialogue with
customers who have difficulties.
This provides a sympathetic
approach to understand
customer circumstances
and offer forbearance.
2
We attract customers
who we can serve.
We use many ways to reach
consumers including increasingly
digital methods, as well as
through partners such as
agents and brokers.
Customers are
at the heart
of what we do
Fulfilling our Purpose: How we help to put people on a better path
Read more on pages 3 to 4
22
Our Purpose continues to focus on why we are here:
Our Vision outlines our ambition: we imagine a world
where
Our Mission is to become
Our three Strategic Pillars, People and Culture, Growth
and Sustainability and Customer and Community
will drive our Mission to success. These three pillars
ensure that all of our decisions are aligned with our
values, stakeholder expectations, and the customers
and communities that we serve. We will continue to be
a sustainable business and will provide the products,
services and support needed in the future in line
with our Purpose.
Building a
sustainable Group
Our refreshed
Strategic Blueprint
Blueprint, to outline why we are here, where
we want to get to and how we do it.
We have a clear Purpose that makes a positive impact on
people’s lives. Our colleagues are key to our success, so we will
focus on attracting and retaining the right people, making this
a great place to work, and having opportunities to develop in
a diverse and inclusive environment.
– We conduct an annual survey to continually focus on making
improvements for our colleagues.
– We have diversity and inclusion groups (gender, race,
disability and LGBTQ+) to help create an inclusive environment.
– We offer support through our Employee Assistance
Programme (EAP) and the provision of the Thrive app.
Objectives
– Focusing on inclusion and development to retain and attract
diverse talent that collaborates effectively in a hybrid setting.
– Re-energising investment in colleague engagement through
our values and behaviours.
People and Culture
1
Progress in 2022
– Hybrid working with a return to offices to meet colleague
and customer needs is working successfully.
– ‘One Group’ business model implemented and embedded,
streamlining governance and management structures.
– Revised organisational design implemented, with single shared
services across Finance, HR, IT, Change, Risk and Operations.
– Specific teams and harmonised role levels created under
Managing Directors for our Cards, Loans and Vehicle
Finance divisions.
Challenges in 2022
– The business has been through significant structural change
over the last two years, including the closure of the Consumer
Credit Division (CCD) and the implementation of ‘One Group’.
– A number of our colleagues have faced cost of living pressures
that we have supported them through, with initiatives such as
the Winter Fuel Payment Scheme.
Focus for 2023
– Talent acquisition and retention.
– Motivate our colleagues to help deliver our strategic objectives.
– Continued investment in our Diversity and Inclusion Programme.
Risks
– Information and data security risk.
– Conduct risk.
– People risk.
Performance
– 68% colleague engagement (2021: 69%).
– 33% senior management gender diversity (2021: 27%).
– 2.0k employees number (2021: 2.5k).
Vanquis Banking Group plc Annual Report and Financial Statements 2022
23
Strategic report
Through Growth and Sustainability, we will aim to be efficient
and effective by focusing on seamless collaboration through
connecting teams and technology.
Capital
At December 2022, the Group had capital resources far in excess
of the overall capital requirement, retaining a credit rating, an
extensive wholesale markets franchise, and a strong performance
in debt capital markets, providing opportunities for optimising
the composition of the Group’s regulatory capital if desired.
Funding
The Group has a highly liquid position, holding in excess of
£380m above liquidity coverage ratio requirements. We have
continued to deliver on a number of funding objectives:
– in line with the Group’s strategy to reduce its reliance
on Revolving Credit Facilities (RCF) as a source of funds,
the Group took the decision to repay the RCF early on
30 March 2022 (the Group did not require the funding
and did not plan to renew the facility on maturity);
– the Group has placed all surplus funds on deposit with
the Bank of England via Vanquis Bank;
– the £70m loan from Vanquis Bank to Vanquis Banking Group
plc was repaid early on 30 June;
– Vanquis Bank extended a £70m loan to Moneybarn
under the existing Large Exposure Limit on 30 June 2022
(this was not waiver dependent); and
– the Group received approval from the Prudential Regulation
Authority (PRA) of a Core UK Group waiver to allow the
use of retail deposits held at Vanquis Bank Limited to
fund Moneybarn No.1 Limited, enabling the transition to a
traditional bank funding model that is primarily retail funded.
Objectives
– Embedding our operating model around our brands
and consolidating our products onto one platform.
– Developing technology and investing in systems.
– Cost efficient investment for sustainable growth and value-add.
Growth and Sustainability
2
Progress in 2022
– Acceptance of our application to the PRA to use retail deposits
to fund different parts of the Group, resulting in a lower
cost of funds.
– Improving the quality of our portfolio and exiting from
high-risk segments.
– Transitioning our products to a new IT platform (named
Gateway) following a successful pilot of Sunflower Loans.
– Broadening our propositions, including increasing the price points
for our Credit Card customers, whilst remaining cost efficient.
Challenges in 2022
– Increased competition in segments such as vehicle finance,
partially alleviated by the rising cost of SONIA (Sterling Overnight
Index Average) on some of our competitors.
– Our customers have potentially been exposed to the cost of
living challenges as the UK faces macroeconomic headwinds.
Focus for 2023
– Investing in further growth and expansion of our core
product lines.
– Having an IR Programme, communicating the Group’s refreshed
strategy and the approval of the Capital Waiver.
Risks
– Technology and IT risk.
– Capital risk.
– Liquidity and funding risk.
– Model risk.
By putting people at the heart of what we do, we ensure that
our business is centred on our Customers and Communities,
with a focus on social impact.
Supporting our Customers
The Group is well positioned to provide tailored and responsible
products and services to customers who span the mid-cost,
near-prime segment, including those dealing with significant
life events. Short or longer-term financial difficulties can damage
customers’ credit files, leading to them being excluded by prime
lenders. Our services help people enter or re-enter the credit
market, stay in control of their finances and build up their
credit scores.
Supporting our Communities
We have continued to support our communities through our
Social Impact Programme, working with charities and specialist
partners to address barriers to social and financial inclusion.
Our assistance has taken many forms:
– establishing a School Uniform Fund helping more than
1,000 pupils;
– supporting children and adults to boost their skillset,
including numeracy, literacy and school-home support;
– sponsoring the ‘Bradford City of Culture’ Programme in 2025; and
– disbursing over £260,000 in grants to 27 voluntary
organisations focusing on inequality, exclusion, disadvantage
and mental health.
During 2022, we have worked with the Outward Bound Trust,
the National Literacy Trust and four community foundations
to enrich the lives of our communities and make a positive
social impact.
Objectives
– Building deep relationships with customers, ensuring access
to products, services and support through various channels.
– Continuing our award-winning work with partners
and communities.
Customer and Community
3
Progress in 2022
– Maintained existing high levels of customer satisfaction.
– Continued investment in our communities and partnerships.
– Improving customer outcomes through the launch of digital
wallets, a broader range of APRs, and the successful launch
of our near-prime vehicle finance offering.
– Completed customer remediation through the Scheme
of Arrangement.
Challenges in 2022
– Rising cost of living pressures impacting customers’ incomes.
– Significant increases in the price and age of used vehicles
purchased, due to a limited availability of new cars.
– Increased demand for our social investment support,
recognising the adverse macroeconomic environment.
Focus for 2023
– Investment in community-based projects supporting numeracy
and literacy.
– Continued development of our range of propositions, reflecting
changes in consumer demands and needs.
Risks
– Credit risk.
– Operational risk.
– Information and data security risk.
– Regulatory risk.
– Conduct risk.
– Business resilience risk.
– People risk.
– Model risk.
Performance
– 15.3p dividend per share (2021: 12p).
– 17.1% return on equity continuing operations (2021: 25.6%).
– 37.5% total capital ratio (2021: 40.6%).
– £110.1m statutory PBT continuing operations (2021: £142.2m).
– 38.7p adjusted basic EPS continuing operations (2021: 57.5p).
Performance
– 1.7m customers (2021: 1.6m).
– £1.4m community investment (2021: £1.4m).
– 4.6/5 credit cards CSat score (2021: 4.7/5).
– 4.3/5 vehicle finance Feefo rating (2021: 4.4/5).
Vanquis Banking Group plc Annual Report and Financial Statements 2022
24
The key performance indicators (KPIs) represent the principal metrics reported to Group management
on a monthly basis to support the strategic decision making across the Group.
People and Culture
1
Adjusted PBT –
continuing operations (£m)
Statutory PBT –
continuing operations (£m)
Adjusted basic EPS –
continuing operations (p)
20 2021 2122 22
£126.6m
Performance
£110.1m
Performance
38.7p
Performance
27.8
(37.0)
167.8 142.2 57.5
38.7
11.7
126.6
110.1
R R R
Definition
Adjusted PBT for continuing operations divided by
the weighted average number of shares in issue.
Strategic focus
Demonstrates value generated per shareholder.
Definition
Adjusted profit before tax is stated before amortisation of acquisition intangibles, discontinued operations
and exceptional items. Statutory profit before tax is stated before discontinued operations.
Strategic focus
Profits which will impact organic investment within the Group or dividend payments to the Group’s shareholders.
Comment
Adjusted profit has reduced by £41.2m and statutory profit by £32.1m. Whilst total income remained stable relative to 2021, volume growth led to higher impairment charges
year-on-year, and the continued investment in the Group’s IT, Operations and Change & Transformation agenda inflated costs relative to 2021.
Growth and Sustainability continued
2
Employee numbers (k) Colleague engagement (%) Senior management gender diversity (%)
20 21 22 20 21 22 20 21 22
2.0k 68% 33%
4.2
72
27
2.5
69
27
2.0
68
33
Definition
Number of people working for the Group at year end
under contracts of employment.
Strategic focus
Number of employees delivering for all stakeholders.
Comment
Employee numbers continued to decrease following
the closure of CCD.
Definition
A series of questions used in our colleague
engagement survey which determine the degree to
which colleagues feel they are invested in, motivated
by and passionate about the work they do at Vanquis
Banking Group.
Strategic focus
Colleagues who feel engaged at work and want to
provide their views on the Group and its strategy.
Comment
Engagement across our business has held steady at
68%, down just 1% from 2021, a positive outcome given
the challenging year of change and transformation
experienced throughout 2022.
Definition
Improving the gender diversity of the Group’s senior
management population which is defined as all
female colleagues with job level 14 and above.
Strategic focus
Delivering a more equal, inclusive and diverse
workplace, and supporting HM Treasury’s Women in
Finance Charter to improve gender diversity in senior
positions within the financial services sector.
Comment
Throughout 2022 we have continued to drive actions
to support delivering a better gender balance in
senior leadership and the achievement of our 40%
target by December 2024.
20 21 22
Customer receivables –
continuing operations (£bn)
59.9%
Performance
£1.9bn
Performance
17.1%
Performance
Adjusted ROE –
continuing operations (%)
Cost:income ratio –
continuing operations (%)
20 21 2220 21 22 20 21 22
38.2
54.8
59.9
1.7 1.7
1.9
17.1
25.6
4.6
R
Definition
Adjusted Return on Equity (ROE) is defined as adjusted
profit after tax net of fair value gains for continuing
operations as a percentage of average equity. Equity
is stated after deducting the Group’s pension asset,
net of deferred tax, and the fair value of derivative
financial instruments, net of deferred tax.
Strategic focus
Returns on equity generated show how efficiently
the Group is delivering value for its shareholders.
Comment
The adjusted ROE reduced in FY’22 reflecting
the reduced profitability year-on-year.
Definition
Adjusted annualised operating costs as a percentage
of annualised total income for continuing operations.
Strategic focus
Efficiency of the cost base in delivering returns.
Comment
The cost to income ratio is expected to reduce
marginally in FY’23 versus FY’22, including the
remaining transformation investment in the Group’s
businesses. It is expected to continue to reduce
towards our circa 40% target from the end of 2024
onwards as the Group benefits from operational
efficiencies as a result of its transformation programme.
Definition
Amounts receivable from customers as reported
on the balance sheet for the Group’s continuing
operations representing gross receivables less
impairment provision calculated in accordance
with IFRS 9.
Strategic focus
Amounts receivable from customers net of provisions
and other items.
Comment
Net receivables have increased materially year-on-
year reflecting the underlying growth in lending to
customers during the period and a reduction in the
stock of provisions held.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
25
Strategic report
Growth and Sustainability
2
Dividend per share (p)
20 21 22
15.3p
Performance
—
15.3
12
Definition
Dividends declared in the period.
Strategic focus
Dividend returns provided to our shareholders
from the value generated by the Group. Subject to
market conditions the Group’s dividend policy is to
pay out approximately 40% of its adjusted earnings
to shareholders.
Comment
The Group’s total dividend of 15.3p per share
represents growth of 27.5% year-on-year reflecting
the strong business performance and the Board’s
confidence in the outlook for the Group and its
capital strength.
Customer and Community
3
CET1 ratio (%)
20 21 22
34.2
29.1
26.4
26.4%
Performance
Definition
The ratio of the Group’s Common Equity Tier 1 (CET1)
to the Group’s risk-weighted assets measured in
accordance with the Capital Requirements Ratio (CRR).
Strategic focus
Demonstrates the Group’s ability to withstand
financial distress.
Comment
CET1 ratio has decreased in the year reflecting the
scheduled unwind of the IFRS transitional relief and an
increase in risk-weighted exposures (primarily amounts
receivable from customers), partly offset by the
underlying profit excluding discontinued operations.
R
Total capital ratio (%)
R
34.2
40.6
37.5
20 21 22
Definition
The ratio of the Group’s total regulatory capital
(own funds) to the Group’s risk-weighted assets
measured in accordance with the CRR.
Strategic focus
Demonstrates the Group’s ability to withstand
financial distress and the ability to facilitate future
growth in risk-weighted assets.
Comment
Total capital ratio decreased in the year reflecting
the scheduled unwind of the IFRS transitional
relief and an increase in risk-weighted exposures
(primarily amounts receivable from customers),
partly offset by the underlying profit excluding
discontinued operations.
37.5%
Performance
22.2%
Performance
6.2
32.3
22.2
Adjusted RORE –
continuing operations (%)
R
20 21 22
Definition
Adjusted Return on Required Equity (RORE) is defined
as adjusted profit after tax for continuing operations
divided by the Group’s monthly average PRA regulatory
capital requirement including PRA buffers for
the period.
Strategic focus
Demonstrates how well the Group’s returns are
reinvested and is an indicator of its growth potential.
Comment
The adjusted RORE reduced in FY’22 reflecting
the reduced profitability year-on-year.
Customer satisfaction Community investment (£m)
20 2120 21 22 22 20 21 22
Credit cards
4.6
CSat score (out of 5)
Vehicle finance
4.3
Feefo rating (out of 5)
£1.4m
4.6
4.7
4.6
4.5
4.4
4.3
1.2
1.4 1.4
Definition
The rate at which surveyed customers were satisfied (or more than satisfied) with the service they have
been provided.
Strategic focus
Demonstrates how happy our customers are with the service they are receiving.
Comment
Customers participating in the customer surveys have continued to demonstrate they are satisfied with
the service being provided.
Definition
The cash cost of contributions provided to community
projects or charities.
Strategic focus
Investments in the communities we serve to improve
our customers’ lives.
Comment
The Group has maintained the amount that is
invested in the communities it serves at 2021 levels.
£144.9m
Performance
143.7
290.2
144.9
Funding headroom (£m)
20 21 22
Definition
Available cash reserves and funding on committed
facilities to fund the non-bank group businesses.
Strategic focus
Demonstrates liquidity immediately available to fund
the non-bank group.
Comment
Funding headroom has decreased due to utilisation
of cash surpluses at the start of the year following
the issuance of £200m of Tier 2 debt capital in 2021.
Furthermore, Vanquis Bank Limited has significant
levels of liquidity and following the approval of the
Core UK Group waiver in November 2022, can now
fund other parts of the Group.
Key
Links to remuneration
R
Read more on pages 119 to 151
See pages 229 to 234 for
an explanation of their
method of calculation
Certain alternative
performance measures
(APMs) have been used
in this report
Vanquis Banking Group plc Annual Report and Financial Statements 2022
26
Credit cards
The Group’s credit card business, Vanquis
Bank, has been operating since 2003 and
has been the largest part of the Group, on
a receivables basis, since 2013. It is a leading
specialist lender in the large and established
credit card market and has a strong capital
and liquidity position. It offers a range of credit
card products as well as personal loans.
Market characteristics
– The credit card market is large and established. It reduced
in 2020, driven by lower consumer spending during
Covid-19, but rebounded strongly since then.
– Competition in the market remains stable with key
competitors including Capital One, NewDay own-brand
cards and the Barclaycard Forward card.
– There have been a few new entrants in recent years
(Zopa and Level), although these providers are yet
to reach significant scale.
– Vanquis Bank is the only specialist bank, covering
the broadest range of risk categories in the market.
Market appeal
– Credit cards have high cultural adoption and acceptance
in the UK, meaning a substantial and established
domestic market.
– There is an ongoing customer relationship as credit cards
have everyday utility as a means of transacting.
– Credit cards are growing in importance as a means
of transacting given the additional protections credit
cards provide to consumers (through section 75
of the Consumer Credit Act).
Model
– Credit card providers typically offer low initial limits
and grow these responsibly through credit line increases.
– Consumers are predominantly acquired online, with
affiliates (e.g. ClearScore, Totally Money, etc.) becoming
increasingly used by consumers who want guaranteed
acceptance before applying. Mobile apps have become
the principal way to manage an account.
– New advancements in credit cards include the increasing
use of open banking to assess affordability and digital/
virtual cards.
Fiona Anderson
Managing Director – Cards
Number of active
credit card consumers
in our target
addressable market*
Dec
21
Dec
22
8.03m
8.13m
Vanquis
share
* Internal analysis of our target
addressable market based
on TransUnion data.
9.0%
Vanquis share
9.0%
11.5%
Strategic report
Vanquis Banking Group plc Annual Report and Financial Statements 2022
27
Credit card receivables grew by 11% year-on-year driven
by new customer acquisition and spend
– The Group’s credit card business reported adjusted PBT
for the year of £178.5m (2021: £173.9m) which was a result
of good loan book growth, benign impairment trends
and cost reductions year-on-year.
– New customer bookings for the period were 225k (2021: 199k)
reflecting an increased emphasis on customer acquisition
initiatives and above the line marketing efforts. The total
number of customers at the end of December stood at
1.54m (2021: 1.54m).
– At the end of December, spend on a per average
active customer basis was approximately 6% higher
year-on-year. When combined with higher customer
bookings, and payments per active customer remaining
stable, this resulted in receivables growth of approximately
11% to £1,182m (2021: £1,063m).
– The annualised cost of risk at the end of December was
1.3% (2021: 0.3%) reflecting lower average gross receivables
year-on-year driven by growth in receivables being
weighted towards Q4’22. As a result, the risk-adjusted
margin was broadly flat at 25.8% (2021: 26.0%).
Credit cards – financial performance
Credit card KPIs
Asset yield Cost of risk
25.0%
0.3%
1.3%
23.8%
21
22
– During 2023, the credit card business will continue to
focus on its strategic ambitions which include growing its
customer numbers and balances in a sustainable way
and providing an enhanced digital experience.
– Shortly after the period end, Vanquis Bank won ‘Best
Benefits or Loyalty Scheme’ and ‘Best Customer Service’
at the Card and Payment Awards and it also won the
‘Changing Lives in the Community Award’.
for debt consolidation. I wasn’t too
just used to spend anything I had.
But things change. My credit rating
has improved a lot and now I just
use my Vanquis card for everyday
items, things we need for our little
girl. Things like clothes, toys and the
bigger purchases. Sometimes the
odd treat for myself too because
I know full well I can pay it off
and in a sensible time frame.
Ollie
Teacher
continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
28
Credit cards – financial performance continued
The Group’s credit card business is a leading specialist lender
in the large and established credit card market with strong
capital and liquidity positions. For FY’22, the business reported
adjusted profit before tax of £178.5m (2021: £173.9m) and
receivables at the end of the period of approximately £1,182m
(2021: £1,063m). Shortly after the period end, Vanquis Bank
won ‘Best Benefits or Loyalty Scheme’ and ‘Best Customer
Service’ at the Card and Payment Awards and it also won the
‘Changing Lives in the Community Award’.
New customer bookings for the year were 225k, up from 199k
in 2021, as a result of new customer acquisition initiatives
including a broader range of price points and improved
Balance Transfer offerings. Credit card customer numbers
were broadly flat at 1,541k as of December (2021: 1,541k) versus
a decline the year before. Active customer numbers, defined
as customers with activity on their card in the last month, were
1,221k (2021: 1,266k).
During 2022, credit line increases amounting to approximately
£318m (2021: £170m) were issued to customers as part of
Management’s strategy to rebuild the loan book on a
prudent basis whilst supporting customers’ additional credit
requirements. At the end of December, the average utilisation
rate was approximately 48%, which remains below levels seen
pre-Covid-19. The business has launched several initiatives
already designed to improve the utilisation rate including the
launch of Android Wallet during H2’22. Receivables ended the
period at £1,182m (2021: £1,063m), representing growth of 11%
year-on-year.
The credit card business generated interest income of
£333.2m during the year, versus £328.8m in 2021. There was an
improvement in the asset yield to 25.0% (2021: 23.8%), which
reflects the combination of higher interest income and lower
average balances year-on-year.
Funding costs decreased to £22.4m during the year, versus
£24.9m in 2021, reflecting lower retail deposit balances held
year-on-year, as the amount of deposits held was normalised
post-Covid-19. Net fee and commission income reduced
in FY’22 to £44.2m (2021: £57.4m) reflecting the cessation
of the ROP product.
The impairment charge for FY’22 was £16.8m (2021: £3.7m), an
increase reflecting the growth of the loan book year-on-year,
which equated to an annualised cost of risk of 1.3% (2021: 0.3%).
The higher impairment charge offset the higher asset yield to
produce a risk-adjusted margin which was flat year-on-year
at 25.8% (2021: 26.0%).
Costs decreased to £164.8m during the year versus £184.1m
in 2021 reflecting lower salary costs, an improved profile
with some supplier arrangements and some centralisation
of functional costs.
The credit card business grew its loan book by 11% during 2022,
the highest level of growth since 2017, and it has maintained
its strong capital and liquidity positions. It remains focused on
enhancing its customer and digital propositions, including a
new Vanquis mobile app, and improving its range of services
for customers. During 2023, the credit card business will
continue to focus on its strategic ambitions which include
growing its customer numbers and balances in a sustainable
way and providing an enhanced digital experience.
12 months ended 31 December
2022
£m
2021
£m Change
Total customer numbers (‘000) 1,541 —%
Active customer numbers (‘000)
1,266 (3.6%)
Period-end receivables 1,063 11.2%
Average gross receivables
1
1,379 (3.4%)
Interest income 328.8 1.3%
Interest expense (24.9) (10.0%)
Net interest income 303.9 2.3%
Net fee and
commission income
57.4 (23.0%)
Other income 0.4 1,175.0%
Total income 361.7 (0.4%)
Impairment charges (3.7) 354.1%
Risk-adjusted income 358.0 (4.1%)
Operating costs (184.1) (10.5%)
Adjusted profit before tax
2
173.9 2.6%
Annualised asset yield
3
23.8% 1.2%
Annualised cost of risk
4
(0.3%) (1.0%)
Annualised return on equity
5
42.7% (10.6%)
1 Calculated as the average of month end gross receivables for the
13 months ended 31 December.
2 Adjusted profit before tax is stated before £0.2m of exceptional redundancy
costs in 2022 and exceptional redundancy costs of £1.0m in 2021.
3 Interest income as a percentage of average gross receivables for
the 13 months ended 31 December.
4 Impairment charges as a percentage of average gross receivables
for the 13 months ended 31 December.
5 Adjusted profit after tax as a percentage of average equity for
the 13 months ended 31 December.
Certain alternative performance measures (APMs) have been used
in this report. See pages 229 to 234 for an explanation of relevance
Strategic report
Vanquis Banking Group plc Annual Report and Financial Statements 2022
29
Vanquis have been great. It
was a really easy process to
follow to get the card, a decent
interest rate for me and I’ve
never had any issues.
Ollie
Teacher
Customer case study
Ollie’s story
I’m Ollie, I’m a teacher and I live just outside Leeds
with my partner and our 8-month-old daughter.
We’ve recently moved to a new build with three
bedrooms, a lovely garden for our little girl to grow
up in, and it’s not far from both our schools.
My wife’s a teacher too at the same school, so we
didn’t move far, just far enough to find a bigger
house for our new family.
I first took out a Vanquis credit card for debt
consolidation. I wasn’t too great with my finances at
Uni, as I just used to spend anything I had. But things
change. My credit rating has improved a lot and now
I just use my Vanquis card for everyday items, things
we need for our little girl. Things like clothes, toys and
the bigger purchases. Sometimes the odd treat for
myself too because I know full well I can pay it off
and in a sensible time frame.
Vanquis have been great. It was a really easy process
to follow to get the card, a decent interest rate for
me and I’ve never had any issues. I’d recommend
them for sure.
Watch Ollie’s full interview at
www.vanquisbankinggroup.com/
who-we-are/our-customers/
meet-ollie
Vanquis Banking Group plc Annual Report and Financial Statements 2022
30
Market characteristics
– Vehicle finance is a secured product. Secured finance is a
well-established and culturally accepted way to purchase
big ticket items, such as a car, with the opportunity for
further growth in used car acquisition.
– Customers have an incentive to maintain their repayments
due to the utility of the vehicle (e.g. a car is needed to
get to work).
Market appeal
– The vehicle finance market is large and growing.
– Only 30% of used car sales are on finance, offering attractive
growth prospects for lenders as finance penetration develops.
– There are numerous providers that span over a range of risk
appetites (e.g. Advantage, MoneyWay and Close Brothers).
– Moneybarn has the broadest coverage of APRs in the
non-prime market and its expansion into near-prime
lending enables utilisation of existing capabilities to
support more consumers requiring access to finance
in order to purchase a vehicle.
– Moneybarn’s access to lower cost funding provides
a significant advantage over a number of competitors.
Model
– Vehicle finance is typically on three to five-year secured
hire purchase contracts.
– Consumers in this market are not accessing finance with
the manufacturer or with their bank and are typically
acquired through intermediaries.
– There are typically small levels of repeat loans
with the same lender.
– The technology in this market is evolving from a manual
process to increased digitisation and smoother customer
onboarding (e.g. auto-affordability and ID verification).
Moneybarn, was acquired by the Group in 2014.
It has since become a leading player in the
market in 2021 provided further opportunities
for the business to support more consumers
excluded from mainstream lending.
David Shrimpton
Managing Director – Vehicle finance
Number of active vehicle
finance consumers in our
target addressable market*
1.94m
1.99m
Moneybarn
share
5.0%
* Internal analysis of our target
addressable market based
on TransUnion data.
5.0%
Moneybarn share
Dec
21
Dec
22
4.8%
Vanquis Banking Group plc Annual Report and Financial Statements 2022
31
Strategic report
12 months ended 31 December
2022
£m
2021
£m Change
Total customer numbers (‘000) 93.9 6.5%
Period-end receivables 586.2 10.2%
Average gross receivables
1
671.1 (2.2%)
Interest income 137.9 2.0%
Interest expense (27.1) (18.5%)
Net interest income 110.8 6.9%
Total income 110.8 6.9%
Impairment charges (44.6) (8.5%)
Risk-adjusted income 66.2 17.4%
Operating costs (37.3) 6.4%
Adjusted profit before tax
2
28.9 31.5%
Annualised asset yield
20.5% 0.9%
Annualised cost of risk
4
(6.6%) 0.4%
Annualised return on assets
5
3.0% 0.6%
1 Calculated as the average of month end gross receivables
for the 13 months ended 31 December.
2 Adjusted profit before tax is stated before £0.2m of exceptional redundancy
costs in 2022 and exceptional Senior bond buy-back costs of £1.4m in 2021.
3 Interest income as a percentage of average gross receivables for the
13 months ended 31 December.
4 Impairment charges as a percentage of average gross receivables
for the 13 months ended 31 December.
5 Adjusted profit after tax as a percentage of average total assets
for the 13 months ended 31 December.
Vehicle finance – financial performance
Vehicle finance adjusted PBT grew significantly in FY’22
driven by strong loan book growth and cost controls
– The Group’s vehicle finance business delivered adjusted
PBT for the period of £38.0m (2021: £28.9m) which
represents strong loan book growth year-on-year
and lower interest expense.
– At the end of December, there were 100k vehicle finance
customers (2021: 93.9k) and receivables of £646m
(2021: £586m), representing growth of 10%. Growth in
customers and receivables year-on-year reflects the
strong positioning of the business and its ability to draw
upon the Group’s access to capital and funding.
– Credit issued during FY’22 was £342m, a significant
increase year-on-year, reflecting new business volumes
increasing to 42k (2021: 37k) with vehicle pricing remaining
consistent year-on-year.
– The annualised cost of risk at the end of December
decreased to 6.2% (2021: 6.6%) driven by lower arrears
rates during the period reflecting the focus on attracting
lower credit risk customers since 2020. As a result, the
risk-adjusted margin improved to 11.8% (2021: 9.9%).
– During 2023, the vehicle finance business will focus on
growing its addressable market by introducing new
products and services for customers including new asset
classes and contract types.
The Group’s vehicle finance business is one of the leading
suppliers of vehicle finance to non-prime customers in the UK.
For the 12 months to the end of 31 December 2022, Moneybarn
generated adjusted profit before tax of £38.0m (2021: £28.9m)
and receivables at the period end were £646m (2021: £586m),
representing growth of 10% year-on-year.
New business volumes in FY’22 grew by 14% versus 2021 at 42k
(2021: 37k) notwithstanding the challenging macroeconomic
backdrop. As a result, the vehicle finance business ended the
year with 100k customers for the first time in its history (2021:
93.9k). As a result of its focus on higher-quality customers
on average, and the robust pricing environment seen in the
used-car market throughout 2022, the average loan size
increased to approximately £9k whilst maintaining average
loan to values consistent with 2021, which drove total credit
issued to over £342m after unwinds (2021: £287m).
At the end of December, receivables stood at £646m
(2021: £586m), driven by the improvement in business volumes
year-on-year, particularly during the second half of the year.
Interest income during FY’22 increased to £140.6m (2021: £137.9m)
reflecting the growth in the loan book year-on-year. The
annualised asset yield increased year-on-year to 21.4% versus
20.5% in 2021, reflecting the fall in average gross receivables
year-on-year as a result of the timing of new business
volumes being weighted to the second half of the year.
Interest costs decreased during the year to £22.1m from
£27.1m in 2021, reflecting a lower cost of funding received from
the Group during the period, including the intercompany
loan from Vanquis Bank. As a result, the net interest margin
improved at the end of December stood at 18.0% versus 16.5%
a year earlier.
Impairment fell year-on-year to £40.8m (2021: £44.6m) as a
result of the business’ focus on lower risk customers in recent
years coupled with a small amount of provision release. As a
consequence, the annualised cost of risk decreased to 6.2%
from 6.6% in 2021. This resulted in the risk-adjusted margin
improving to 11.8% (2021: 9.9%).
Costs increased during the course of the year to £39.7m
(2021: £37.3m), albeit by a much-reduced rate versus the
previous year, reflecting the significant increase in lending
volumes year-on-year and the additional service costs
associated with the higher volumes.
During 2023, the vehicle finance business will focus on growing
its addressable market by introducing new products and
services for customers including new asset classes and
contract types.
Vehicle finance KPIs
Asset yield Cost of risk
21.4%
6.6%
6.2%
20.5%
21
22
Certain alternative performance measures (APMs) have been
used in this report. See pages 229 to 234 for an explanation
continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
32
Moneybarn were brilliant.
Very simple, great communication,
the documentation came through
I can’t fault them.
Lee
Customer service manager
Customer case study
Lee’s story
I’m Lee, I’m 51 and I’m a customer service manager
for an IT software company working in Manchester.
I currently live in a 3-bedroom semi with my wife, my
two children and our rescue dogs that we adopted
last year.
I use my car every day for school runs, youth club,
various activities, Dad’s taxi if you like. There’s always
something going on when you’ve got two kids!
Before I got my car finance from Moneybarn, I had a
four-seat convertible Audi, then Covid-19 changed
everything and we moved to Manchester. My daughter
moved in, we adopted Alfie, and then adopted two
dogs from overseas who had been abandoned and
mistreated. We went from a family of two to a family
of six, very quickly, so we needed a bigger car.
In the past, I had some financial trouble, so our lenders
were restricted when it came to us finding the right car
for us. Moneybarn were just brilliant from the off. They
put us at ease, they told us how much we’d be paying
out in total. They were very thorough in their approach
to make sure everything was affordable for us.
Moneybarn were brilliant. Very simple, great
communication, the documentation came through
quickly, just really efficient. I can’t fault them.
It’s given us the ability as a family unit to be able to go
to places like camping at the weekend. We know at the
drop of a hat we now have access to a vehicle to do
what we want.
Watch Lee’s full interview at
www.vanquisbankinggroup.com/
who-we-are/our-customers/
meet-Lee
Vanquis Banking Group plc Annual Report and Financial Statements 2022
33
Strategic report
Personal Loans Division
Market characteristics
– The personal loans market is substantial and growing.
– The business operates under the Vanquis Bank brand
on the open market through intermediaries and affiliates
such as ClearScore.
– Providers operate at a range of price points
(circa 15 - 50% APR) enabling consumers with a broad
range of risk profiles to access unsecured loans.
– There have been a number of new near-prime entrants
(e.g. Lendable and Chetwood Financial) in recent years.
Market appeal
– The non-prime personal loans market is substantial in size
and growing.
– Personal loans have high cultural adoption and
acceptance in the UK.
– Offering personal loans provides the opportunity to
leverage core skills in loans and allows Vanquis Banking
Group to meet more of its existing customer needs.
– In addition, Vanquis Banking Group has strong access
to funding, low cost of funds and considerable capital
strength versus competitors in this market, providing an
opportunity for it to meet a greater level of the demand
in the market.
Model
– We offer personal loans over one to five years across
a broad range of APRs.
– Personal loans are typically taken to meet a specific
one-off need.
– Customers are acquired increasingly through internet
affiliates, with customers then typically managing their
account through an online login or mobile app.
Personal loans
The Group’s personal loans business was
launched towards the end of 2021. 2022
a standalone division. It offers personal
loans to new and existing Vanquis Banking
and intermediaries.
Hamish Paton
Managing Director – Personal loans
Number of active personal
loan consumers in our target
addressable market*
4.36m
4.42m
Vanquis
share
* Internal analysis of our target
addressable market based
on TransUnion data.
0.8%
Vanquis share
Dec
21
Dec
22
0.8%
0.5%
Vanquis Banking Group plc Annual Report and Financial Statements 2022
34
12 months ended 31 December
2022
£m
2021
£m Change
Total customer numbers (‘000) 34.4 19.9 72.9%
Period-end receivables 76.3 28.1 171.5%
Average gross receivables
1
50.9 25.6 98.8%
Interest income 13.1 7.2 81.9%
Interest expense (1.2) (0.8) 50.0%
Net interest income 11.9 6.4 85.9%
Total income 11.9 6.4 85.9%
Impairment charges (8.5) (2.1) 304.8%
Risk-adjusted income 3.4 4.3 (20.9%)
Operating costs (19.1) (13.0) 46.9%
Loss before tax (15.7) (8.7) 80.5%
Annualised asset yield
2
25.7% 28.1% (2.4%)
Annualised cost of risk
3
(16.7%) (8.2%) (8.5%)
1 Calculated as the average of month end gross receivables
for the 13 months ended 31 December.
2 Interest income as a percentage of average gross receivables
for the 13 months ended 31 December.
3 Impairment charges as a percentage of average gross receivables
for the 13 months ended 31 December.
Personal loans – financial performance
Personal loans continued to grow in FY’22 with
receivables and customer growth of 172% and 73%
– 2022 was the first full year of operations for the personal
loans business, following the successful launch of an initial
pilot phase in H2’21.
– The Group’s personal loans business delivered a loss
before tax of £15.7m for the period (2021 loss before tax:
£8.7m) reflecting growth in the business year-on-year
and continued investment in the IT platform supporting
it, known as Gateway.
– As of 31 December 2022, the business had 34k (2021: 20k)
customers and total receivables of approximately £76m
(2021: £28m).
– The new IT infrastructure platform will continue to support
the personal loan product and is capable of housing
multiple products over time. It will provide customers with
a single, holistic view of all product offerings in future.
– During 2023, the personal loans business will focus on
continuing the migration of its loans offering onto the new
Gateway platform, exploring new partnership agreements
and assessing opportunities to evolve its pricing and
product proposition.
Vanquis Banking Group established a personal loans business
during 2021 to diversify its product offering to new and existing
customers. Its products are positioned within the mid-cost
credit segment of the market, and loans range from between
£1k-£5k over one to four years. The typical personal loan
customer will be similar in nature to existing credit card and
vehicle finance customers with similar average credit scores.
The business grew both customer numbers and receivables
strongly during FY’22, reflecting the successful launch of the
business and its market position.
New business volumes during FY’22 were 27k, versus 12.8k in
2021, reflecting the business’ first 12 months as an open market
operator. As a result of these new customer bookings, the
businesses ended the year with 34.4k customers versus 19.9k
at the end of 2021. At the end of December, receivables stood
at £76.3m versus £28.1m at the end of 2021, driven by new
business volumes increasing significantly year-on-year.
The personal loans business generated interest income of
£13.1m during the year (2021: £7.2m) driven by higher average
receivables year-on-year as the business grew strongly
throughout the period. The asset yield for the year was 25.7%
versus 28.1% in 2021, reflecting the growth in the loan book
during the period.
The impairment charge for FY’22 increased to £8.5m, from
£2.1m in 2021, as the business began to gain scale and
book new customer loans. This equated to an annualised
cost of risk for the year of 16.7% (2021: 8.2%), which resulted
in the risk-adjusted margin falling to 6.7% versus 16.8%
for the prior year.
Interest costs for the year increased to £1.2m, versus £0.8m
in 2021, reflecting higher average balances being carried,
equating to an interest margin of 2.4% versus 3.1% in 2021. Costs
increased during the course of the year to £19.1m (2021: £13.0m),
reflecting higher new business volumes and the ongoing
investment in the new IT infrastructure platform known
as Gateway.
Personal loans KPIs
Asset yield Cost of risk
25.7%
8.2%
16.7%
28.1%
21
22
Certain alternative performance measures (APMs) have been
used in this report. See pages 229 to 234 for an explanation of
Personal Loans Division continued
During 2023, the personal loans business will focus on continuing
the migration of its loans offering onto the new Gateway platform,
exploring new partnership agreements and assessing
opportunities to evolve its pricing and product proposition.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
35
Strategic report
I came to get a Vanquis loan
because my husband has got a
Vanquis credit card. So, we know
the brand, we know the company
and we needed a bit extra to
help us get some necessary
plastering done on the house.
Tracy
ICU nurse
Customer case study
Tracy’s story
Hi, I’m Tracy, I’m 48 and I’m a full time ICU nurse
working in Glasgow. I love the work that I do, I’ve got
to be quite organised, know the ins and outs of all the
equipment and my patients’ needs. I just don’t always
know whether I’ll be helping someone with a post-op
recovery or helping with an unexpected trauma when
I get to work that day.
My main hobby is going on holiday. Me and my
husband try to get away two to three times a year
if we can, but when I’m not planning holidays I like
to watch all sorts on Netflix.
I live with my husband in a private rental which
needs a bit of TLC at the moment. That’s why I’ve
taken out a Vanquis loan, we needed some home
improvements doing.
I came to get a Vanquis loan because my husband
has got a Vanquis credit card. So, we know the brand,
we know the company and we needed a bit extra
to help us get some necessary plastering done on
the house. There was a little bit left over from us
having the work done so we’re putting that towards
a holiday in Morocco.
I like to repay my loans early, so I’ll start overpaying
on that as soon as we get back from our holiday.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
36
At Vanquis Banking Group, our Purpose, Mission and Strategic
Objectives underpin everything we do and decisions we take
as an organisation. They enable us to focus on the long-term
success of our business by ensuring that we:
– operate our business of lending to our current and future
customers in a responsible manner by ensuring that we
provide them with the credit products and services that
meet their particular needs and deliver fair outcomes to
them throughout their journey with us; and
– act responsibly and sustainably in all our stakeholder
relationships by creating a fair, inclusive and diverse
workplace, supporting our local communities, reducing
our impact on the environment and taking action on
climate change, treating suppliers fairly, and engaging
with the Government and our investors and regulators
on ESG-related matters.
Governance and management
ESG matters are an important part of the Group’s overall
strategy for which the Vanquis Banking Group plc Board is
responsible. As such, the Board receives regular updates
on a range of ESG topics including community investment,
climate risk and diversity and inclusion. The Board is also
supported by the CCE Committee, which monitors the Group’s
culture, stakeholders’ expectations and evolving corporate
governance requirements.
Read more on pages 100 to 102
The Executive Committee plays an important role in
supporting the management and reporting of ESG issues as it
reviews and approves programmes of activity and associated
budgets. The Group also has cross-functional working groups
in place which oversee the climate risk agenda and support
the delivery of the Group’s Inclusion and Wellbeing Strategy.
The Group’s sustainability strategy and the ESG programmes
that are delivered via it are aligned to the Paris Climate
Agreement and the UN Global Compact, and support
the delivery of the UN SDGs.
Sustainability
Creating better
everyday lives
Taken together, our Purpose, Mission and
Strategic Priorities bring clarity to why Vanquis
Banking Group exists, and the role we play in the
lives of our customers. They also underline our
commitment to responding to the needs of our
key stakeholders, and managing and reporting
our environmental, social and governance
(ESG) performance.
Malcolm Le May
Chief Executive Officer
Vanquis Banking Group plc Annual Report and Financial Statements 2022
37
Strategic report
No poverty
Vanquis Banking Group objective
By 2030, to contribute to ending poverty in all its forms everywhere, by ensuring
our customers have access to cost-effective and appropriate products for their
needs and supporting them through financial difficulty.
FY’22 highlights and achievements
We primarily contribute to this Goal by delivering on our Purpose of helping
to put people on a path to a better everyday life and responsibly providing
our 1.7 million customers with credit cards and loans through our Vanquis
business and vehicle finance products through Moneybarn. We also support
the financial inclusion agenda through our Foundation by providing grants to
charities and specialist partners to address issues like customer vulnerability,
product accessibility and financial difficulties. In 2022, we also contributed to
the achievement of this SDG by working with longstanding partner IncomeMax
to launch a new online platform which provides customers with digital access to
one-to-one, expert advice to help maximise their income. We also continued to
fund the Money Charity to provide information, advice and guidance to people
of all ages so that they develop money management skills and increase their
financial wellbeing. In 2022, this enabled the charity to deliver: 209 hours’ worth
of financial education workshops to 4,948 young people; and 78 hours’ worth
of financial wellbeing workshops to 954 adults. In providing this much needed
support, the Money Charity prioritises supporting the most disadvantaged
students and hard to reach groups. In 2022, 83% of participants came from
disadvantaged groups.
Quality education
Vanquis Banking Group objective
By 2030, to contribute to ensuring inclusive and equitable quality education and
promote lifelong learning opportunities for all by partnering with organisations
that will help to equip children and adults with essential skills and knowledge
that will allow them to excel in many different directions.
FY’22 highlights and achievements
We continue to contribute to this SDG through the work we support with our
education partners. Through our longstanding partnerships with National
Numeracy, the National Literacy Trust and Leading Children, we have supported
a number of programmes which aim to boost the literacy and numeracy
skills of children and young people. We are also committed to ensuring that
children do not lose out on their education because of the current cost of
living challenges that many families are dealing with. This is why we set up
funds with School-Home Support and the Dixons Academies Trust which have
supplied essential items of school uniform to more than 1,000 students across
Bradford, Liverpool, Manchester and Blackpool in time for the start of the
autumn 2022 term.
Gender equality
Vanquis Banking Group objective
By 2024, to have 40% female representation in the Group’s senior
management population.
FY’22 highlights and achievements
The Group’s senior management population currently has 33% (2021: 27%)
female representation. The key actions we undertook throughout 2022 to
support this SDG include: ensuring gender balanced shortlists when recruiting
for all senior leadership roles across Vanquis Banking Group; hosting events
to challenge and change behaviour/mindsets around, equality, diversity
and inclusion. This has included: delivering ‘Menopause in the Workplace’
sessions, helping colleagues benefit from increased menopause awareness,
guidance and support; continuing to adopt hybrid working models and
enabling colleagues to work with greater flexibility, ensuring they have the
support they need. We have also continued to support a Gender Affinity
Group as part of our Company-wide Inclusion Community.
Through our Foundation, we also support projects which aim to empower
women and girls. For example, in 2022, through our partnership with the London
Community Foundation we provided funding to the female-led charity, Believe,
which will enable it to deliver a leadership programme to disadvantaged
young women in Lewisham, South London, so that they improve their social and
economic outcomes, whilst taking control of their lives. In addition, through our
partnership with the Hampshire and Isle of Wight Community Foundation, we
are funding the Avenue Centre in Southampton to deliver a programme that will
support socially deprived young mums to overcome a range of challenges from
domestic and financial abuse to asylum and mental health issues.
Decent work and economic growth
Vanquis Banking Group objective
By 2030, to contribute to promoting sustained, inclusive and sustainable
economic growth, full and productive employment and decent work for all by
creating opportunities for all generations and protecting and promoting labour
rights in both our business and supply chains.
FY’22 highlights and achievements
We continue to support this Goal, which is aligned with our Purpose, by funding
the delivery of activities and initiatives in the communities we serve via our
Foundation. In 2022, this involved providing funding to Bradford Community
Broadcasting (BCB) to engage with and support children and young people to
increase their oracy and digital skills, confidence and self-esteem, and widen
their life chances, aspirations and educational outcomes through becoming
radio broadcasters and producers for the broadcasts on BCB Radio. We also
provided funding to the Portsmouth Sail Training Trust, which is close to where
our vehicle finance business is based, to deliver maritime industry training and
skills development for disadvantaged young people from its local community.
Finally, we continued to support and participate in the Social Mobility Business
Partnership which delivers a programme that aims to remove barriers,
develop skills and provide experiences to sixth form and college students from
disadvantaged backgrounds so that they can pursue careers in the legal and
professional services sectors. In 2022, the overall programme supported more
than 500 16 to 18 year-old students, with Vanquis Banking Group hosting 11
students from schools and colleges next to its Bradford head office.
Reduced inequalities
Vanquis Banking Group objective
By 2030, to contribute to reducing inequality by building our capabilities to better
identify, support and empower our stakeholders who may face inequality and
exclusion whether it is because of their age/sex/gender identity/race/ethnicity/
origin/disability/ability/where they live or what their economic status is.
FY’22 highlights and achievements
We support this Goal by providing funding to a range of projects through our
Foundation which seek to reduce inequalities. For example, in 2022, we provided
funding to Horn Stars in Brent, North West London, to deliver its Youth Zone
project, which is a twice weekly safe space for 9 to 19 year-olds comprising youth
club sports activities and monthly trips reaching 100 young people experiencing
deprivation. We also supported the Free2B Alliance, a London-based community
organisation, which supports LGBTQ+ young people and their parents by increasing
their wellbeing, resilience and social connections, and by reducing isolation and
improving family connections. Our funding also supports the delivery of LGBTQ+
awareness training in schools and other organisations to promote inclusivity.
In terms of seeking to maintain an inclusive and diverse workplace at Vanquis
Banking Group, we continue to do this via our Group-wide Inclusion Community,
which comprises five aligned Affinity Groups focused on Disability, LGBTQ+,
Gender Balance, Ethnicity and Social Mobility. These groups currently have
over 70 active and representative members, as well as an extensive network of
Affinity Group allies, and help to coordinate work across the Group to celebrate,
learn and increase awareness around an extensive range of inclusive and
diversity-related events.
Climate action
Vanquis Banking Group target
To achieve net zero carbon dioxide emissions by 2040 target, support the
UK’s transition to a net zero economy and take urgent action to tackle climate
change and its impacts.
FY’22 highlights and achievements
During 2022, we have continued to reduce our impact on the environment
by improving the energy and resource efficiency of our operations and
understanding and reporting the actual and potential impacts of climate-related
risks and opportunities on the Group. We have also taken a number of important
steps that support our net zero target. These include: accounting for all the
scope 3 GHG emissions that are material to our business activities so that we
can report accurately, working towards setting accurate science-based targets
to support the delivery of our overall net zero by 2040 target; publishing a second
report which meets the TCFD recommendations; and evolving our approach
to carbon offsetting so that we achieve carbon reduction from the planting/
preservation of natural habitats.
Visit: vanquisbankinggroup.com
View: Sustainability Report at
www.vanquisbankinggroup.com/
sustainability/sustainability-report-2022
Vanquis Banking Group plc Annual Report and Financial Statements 2022
38
Sustainability continued
embedding of our Purpose, Mission and Strategic Priorities as well as our performance against
our ongoing ESG objectives and targets.
Regular progress reports and updates are provided to the Group Executive Committee, Board and CCE Committee. These
measures also support us to meet non-financial reporting requirements under sections 414CA and 414CB of the Companies
Act 2006 (see pages 52 and 53) and inform the remuneration of the executive directors, which is, in part, linked to our progress
towards the Group’s ESG objectives and targets.
More details of this are set out in the Directors’ Remuneration Report (DRR) on pages 127 to 151
Objective Measure Performance in 2022
Customers
Customer outcomes are
positive and consistent with
our Purpose, Mission, Strategic
Priorities and culture.
Levels of customer
satisfaction.
Credit card: 4.6/5 (2021: 4.7/5).
Vehicle finance: 4.3/5 (2021: 4.4/5).
Number/percentage
of customer complaints.
Total number of complaints: 29,188
(2021: 66,516).
Number of complaints referred to the FOS:
3,154 (2021: 13,313).
Number of FOS complaints upheld in
the customer’s favour: 835 (2021: 8,581).
Colleagues
Our colleagues are engaged
with and supportive of the
Group’s Purpose, Mission,
Strategic Priorities and culture.
Colleague engagement
score as measured by annual
colleague engagement survey.
Over colleague engagement score: 68%
(2021: 69%).
Better Everyday Index score
which relates to the Group’s
culture and the way we treat
customers and colleagues.
Better Everyday Index score: 60% (2021: 63%).
Communities
Positively impact the lives of
the people in the communities
we serve, particularly children
and young people, by providing
them with access to education,
social and financial inclusion,
money advice and economic
development opportunities.
The amount invested per
year to support community
programmes, money advice
programmes and social
research, including the
number of grants distributed
to grass roots community
organisations.
£1.4m invested to support community
programmes, money advice programmes
and social research (2021: £1.4m).
1,014 hours volunteered by colleagues during
work hours (2021: 425).
The environment
Continue action to reduce our
impacts on the environment,
particularly in relation to
climate change.
Absolute scope 1
and 2 greenhouse gas
(GHG) emissions.
Scope 1 and 2 emissions: 1,017 tonnes
of CO
2
e (2021: 1,239 tonnes of CO
2
e),
a reduction of 18%.
Total scope 1 and 2 (and associated scope 3)
emissions: 1,348 tonnes of CO
2
e (2021: 1,648
tonnes of CO
2
e), a reduction of 18%.
The progress of our
work in meeting the
recommendations
of the TCFD.
We have continued to report in line with
the recommendations of the TCFD. Refer to
pages 40 to 49 for more information. We will
also, by Q2’23, set science-based targets that
will focus on reducing our scope 1 and 2 GHG
emissions and engaging with our top suppliers
by spend to reduce their own GHG emissions.
For further details on our ESG activities and progress against 2022 targets, refer to our 2022 Sustainability Report
and corporate website.
Measuring and reporting
our ESG performance
Strategic report
Supporting and engaging
our colleagues
At Vanquis Banking Group, we care about people and
recognise the importance of investing in the culture and
experience for our 2,005 colleagues. By creating, supporting
and sustaining engaged and motivated teams, we will
be in the best position to deliver on our Purpose, Mission
and Strategic Priorities which will not only ensure that we
continue to deliver positive outcomes for our customers,
but also support our colleagues throughout their career
journeys with us.
We know that our people perform at their best when they are
part of a culture that is encouraging, supportive and inclusive.
By embedding our Purpose, Mission and Strategic Priorities
across the Group and engaging our colleagues in meaningful
ways, our aim is to create a great place to work and to
inspire all our colleagues to contribute to the sustainability
of Vanquis Banking Group.
Be Yourself – Our Inclusion and Diversity Programme
At Vanquis Banking Group, our ambition is to build and sustain
an inclusive culture which celebrates and values differences,
and ensures that all colleagues can be themselves, have a
voice and can reach their full potential. We know that when we
have this culture, and our workforce is diverse, it ensures that
our colleagues are more engaged, motivated and committed
to better deliver for the diverse customer base we serve.
To support us in meeting our ambition, our People Function
works across the Group to provide our colleagues with access
to training and development opportunities so that they can
develop the skills they need and promote a healthy and safe
working environment where they can be themselves and
feel engaged.
Inclusion and diversity data as at 31 December 2022*
– 18% (2021: 20%) of colleagues informed us that they had
a disability or long-term health condition
– 17% (2021: 19%) of colleagues informed us that come from
a Black, Asian, other White or Minority Ethnic background
– 6% (2021: 7%) of colleagues informed us that they were part
of the LGBTQ+ community
– 17% (2021: 17%) of colleagues were eligible for free school
meals when growing up
* This data is based on colleagues’ voluntary self-declaration via our
November 2022 colleague engagement survey which accounts for 79%
of the Vanquis Banking Group workforce.
Gender diversity at Vanquis Banking Group
An important area of focus for our Inclusion and Diversity
Programme is on improving gender diversity. Throughout 2022,
we have continued to drive action to support our business to
achieve a better gender balance in our senior management
population and, in doing so, ensure that we meet our Women
in Finance Charter 40% by December 2024 target.
As of December 2022, the representation of women and men
in the Group’s workplace is as follows:
Total
No. of
women
% of
women
No. of
men
% of
men
Board 9 4 44% 5 56%
Executive
Committee 11 4 36% 7 64%
Senior management
population 122 40 33% 82 67%
All workforce 2,005 1,003 50% 1,002 50%
39
Vanquis Banking Group plc Annual Report and Financial Statements 2022
40
We recognise that the growth and sustainability
of our business depends on the resilience of our
operations, supply chains, and the communities
where our customers and colleagues live and work.
This means that it is essential we minimise our environmental
impacts and work with others to take action on the globally
important issue of climate change. This means embracing
the Paris Agreement and keeping global warming to no more
than 1.5°C above the temperature set before the beginning of
the Industrial Revolution. This requires the Group to transition
to a low carbon economy and contribute to building a
resilient future, and creating new businesses and jobs.
Our commitment to do this is underpinned by our ambition
to achieve net-zero carbon dioxide emissions by 2040.
As we progress towards our 2040 target, we will continue to
identify, analyse and report material climate change-related
risks and opportunities and their financial impact on the
Group, in line with the TCFD’s four recommendations and
eleven recommended disclosures.
Reporting in line with the TCFD recommendations
We have continued to make progress in terms of reporting
in line with the TCFD’s recommendations and enhanced our
disclosures since our Annual Report and Financial Statements
2021. In publishing a climate-related financial report in our
Annual Report and Financial Statements 2022, the Group has
made a disclosure that is fully consistent with the following
TCFD recommendations and recommended disclosures:
governance (disclosures (a) and (b)), strategy (disclosures (a),
(b) and (c)), risk management (disclosures (a), (b) and (c)), and
metrics and targets (disclosure (b)). We will be fully consistent
with metrics and targets disclosures (a) and (c) following the
conclusion of the work we are currently undertaking to set
targets that will be approved by the SBTi. The work required to
ensure that the Group is fully consistent with these outstanding
recommended disclosures will be undertaken throughout 2023.
In publishing a compliance statement which makes clear which
recommended disclosures we are fully consistent with, and
which we continue to work towards, Vanquis Banking Group
complies with the FCA’s Listing Rule 9.8.6R(8). We will ensure
that we continue to work towards applying all the TCFD general
and
supplemental guidance to the approach we take to
understanding,
managing and reporting of climate-related
risks and opportunities, as well as in publishing future
TCFD reports.
Recommendation 1: Governance and management
of climate-related risks and opportunities
In this section, we set out how our Board, its committees
and senior management team assess, manage and report
climate-related risk and opportunities, as well as monitor and
provide rigorous challenge to the Group’s progress against the
goals and targets that have been set in relation to the climate
change agenda.
Be Open – Listening to our colleagues
Engaging with, and gathering feedback from, our colleagues
is key to nurturing and growing a people centric culture,
and ensuring that we have policies (see the Non-Financial
Information Statement on pages 52 and 53), processes and
initiatives in place to help them thrive. We continue to carry
out an annual colleague survey to find out what colleagues
think and feel about working for Vanquis Banking Group.
The most recent survey was undertaken in November 2022
and had a response rate of 79% (2021: 71%). Scores for overall
colleague engagement and in relation to our Better Everyday
Life index (this is about the Group’s culture and the way we
treat customers and colleagues), which have held steady
despite a challenging a year of change and transformation,
are set out below:
– our overall colleague engagement score in 2022: 68%
(2021: 69%); and
– our Better Everyday Index score in 2022: 60% (2021: 61%).
Our Colleague Forum
We also have in place a Colleague Forum which is made up
of 42 elected representatives who are drawn from across all
areas of our business and ensure that the voice of colleagues
is factored into decision making processes and fed back to
the Board through our Designated Non-Executive Colleague
Champion (see page 86 for more information).
Sustainability continued
Taking action on
climate change
Vanquis Banking Group plc Annual Report and Financial Statements 2022
41
Strategic report
Disclosure 1a): How the Board oversees climate-related
risks and opportunities
The Vanquis Banking Group plc Board has overall accountability
for the delivery of the Group’s strategy and reviews sustainability
performance and ESG considerations, including matters which
relate to the climate change agenda. The Board receives two
updates on the ESG agenda per year in the form of papers
that are submitted and discussed by Board members. During
2022, these included updates in relation to the Group’s net
zero ambitions and the strategy that is in place to manage
climate-related risks and opportunities. This enabled the
Board to review and consider an analysis of the scope 3 GHG
emissions that are material to our business activities. This, in
turn, resulted in the Board having an input into which category
of scope 3 GHG emissions should be considered by the Group
when setting the science-based carbon reduction targets
that will be set and approved by the SBTi later in Q2’23. In 2022,
the Board also discussed and considered the metrics and
associated thresholds that will be used to support the appetite
statement that has been defined for climate risk, which is one
of 13 principal risks within the Group’s Risk Management
Framework (go to pages 54 to 65 for more information).
The Board delegates responsibility for the oversight of the
management of a number of ESG-related matters to its
CCE Committee and Audit Committee. The Board’s CCE
Committee supports the Board in providing oversight of the
Group’s approach to managing and reporting its impact on
the environment, which includes considering climate-related
impacts on strategy, major plans of action, and business
plans as well as setting the organisation’s performance
objectives, monitoring implementation and performance. The
process in place that enables the CCE Committee to oversee
the climate-related risk agenda and its application to the
Group and its stakeholders, involves submitting papers to its
members for discussion and approval. The CCE Committee
is provided with two updates on climate-related issues
per annum. During 2022, the two updates provided to this
Committee enabled its members to oversee the Group’s
ongoing compliance with the FCA’s Listing Rule to ensure
that its report was consistent with the recommendations of
the TCFD, monitor the progress being made in developing
the SBTi-approved carbon reduction targets that will be set
for the Group, and assess the climate-related metrics that
are included in the remuneration scorecard for executive
directors (more details of this are set out in the DRR on pages
127 to 151). Finally, the Board’s Audit Committee, which provides
oversight of, and approves, the non-financial performance
information that is included in the Group’s Annual Report and
Financial Statements, receives a paper on an annual basis
which enables its members to review and approve the content
of the Group’s TCFD reports, as well as the controls and
mitigating processes in place that support the management
of climate-related risks (see below).
Further information on our governance framework is outlined
in the Governance Report on pages 68 to 151 and more
detail on the roles of the Board and its committees is set out
in the matters reserved for the Board and its committees’
terms of reference, which are available in the corporate
governance section of our corporate website (go to
www.vanquisbankinggroup.com for more information).
Disclosure 1b): How management assesses and manages
climate-related risks and opportunities
Vanquis Banking Group’s CEO, with support from the Executive
Committee, continues to provide management oversight
of the progress being made by the Group in managing its
strategic ESG objectives, including those that relate to climate
change. This includes reviewing and updating associated
risk management policies, and setting and monitoring
climate-related performance objectives.
The structures in place to manage climate-related matters
continued to be reviewed and updated during the year
reflecting the increasing importance of climate change
to the Group and its stakeholders.
The cross-functional Climate Risk Committee (CRC), which
is chaired by the Group’s Chief Risk Officer, and includes
members from the risk management, operations, finance
and sustainability teams, provides guidance and direction for
the assessment and management of climate change-related
risks and opportunities that are material to the Group and its
stakeholders to support the Group’s ongoing compliance
in meeting the recommendations of the TCFD. During 2022,
the CRC supported the evolution of the Group’s approach
to scenario analysis, creation of metrics to accompany
the climate risk appetite statement, and development of a
methodology to calculate the Group’s financed emissions
(scope 3, category 15) arising from the vehicle finance
business. The CRC is supported by the Group’s Enterprise
Risk Management processes which enables the business
to identify, assess and manage all risks, both existing and
emerging, that may impact our strategic objectives and
relevant stakeholders. They also assist the CRC in the process
of analysing the risks and opportunities that climate change
presents to the Group’s operations and stakeholders. The CRC
reports to the Executive Committee on the Group’s response
to the issue of climate change biannually, and its work is
reviewed by the Board and its committees through the
updates that are provided to its members.
Progress against the mitigating activities and controls in place
which relate to climate risk was subject to independent and
objective review by the Group Internal Audit function in FY’22
and will continue to be reviewed throughout FY’23.
Recommendation 2: The actual and potential impacts
of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial planning
Our strategy is to ensure that the management of
climate-related risks and opportunities is an integral part
of our overall business strategy and the decision making
processes that relate to areas such as operational resilience,
customer service, and supply chain management. Our net
zero by 2040 ambition is underpinned by an outline transition
plan which sets out how we will reduce our GHG emissions
(see page 45 for more information).
In this section, we therefore focus on describing our key
climate-related risks and opportunities, and our assessment
of their potential to impact our business, as well as the
resilience of our strategy and stakeholders to such impacts.
This assessment has been undertaken using scenario
analysis. This involves: identifying physical and transition
risk scenarios; linking the impacts of the scenarios to
financial risks; assessing any sensitivities to those risks; and
extrapolating the impacts of those sensitivities to calculate
an aggregate measure of exposure and potential losses.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
42
Transition risks Physical risks
These risks are driven by the combination of policy
drivers and technological innovations. They allow for
feedback loops such as tax revenue recycling as well as
interactions within and between sectors and regions.
These are driven by gradual physical risks in the form
of temperature effects on operations and productivity,
and by the increase in frequency and severity of extreme
weather events.
The detailed scenario analysis is based on a time horizon which has a short-term outlook of five years. This enables us to
use resultant findings to influence the decision making process regarding our strategy, revenues and costs. We generally
apply a three-year time horizon to our financial and operational planning, as we would expect most of our current business
development projects to be completed in a three-year period. This time period has been extended to five years using a growth
assumption, so that it can, in addition to taking into account our financial and operational planning, align more closely with
our strategic plans. Beyond five years, there is significant uncertainty around the impact of climate-related risks as much
depends on the speed and effectiveness of the transition to a net-zero economy. Despite this, our scenario analysis does
include a high-level review of how we may be impacted by climate change in the medium and long term.
In analysing the results of our scenario analysis, we have used a financial impact to represent the estimated loss to the Group’s
revenues over the next five years assuming that no mitigating action is taken. This impact has been rated in the following way:
Sustainability continued
Over the course of 2022, our scenario analysis methodology has evolved to use quantitative information which has enhanced
our assessment of the potential financial impacts of climate change on Vanquis Banking Group, and is supporting us to make
improvements to our disclosures. We have also redefined our time horizons as follows:
Average temperature rise relative
to pre-industrial levels by 2100
Scenario description
Scenario 1 – Early
Action (RCP1.9)
Where action is taken to limit the global temperature to below 1.5°C in an orderly
manner. In this scenario, it is anticipated that there will be strict product and regulatory
standards, high carbon pricing and strategic investment in low carbon technologies.
There is also likely to be a high level of consumer buy-in.
Scenario 2 – Late
Action (RCP4.5)
Where progress towards a low carbon economy is partial, leading to a global
temperature increase of between 2°C and 4°C. It also assumes that physical risks will
increase, with an intensification of natural disasters associated with, for example, rising
sea levels and more frequent abnormal weather events.
Scenario 3 – No Additional
Action (RCP8.5)
Where there are no actions taken to tackle the climate change.
Time horizons Description
Short term (S) (0-5 years)
This time horizon accounts for the financial and operational planning we use,
as well as the goal date for the science-based target(s) we will set in 2023.
Medium term (M) (5-15 years)
This time horizon takes account of whether the transition to net zero is progressing
or failing, and whether exposure to any physical risks is being adequately priced-in.
Long term (L) (15-20 years)
This time horizon takes into account our net zero by 2040 target and enables
the effects of physical risks to assets and liabilities to be reflected.
Reporting in line with the TCFD recommendations continued
Recommendation 2: The actual and potential impacts of climate-related risks and opportunities on the organisation’s
businesses, strategy and financial planning continued
2a) The climate-related risks and opportunities in the Group’s business, strategy and financial planning
Our approach to scenario analysis
Our scenario analysis takes account of both the transition and physical risk categories that are associated with climate change.
Our analysis makes use of the Group’s financial forecasts, operational footprint, customer data, supply chain information and
environmental data, to create a representation of Vanquis Banking Group. This information is combined with industry reference
scenarios on climate-related emission pathways (Representative Concentration Pathways (RCPs)), including assessments by the
Intergovernmental Panel on Climate Change and International Energy Agency, to consider the potential impact of physical and
transition risks on the Group. These pathways represent a broad range of climate outcomes and are neither forecasts nor policy
recommendations. In our scenario analysis, we have adopted the following identified scenarios:
Vanquis Banking Group plc Annual Report and Financial Statements 2022
43
Strategic report
High Medium Low
A loss impacting the profit and loss
statement by more than 20% and/or
by more than £20m
A loss impacting the profit and loss
statement by between 10% and 20%
and/or between £5m and £20m
A loss impacting the profit and loss
statement by between 5% and 10%
and/or by between £1m and £5m
Probable Possible Remote
Expected to occur in most
circumstances (i.e. >50% chance)
Not expected to occur but occur
periodically (i.e. >25% chance)
May occur only in exceptional
circumstances (i.e. less than
2% chance)
While scenario analyses are not predictions, and are not typically associated with likelihoods, our analysis has used the following
likelihoods which have enabled us to generate and apply a risk rating of either High, Medium or Low to each of our scenarios:
Impact
Low Medium High
Likelihood Probable
Medium Medium High
Possible
Low Medium High
Remote
Low Low Medium
This, in turn, has enabled us to combine the impacts and likelihoods to determine the following risk ratings:
The guidance for banks published by the TCFD in 2021 requires us to disclose information on significant concentrations of credit exposure
to carbon-related assets. The TCFD makes it clear that these assets are those tied to energy, transportation, materials and buildings,
and agriculture, food and forest products sectors. Given the reference that is made in the guidance to transportation, which could be
interpreted to encompass the loan products offered by the Group’s vehicle finance business, it is suggested that this part of Vanquis
Banking Group is more susceptible to the risks associated with climate change. In particular, the transition risks associated with the
introduction in the UK of a total ban on the sale of new petrol and diesel cars and vans by 2030, the requirement for vehicles to be
100% zero emissions from 2035, and the implementation of ultra-low emission zones and clean air zones in UK city centres.
The Group is committed to working to understand the risks associated with those parts of the Group that are sensitive to the impacts
from climate change. That said, the Group’s credit exposure to the assets that are purchased through the loan products that our
vehicle finance business offers, is considered to be limited given that the vehicle finance we offer is typically on three to five-year
secured hire purchase contracts. We also continue to monitor the list price of used electric vehicles (which continues to be a barrier
to ownership for many of our customers) and explore the development of new finance products that will enable our customers to
transition from internal combustion engine cars to battery electric vehicles (BEVs).
2b) The impact of climate-related risks and opportunities on the Group’s business, strategy and financial planning
The results from our scenario analysis, along with the actions we will take in response, are set out below, and we have considered
the impact of climate change in the preparation of our financial statements which can be seen on page 163.
Transition risks and opportunities
Policy and legal risks Reputation risks
Policy and market opportunities
Scenario RCP1.9 RCP4.8 RCP8.5 RCP1.9 RCP4.8 RCP8.5 RCP1.9 RCP4.8 RCP8.5
Risk rating Low Low Low Low Low Low High Low Low
Description
These risks have scope to arise as policy/regulatory actions
around climate change continue to evolve. These actions
vary depending on intent and financial impact. They seek to
constrain activities that contribute to the adverse effects of
climate change or promote adaptation to climate change
(e.g. the continued implementation of a carbon price). For the
Group, changes in carbon price could present an increased
cost risk. Carbon price provides an indication of the level
of transition risks in these scenarios. The Bank of England
explains the term ‘carbon price’ as depicting a shadow
price of GHG emissions, i.e. the marginal abatement cost of
an incremental tonne of emissions. This is a simplification,
intended to capture a range of different policies to reduce
GHG emissions, which may include, for example, carbon
taxes, cap-and-trade schemes, green subsidies and
environmental regulations.
Climate change has been
identified as a potential
source of reputational risk.
Stakeholder perceptions will
continue to evolve depending
on how companies respond
to the climate change
agenda. Negative changes
in stakeholder perceptions
can therefore lead to losses in
market value.
The impacts of climate change
will have implications for the
supply and demand of certain
commodities, products, and
services. Market risks include
everything from changes
in supply and demand to
increased costs for inputs such
as water and energy. While
some of these impacts may be
hard to predict, understanding
the climate-related risks and
opportunities on the supply
chain will be key to mitigating
these market risks.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
44
Sustainability continuedSustainability continued
Transition risks and opportunities continued
Policy and legal risks Reputation risks Policy and market opportunities
Likelihood Probable Possible Remote Probable Possible Remote Probable Possible Remote
Impacts
We analysed how the ongoing
implementation of carbon pricing might
result in increased costs associated with
our operations and travel and transport.
In 2021, the carbon emissions resulting
from the consumption of electricity and
gas across the Group accounted for 435
tonnes of CO
2
e using the market-based
approach to reporting. Our analysis
shows that there is potential for carbon
price to have an impact on the cost of
our energy consumption in the short
term with a higher carbon price needed
to achieve scenario RCP1.9.
There is potential for stakeholders
to engage in activism in the short to
medium term with companies which
are perceived to be not supporting
the shift to a low carbon economy or if
the Group fails to deliver or sufficiently
drive change through its net zero
target by 2040. This could contribute to
decreasing revenue or market share.
There is an opportunity for us to
develop a new business model that
introduces new products to the
customers which accommodate
their needs and meets emerging
climate-related policies (e.g.
to enable our vehicle finance
customers to purchase BEVs). The
affordability of BEVs continues to
be the main barrier to ownership
for the Group’s vehicle finance
customers. The average loan
amount for our vehicle finance
customers stood at £8,771 in 2022.
According to Thisismoney.co.uk, the
average sale price for a three-year
old BEV car in November 2022 was
£26,000, with a four to six-year old
costing £15,600 on average. Of the
over 100,000 ‘live’ customers that
are served by our vehicle finance
business, 111 have purchased a BEV
car, and 7 a BEV light commercial
vehicle. Take-up of BEVs is also
influenced by the ability of our
customers to access a reliable
charging infrastructure. Figures
from the Department for Transport
indicate that there are now 33
electric vehicles for every charge
point in the UK, compared with 16
at the start of 2020.
Time horizon L M S,M,L S,M,L L L M,L L L
Financial impact Low Low Low Low Low Low High Low Low
Methodology
According to The Bank of England,
in its 2021 Climate Biennial Exploratory
Scenario exercise, carbon price is
predicted to increase from $30 per
tonne of CO
2
e as of today to around
$900 by 2050 in the UK and EU in the
RCP 1.9 scenario, to remain at $30 in
the short/medium term and increase
significantly to over $1,000 by 2050,
and to remain at $30 in the RCP 4.8
and RCP 8.5 scenarios, respectively.
We have also considered the extent
to which carbon price increases may
have financial implications for our
customers (i.e. whether carbon price
increases impact gas and electricity
costs which, in turn, impact customer
default rates).
According to the Bank of England, UK
and EU net carbon dioxide emissions
are expected to fall significantly by
2050 in the RCP 1.9 scenario, less
so under the RCP 4.8 scenario, and
only marginally under the RCP 8.5
scenario. We have therefore estimated
how stakeholders perception of
our approach to responding to the
climate change agenda may result
in reputational damage, changes
in consumer behaviour and loss
of revenue.
As our vehicle finance
division provides customers with
second-hand cars, this led us to
consider the changes in policies
which could impact our customers
who reside in communities within
Ultra Low Emission Zones (ULEZs)
or Clean Air Zones (CAZs). We are
therefore monitoring the number
of vehicle finance customers
who reside in ULEZs and CAZs.
Furthermore, we continue to
monitor number of BEVs that are
purchased by customers using
our vehicle finance products as
well as the barriers to their uptake
(e.g., affordability and access to
a reliable charging infrastructure).
Reporting in line with the TCFD recommendations continued
Recommendation 2: The actual and potential impacts of climate-related risks and opportunities on the organisation’s
businesses, strategy and financial planning continued
2b) The impact of climate-related risks and opportunities on the Group’s business, strategy and financial planning continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
45
Strategic report
Actions
The actions the Group will adopt in order to mitigate against these transition risks and ensure that our strategy responds to any
potential opportunities include:
– committing to reach our net zero target by 2040, and continuing to adopt sustainable energy sources, implement energy
efficiency measures and engage with our suppliers to encourage them to reduce their own carbon emissions;
– setting carbon reduction targets which will be recognised by the SBTi. Once set, we will report progress against these targets
on an annual basis;
– continuing to engage with our customers on the benefits of using our vehicle finance products to purchase BEVs/hybrid
vehicles. At the same time, engaging with our stakeholders to gain further insight into the used BEV market and the current
state of the charging infrastructure in the UK;
– continuing to monitor customer default rates due to increased costs (e.g. as a result of energy cost increases); and
– continuing to ensure that the remuneration of the executive directors is partly linked to our progress in meeting the Group’s
climate-related goals and targets.
Physical risks
Acute risks Chronic risks
Scenario RCP1.9 RCP4.8 RCP8.5 RCP1.9 RCP4.8 RCP8.5
Risk rating Low Low Low Low Low Low
Description
The TCFD recommendations identify climate-related physical risks as acute (event driven) and chronic (those due to
longer-term shifts in climate patterns). The increase in the frequency and severity of extreme weather events, such as
floods and storms, could impact the Group’s input and productivity, and insurance claims. We have therefore sought
to quantify how extreme weather events could impact our business activities and damage our assets.
Likelihood Probable Possible Remote Probable Possible Remote
Impacts
An increase in the number and severity of acute and chronic weather events may cause disruptions to our operations,
reduce productivity, and consequently decrease revenue. Furthermore, longer-term shifts in climate patterns and global
temperatures will be more damaging in the long term to our properties. This could result in an increase in the insurance
claims that are made and consequently an increase in the amount of excess payables.
Time horizon S,M,L S,M,L S,M,L S,M,L S,M,L S,M,L
Financial impact Low Low Low Low Low Medium
Methodology
The Environment Agency identifies flood risk in the long
term based on property location as follows: high risk: >3.3%
every year; medium risk: between 2 and 3.3% every year;
low risk: between 0.1% and 2% every year; and very low risk:
<0.1% every year.
The Bank of England explains that global mean
temperatures have already increased by around 1.1°C
compared to pre-industrial levels. Average winter
precipitation in the UK has increased by 25% compared
to the late 20th century. Met Office research found that
events similar to the record rainfall that occurred in the UK
on 3 October 2020 (the UK’s wettest day on record) could
become 10 times more frequent for climatic conditions
similar to those in year 10.
Actions
The actions the Group will adopt in order to mitigate against
these physical risks and ensure that our strategy responds to
any potential opportunities include:
– continuing to maintain and test business continuity plans
to ensure the continuity of our operations in a range of
situations, including those where an extreme weather
event occurs; and
– committing to shifting to more sustainable, low-impact
resources and have a series of targets to achieve this aim
(for example, to ensure that we use 100% renewable energy
across the Group).
In terms of Vanquis Banking Group’s exposure to physical
risks, although it is accepted that extreme weather events will
increase in number and severity compared to the present,
they are unlikely to be as severe as those expected under the
RCP4.8 scenario. Also, the direct financial impacts associated
with these events are considered to be minimal for the Group
because its four main offices are leased, and insurance is in
place to help mitigate the impacts of such physical risks.
Our low carbon economy transition plan
The actions, set out above, that have resulted from our
scenario analysis work are tied to and support our net zero
by 2040 ambition. In order to deliver on this ambition, we have
developed an outline plan that will enable us to transition to
a low carbon economy and deliver in line with the science
based carbon reduction targets we are currently finalising.
This plan will focus on the following areas:
– Scope 1 emissions – reduce building gas, company car
and back-up generator GHG emissions through the
implementation of operational and behavioural changes,
use of alternative fuels (e.g. biodiesel) and use of more
sustainable forms of transport;
– Scope 2 emissions – reduce emissions associated with
electricity use by switching to 100% renewable electricity
and energy storage technologies, and through the
implementation of operational and behavioural changes; and
– Scope 3 emissions – engage with our top 18 suppliers by spend
which account for a significant proportion of the Group’s
carbon footprint to set their own carbon reduction targets.
In addition, reduce emissions associated with business travel,
colleague commuting, water use and waste generation.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
46
Reporting in line with the TCFD
recommendations continued
Recommendation 2: The actual and potential impacts
of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial
planning continued
2c) The resilience of the Group’s strategy, taking
into consideration different climate-related scenarios
As mentioned above, beyond the five-year time horizon we have
included in our scenario analysis work, the level of uncertainty
regarding the impact of climate-related risks increases. Overall,
the results of our scenario analysis indicate that the physical
and transition risks associated with climate change could
impact the Group in the short, medium and long term. The size
of this impact is dependent on the nature and speed of the
global transition towards a lower carbon economy. The work we
have undertaken to date, using three RCP scenarios and their
accompanying assumptions, show that our business continues
to be resilient under all scenarios that have been used in our
analysis. The RCP1.9 scenario would have the biggest impact on
the Group in the short to medium term before any mitigating
actions were considered or taken into account. This is primarily
due to the potential for increases in the price of carbon to have
an impact on the cost of our energy use, as well as have financial
implications for customers (i.e. whether increases in energy costs
impact customer default rates). The RCP4.5 scenario revealed
higher levels of disruption as a result of increases in extreme
weather events and other natural disasters compared with the
RCP1.9 scenario. However, the actions and an outline transition
plan that are set out above, will enable the Group to address any
of the concerns associated with the RCP1.9 and RCP4.5 scenarios
as they will contribute to reducing our exposure to both transition
and physical risks. Under the RCP8.5 scenario, despite there being
much uncertainty about the impacts of climate change, we
can expect our business and our stakeholders to be impacted
by more extreme physical risks in the longer term, as well as lack
of policies to support the transition to a low carbon economy.
In these circumstances, the Group would have to ensure that
adequate measures were in place to manage and address
the physical risks and their potential to impact our operations,
customers and other stakeholders.
The fact that climate change is designated as a principal risk
for Vanquis Banking Group, demonstrates that we recognise
the potential for climate change to impact our business
activities and stakeholders. We will ensure that our strategy of
understanding and assessing the risks associated with climate
change and the impact on Vanquis Banking Group’s financial
results continues to evolve so that we can further improve our
resilience and respond to any related opportunities.
In preparing the Group’s financial statements (see page 163),
we have considered the impact of the results of our scenario
analysis and climate-related risks on our financial performance,
and while the effects of climate change represent a source
of uncertainty, there has not been a material impact on our
financial judgements and estimates due to the physical and
transition climate-related risks in the short to medium term.
Recommendation 3: How the Group identifies,
assesses and manages climate-related risks
In this section, we disclose our processes for identifying,
assessing and managing climate-related risks and how we
integrate these into our overall Risk Management Framework.
3a) The Group’s processes for identifying
and assessing climate-related risks
Climate change has been identified as a principal risk, as
opposed to an emerging risk, to the Vanquis Banking Group
(see page 62). This is because the Group’s long-term success
is dependent on the sustainability of its operations and
business models, and the resilience of its supply chain.
It is also in recognition of transition risks such as current
and emerging regulatory requirements which have potential
to limit the GHG emissions associated with the Group’s
operations and business activities, as well as increases in the
price of carbon that is linked to the energy and fuel that is
consumed across the business. As such, the Group recognises
the importance of addressing any potential climate-related
impacts on the business, its customers and other stakeholders
in financial, operational and reputational terms. As with all
principal risks, the Group’s Risk Management Framework sets
out the high-level control principles that are in place and
those responsible for managing both the overall risk and the
relevant mitigating controls (go to pages 54 to 65 for more
information). By integrating climate risk within the Group’s
Risk Management Framework, it is possible to assess how it
interacts with other material principal risks, including those
that relate to credit, capital, operations, legal and governance
matters and conduct and regulations. All risks are monitored
and reviewed throughout the course of the year to identify
changes that could impact the risk profile.
3b) The Group’s processes for managing
climate-related risks
The Group’s CRC includes representatives from a range of
functions (e.g. from the Group’s Finance, Risk, Procurement
and Building Management teams) and has defined the
risk management approach which enables any material
climate-related risks to be identified, assessed and managed.
It has also recommended that the Group adopt a ‘risk
cautious’ appetite for exposure to climate risk and implement
a control framework that prevents significant customer or
stakeholder detriment, regulatory non-compliance and/
or reputational damage as a result of climate change. To
support our ongoing management of climate-related risks, we
have a range of processes in place. These include monthly risk
appetite reporting using metrics which relate carbon pricing,
customer default rates, operational impacts associated
with extreme weather events and the progress being made
in relation to our net zero target. Regular updates are also
provided to the Board’s Risk Committee on the progress made
in terms of delivering mitigating activities which relate to the
Group’s climate risk.
The effectiveness of the Group’s climate risk control framework
is assessed by the Board’s Risk Committee and has been
subject to independent review by the Group Internal Audit
function as part of the annual audit plan. During 2022, the
Audit Committee reviewed the TCFD report that was produced
by the CRC, including progress against the four TCFD pillars
and 11 recommended disclosures.
3c) How the processes for identifying, assessing
and managing climate-related risks are integrated
into the Group’s overall risk management
Climate-related risks and opportunities are also integrated
within our Enterprise Risk Management Framework and monitored
on an ongoing basis. This enables us to continuously evaluate
the significance of our risks based on their likelihood and impact and
to prioritise their management accordingly. Through this framework,
we also monitor the environment for new and emerging risks, and to
keep up to date with any evolving regulatory requirements. Through
the designation of climate risk as a principal risk, and therefore
its integration within the Group’s Enterprise Risk Management
Framework, we are able to assess how it interacts with other material
principal risks, including those that relate to credit, capital, operations,
legal and governance matters and conduct and regulations.
We are committed to understanding and assessing the
risks associated with climate change and their impact on
the Group’s financial results, and will continue to update our
approach to scenario analysis as more business-related,
economic and climate data becomes available.
Sustainability continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
47
Strategic report
Recommendation 4: The metrics and targets used by the Group to assess and manage relevant climate-related risks
and opportunities where such information is material
In this section, we set out the metrics and targets that the Group has used to assess and manage the most significant climate-related
risks and opportunities. These have been created to enable us to monitor, assess and manage the risks and opportunities
arising from climate change that are material to our business activities and stakeholders. These are set out below and align
with the risks and opportunities that have been identified as part of the strategy discussed above. Vanquis Banking Group’s GHG
emissions data has been subject to a limited assurance by Corporate Citizenship in accordance with the ISAE 3000 Assurance
Standard. A full assurance statement is available on the Group’s corporate website at www.vanquisbankinggroup.com.
4a) and c) The metrics and targets used by the Group to manage and assess climate-related risks and opportunities
in line with its strategy and risk management process
The metrics and targets that are and will be used by the Group to assess the impact of both the transition and physical
climate-related risks and opportunities on our business activities and stakeholders (e.g. customers) in the short, medium,
and long term are set out in the table below.
Risk/opportunity-
related categories
Aspects
Metrics
Targets
Policy and legal
GHG emissions Our scope 1, 2 and 3 emissions reporting
and reductions which relate to energy
and water use, travel and waste
management.
Increased pricing of GHG emissions.
See our environmental KPI results and our GHG
emissions table on page 48 of this report and in our
2022 Sustainability Report for more information on
five-year trends.
The Group will monitor increases in operating costs
(e.g. associated with higher compliance costs).
The Group will also monitor customer default rates due to
increased costs (e.g. as a result of energy cost increases).
Science-based
targets
Carbon reduction. Carbon reduction targets, which are recognised by the SBTi,
will be set in respect of our scope 1 and 2 emissions, and
the emissions associated with the goods and services
we purchase (scope 3, category 1) by Q2’23.
Energy source
Renewable energy Renewable energy consumption. Ensure that we use 100% renewable electricity across
our business premises by December 2024.
Market
opportunities
Customer
engagement
Customer sentiment and perception
regarding their ability to transition to
a low carbon economy as well as the
Group’s ESG performance.
The Group will:
– monitor the number of Group customers using our
vehicle finance products to purchase BEVs and hybrid
electric vehicles;
– monitor customer attitudes and perceptions towards
buying BEVs; and
– engage with policymakers to support the uptake of
BEVs by consumers in the mid-cost and near-prime
parts of the consumer credit market.
Reputation
Supplier
due diligence
Monitor supply chain activities in line with the
Group’s ESG commitments and Corporate
Environmental Management Policy.
Engage with 100% of materially significant suppliers to set
carbon reduction targets and determine their exposure
to climate risks.
Investor Relations Investor sentiment and perception
regarding the Group’s ESG performance.
The Group will continue to engage with our investors on
the climate risk agenda where relevant and ensure the
Group’s participation in: CDP, the FTSE4Good Index, MSCI,
the S&P Global Corporate Sustainability Assessment, etc.
Policy/liability
Executive
remuneration
The remuneration of the executive
directors is partly linked to our progress
in meeting the Group’s climate-related
goals and targets.
Please refer to the Directors’ Remuneration Report
on pages 127 to 151.
Physical risks
Weather patterns Operational impacts caused by severe
weather events and changes in
weather patterns.
The Group will monitor increases in operating costs
(e.g. associated with increased insurance premiums and
potential for reduced availability of insurance on assets
in ‘high-risk’ locations).
We are committed to understanding and assessing the risks associated with climate change and the impact on the Group’s
financial results and will continue to update our approach to scenario analysis as more business-related, economic and climate
data becomes available. In particular, we will continue to develop further insight into the used BEV market, given that the list
price of the majority of used electric vehicles is currently a barrier to ownership for many middle and lower income consumers.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
48
Sustainability continued
Reporting in line with the TCFD recommendations continued
Recommendation 4: The metrics and targets used by the Group to assess and manage relevant climate-related risks
and opportunities where such information is material continued
4b) The Group’s scope 1, scope 2 and material scope 3 GHG emissions, and the related risks
Vanquis Banking Group has measured and reported its GHG emissions since 2007 and currently reports this information in
accordance with the UK Government’s Streamlined Energy and Carbon Reporting (SECR) policy that has been implemented
through the Companies (Directors’ Report) and Limited Liability Partnership (Energy and Carbon Report) Regulations 2018.
Details of our scope 1 and 2 GHG emissions in tonnes of CO
2
e, along with a relevant intensity ratio (i.e. kilogrammes of CO
2
e
per customer) and information on underlying energy use for 2022, are set out below.
2022 2021
Scope 1 GHG emissions (CO
2
e)
Gas use 142 200
Diesel and petrol use 13 111
Scope 2 GHG emissions (CO
2
e)
1
Electricity use (market-based emissions) 453 125
Electricity use (location-based emissions) 862 928
Scope 3 GHG emissions (CO
2
e)
Scope 3 associated ‘well-to-tank’ emissions 287 74
Scope 3 category 1 – purchased goods and services 16,420 17,579
Scope 3 category 3 – fuel and energy-related activities (not included in scope 1 and 2)
2
332 409
Scope 3 category 5 – waste generated in operations 16 15
Scope 3 category 6 – business travel 214 269
Scope 3 category 7 – employee commuting 2,389 Not calculated
Scope 3 category 13 – downstream leased assets
(market-based)
3
0 0
Scope 3 category 15 – investments
4
227,524 Not calculated
Total energy consumed (kilowatt hours)
6,013,939 5,460,285
Scope 1 and 2 (and associated scope 3) emissions intensity ratio (kg of CO
2
e/per customer) 0.79 1.02
1 We used average electricity and gas consumption data in December 2022 for one of the Vanquis Bank offices as the invoices for that period were
outstanding at the time of reporting. The market-based emissions from two suppliers are in CO
2
and not CO
2
e (i.e. do not include non-CO
2
emissions);
however, the variance between CO
2
and CO
2
e is considered to not be material.
2 This year, we have included the ‘well-to-tank’ emissions for UK electricity (generation) as part of Category 4 reporting.
3 The market-based method was used to calculate the emissions associated with an office that is leased by the Group.
4 The emissions from the vehicles that are financed by the Group are based on the number of vehicles that are on a contract that is active as at 31 December 2022.
Strategic report
49
In reporting our emissions we follow the GHG Protocol
Corporate Accounting and Reporting Standard to calculate
Scope 1, 2 and 3 emissions that are material to our UK
operations. We use a financial control approach to account
for our GHG emissions and use emission conversion factors
from BEIS/Defra’s GHG Conversion Factors for Company
Reporting 2022. Our reported scope 1 emissions are those
generated from gas and oil used in buildings, and emissions
from fuels used in the small number of company owned
vehicles used for business purposes. Our reported scope
2 emissions are those that arise from the use of electricity
and are calculated using both market and location-based
methodologies. Where electricity suppliers can provide
us with the relevant conversion factor, we have used the
market-based method; otherwise, we use the location-based
method. We also report the GHG emissions (scope 3 –
category 3) associated with the production, transportation
and distribution of fuels used by transport and utilities
providers. In addition, we also report the following categories
of scope 3 emissions which are material to our business
activities: fuel and energy-related activities (category 3);
waste generated in operations (category 5); business travel
(category 6); and employee commuting (category 7).
In terms of reporting our supply chain GHG emissions, we
have reported the scope 3 category associated with the
purchased goods and services (category 1) we use across the
Group. To calculate category 1 emissions, we have used the
spend-based method, and have used BEIS guidance.
Finally, scope 3 GHG emissions associated with two
downstream activities are considered to be material to the
Group’s operations and stakeholders. These are: downstream
leased assets (category 13) which account for the emissions
that arise from the subletting of No.5 Godwin Street, Bradford;
and investments (category 15) which relate to the financed
GHG emissions associated with the vehicle finance we
provide to our customers. In terms of the latter category,
these emissions were calculated using data that is held
by our vehicle finance business.
As mentioned above, the Group is currently in the process
of setting carbon reduction targets that will be approved
by the SBTi. These targets will be set in respect of our scope
1 and 2 emissions, and scope 3, category 1 emissions which
are associated with the goods and services that we purchase.
The Group is required to set a target in relation to its scope
3, category 1 emissions because of the contribution they
make to our overall carbon footprint. This is despite the
contribution made to the Group’s overall carbon footprint
by our scope 3, category 15 emissions being larger. However,
the SBTi’s most recent guidance for the financial services
sector indicates that there is currently no methodology that
would enable a carbon reduction target to be set in relation
to these emissions. Setting a target for these emissions is
also dependent on all consumers, including those on lower
incomes, being able to afford electric vehicles as well as
an effective charging infrastructure being developed and
implemented across the UK. We will continue to identify
opportunities to set additional climate-related targets
as more data becomes available, methodologies get
developed, and we gain more experience in target setting.
Reducing the carbon intensity of our operations
To achieve our net zero goal, we continue to focus on
improving the energy efficiency of our operations. We do this
by driving energy efficiency across our business premises
and by ensuring good practice and installing more efficient
lighting systems where possible. We also continue to offset
our GHG emissions through the purchase of carbon credits
in renewable energy projects. This year, we have shifted our
approach to carbon offsetting. Instead of financing projects
which are now considered to be carbon avoidance, we have
financed two carbon capture projects, one locally and one
overseas. By doing this, our approach to offsetting supports
the removal of carbon from the atmosphere. In doing so,
we have offset 3,000 tonnes of CO
2
e in the Scottish ReGrow
project, which aims to restore a diversity of woodland types
to Scotland, prioritising the pinewood and riparian woodland
habitats, and 5,000 tonnes of CO
2
e in the Forests Planting
in Panama project, which aims to mitigate the impact of
sourcing timber from rainforests which has resulted in the
depletion of tropical rainforests. This accounts for all our
scope 1 and 2 emissions, as well as the scope 3 emissions
associated with all our fuel- and energy-related activities,
upstream transportation and distribution, waste generated
in our operations, business travel and colleague commuting
and some of the emissions that result from the goods
and services we purchase.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
50
Section 172(1) statement
The directors have acted in a way that they
considered, in good faith, would be most likely
to promote the success of the Company for the
benefit of its members as a whole, having regard
to the matters set out in section 172(a)–(f) of the
Companies Act 2006 (s.172).
Stakeholder engagement
The Board’s engagement with stakeholders is
informed by the Group’s stakeholder engagement
strategy (see pages 85 and 102) which drives
effective and strategic relations between the
Board and its key stakeholders, taking into account
differing stakeholder interests and methods
of engagement.
Our stakeholders, how we’ve engaged with them during
2022 and the outcomes of this engagement can be
found on page 82.
Principal decisions
s.172 of the Companies Act 2006 ultimately
requires effective decision making by the Board.
The decisions of the Board are led by the Group’s
Purpose, culture and strategy, designed to deliver
long-term value for its stakeholders. Key activities
undertaken by the Board during the year are
detailed on page 76 and the principal decisions
made by the Board are detailed on pages 51, 75,
77 and 85.
Disclosures relating to how the directors have
discharged their responsibilities under s.172 are
integrated throughout the Strategic and Governance
Report; please see the table opposite for references
throughout this report.
More information on our Board’s commitment to setting
and driving strategy can be found on page 74.
Section 172 provision Relevant disclosure Pages
The likely
consequences
of any decision
in the long term
Chairman’s statement
Strategic Priorities
Our approach to sustainability
TCFD disclosure
Stakeholder engagement
Principal risks and uncertainties
Viability Statement
Board activities
Corporate Governance Report
Nomination Committee Report
Directors’ Remuneration Report
Directors’ Report
Engagement with shareholders
69
22
16
40
82
59
67
76
68
95
119
112
87
The interests of
the Company’s
employees
Chairman’s statement
CEO’s review
Our people
Stakeholder engagement
Principal risks and uncertainties
Chairman’s introduction to governance
Value for our stakeholders
Board activities
How the Board monitors culture
Our Designated Non-Executive
Colleague Champion
69
8
39
82
59
69
20
76
79
86
The need
to foster the
Company’s
business
relationships
with suppliers,
customers
and others
Chairman’s statement
CEO’s review
Business model
Strategic Priorities
Our approach to sustainability
Non-financial information statement
Ethics and governance
Stakeholder engagement
Our customers
Principal risks and uncertainties
Corporate Governance Report
Board activities
Engagement with shareholders
69
8
20
22
16
52
38
82
3
59
68
76
87
The impact of
the Company’s
operations on
the community
and the
environment
Chairman’s statement
CEO’s review
Our approach to sustainability
TCFD disclosure
Non-financial information statement
Ethics and governance
Stakeholder engagement
Principal risks and uncertainties
Board activities
69
8
16
40
52
38
82
59
76
The desirability
of the Company
maintaining a
reputation for
high standards
of business
conduct
Chairman’s statement
CEO’s review
Our people
Our approach to sustainability
TCFD disclosure
Non-financial information statement
Ethics and governance
Stakeholder engagement
Board activities
How the Board monitors culture
Board evaluation
Audit and Risk Committees
69
8
39
16
40
52
38
82
76
79
93
103-111
The need
to act fairly
as between
members of
the Company
Stakeholder engagement
Engagement with shareholders
Board activities
Directors’ Remuneration Report
Business model
82
87
77
119
20
Section 172(1) statement
Decisions
Stakeholders
Purpose and
culture
Strategy
Vanquis Banking Group plc Annual Report and Financial Statements 2022
51
Strategic report
Decision making for long-term success
Board discussion and decision making is informed by the
interests of our key stakeholders. Board papers contain
analysis of the impact of the proposal on the Group’s
stakeholders and how the provisions of s.172 have been
considered. The Board acknowledges that the Group has
a wide range of stakeholders with differing interests and
priorities, and decisions will not always result in a positive
outcome for all stakeholders. The Board therefore seeks to
balance stakeholders’ competing interests in order to make
balanced decisions that drive the Company’s long-term
success. Being led by the Group’s Purpose, culture and
strategy, the Board ensures that decisions are consistently
made with the intention of promoting the long-term success
of the Group and delivering sustainable value to our stakeholders
as a whole. During 2022 the Board made several principal
decisions that demonstrate this commitment. You can read
about these principal decisions, including the Board’s decision
making process and considerations in reaching their decision,
below and on pages 51, 75, 77 and 85.
Principal decision: Consolidating our loans strategy supported by a unified Group-wide technology platform
The Board approved the consolidation of Sunflower Loans and Vanquis loans into a single product under the Vanquis brand
supported by an agile Group-wide technology platform known as Gateway. You can read more about this on page 34.
Decision making process
The Sunflower loan and Vanquis open market loan products
were launched on a pilot basis last year and the performance
of these pilots were monitored by management, using KPIs
and governance committees. The Board received updates
on the performance of the pilots via reports from the CEO.
Following the conclusion of the pilots, the Board reviewed
the financial performance and KPIs of the two pilot products
and decided that the products be consolidated into a single
Vanquis branded loan with a lower risk target market and
lower APR.
Strategy and Purpose
The Board considered that the consolidated loan product
aligned with the Group’s strategic positioning as a mid-cost
credit provider and provided an opportunity for the Group
to grow its share in the target market through the clarity of
a single-brand loan product. Furthermore, the consolidated
proposition supported the Group’s Purpose to help put
people on a path to a better everyday life as a wider product
range would be offered to the millions of adults in the UK not
currently well served by the mainstream credit companies.
The Board discussed the risks and mitigations in proceeding
with the proposal to continue its open market loan product
under the Vanquis brand at larger volumes.
Challenges
The Board considered the risk that the volume of change
and migration to the Gateway platform might cause
disruption to customers and would require additional
resources to support the technology delivery requirements.
The Board received assurance from management that the
migration would be closely monitored, that change would
be implemented within the Group’s change governance
framework, and that mitigation plans had been devised
to minimise and resolve any potential disruption.
Balancing stakeholder interests
The needs of our customers were a key consideration in the
Board’s decision making. It was recognised that the greater
range of APRs should enable our customers to access the
right product at the right time in their customer journey,
and allow us to reach a wider customer base. While the
decision to consolidate the loans under the Vanquis
brand aligned with the Group’s strategy and Purpose, and
provided the greatest opportunity for long-term growth
and shareholder returns, the Board recognised that not
proceeding further with Sunflower branded loans following
the pilot would impact colleagues who had worked on the
brand during its pilot. Management provided assurance
to the Board that the impact on colleagues would be
communicated and managed effectively, with appropriate
support provided.
Links to stakeholders
Links to strategy
2
3
Links to risks
P4
P5
P11
P12
Links to s.172
Links to strategy
Find our key risks
on page 57
P
Links to risks
1
People and Culture
2
Growth and Sustainability
3
Customer and Community
Links to s.172Links to stakeholders
Customers
Investors
Colleagues
Regulators
Debt providers
Communities
Government
Suppliers
Pensioners
Acting fairly as between members
The likely consequences of any
decision in the long term
The interests of employees
Business relationships with
suppliers, customers and others
The impact on the community
and the environment
Maintaining a reputation for high
standards of business conduct
Vanquis Banking Group plc Annual Report and Financial Statements 2022
52
Information on the Group’s non-financial impact can be found throughout the report. The table below explains how the Group
meets the non-financial reporting requirements of the Companies Act 2006.
The Group remains committed its Purpose of helping to put people on a path
to a better everyday life and its mission to be the first-choice bank for those
excluded from accessing financial services by traditional lenders. You can
read about the re-naming of the Group to better align with our strategy
on page 75.
Our colleagues are central to the Group’s long-term success and the
achievement of its mission. We continue to work to enhance our workplace
culture and maximise colleague engagement.
Supporting policies: Inclusion and Diversity Policy, Family Friendly Policy
and Mental Health and Wellbeing Policy.
Due diligence: All People policies were reviewed during 2022 to ensure a
unified approach under the new shared corporate services model. Diversity
metrics are closely monitored (see Nomination Committee Report on page
95). Health and safety training is mandatory for all new colleagues and there
is regular refresher training throughout the year.
Risks and risk management: People risk (page 64).
Measurement: Colleague engagement is measured through our Group
colleague surveys (page 81).
Supporting policies: Environmental Management Policy, Climate Principal Risk
Policy and Procurement Policy.
Due diligence: The Group reports in line with the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD) which enables us to
consider the impact of climate-related risks and opportunities on the Group’s
financial performance. Also, the Group’s supplier due diligence processes and
procedures involve engaging with suppliers to understand their exposure to
material climate-related risk and carbon reduction commitments.
Risks and risk management: Climate risk (page 62) and conduct
and regulatory risk (page 63).
Measurement: Pursuant to the FCA’s Listing Rule 9.8.6R(8) and the Companies
(Directors’ Report) and Limited Liability Partnership (Energy and Carbon
Report) Regulations 2018, the Group publishes an annual TCFD Report and
discloses comprehensive environmental data in its Annual Report and
Accounts and standalone Sustainability Report -
www.vanquisbankinggroup.com/sustainability. The Company also makes
an annual submission to the CDP. Finally, as a signatory to the UN Global
Compact, the Company is aligned with its environmental principles
and reports on its progress annually -
www.vanquisbankinggroup.com/sustainability/responding-climate-change.
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Strategic report
The strategy of the Group’s community investment programme is to invest in
activities and initiatives which seek to address some of the key factors which,
on their own or acting together, can reduce social and/or financial inclusion.
Supporting policies: Community Involvement Policy and Volunteering
and Matched-Funding Policy.
Due diligence: The Group’s community investment strategy is reviewed and
approved by the Group Executive Committee and the Board on an ongoing
basis. This involves ensuring that the Group’s investments have a sustainable
benefit to the communities it serves and the business itself. A dedicated team
is responsible for the design, development and delivery of the Group’s
community investment programme.
Risks and risk management: People risk (page 64) and legal and governance
risk (page 62).
Measurement: The Group reports on the amount it has invested in its
community investment activities, as well as the social impacts that have been
delivered, in its Annual Report and Accounts and standalone Sustainability
Report - www.vanquisbankinggroup.com/sustainability. This is done using the
Business for Social Impact B4SI Framework so that the Group can understand
the differences its contributions make to business and society. The Group’s
colleague surveys are also used to understand colleagues understanding of,
and engagement with, the Group’s community investment programme.
The Group is committed to supporting and respecting human rights and, as
such, is opposed to slavery and human trafficking in both its direct operations
and in the indirect operations of its supply chains. As such, the Group will not
knowingly support or do business with any organisation involved in slavery
or human trafficking.
Supporting policies: Human Rights and Modern Slavery Policy, Procurement
Policy, Diversity Policy and Whistleblowing Policy.
Due diligence: The Group has well-established supplier due diligence
processes and procedures to manage supply chain-based risks and ensure
suppliers comply with the Group’s policy requirements and meet legislative
requirements including those that relate to the Modern Slavery Act 2015.
Across the Group, all new suppliers are assessed for the types of potential
risks they pose and are sent questionnaires covering issues such as financial
stability, data protection, information security, business continuity, regulatory
compliance, and corporate responsibility.
Risks and risk management: Legal and governance risk (page 62), people risk
(page 64), and conduct and regulatory risk (page 63).
Measurement: Pursuant to the UK Modern Slavery Act 2015, we produce
a Modern Slavery Statement
www.vanquisbankinggroup.com/modern-slavery-statement. Also, as a
signatory to the United Nations Global Compact, the Group is aligned with
its human rights and labour standards and reports on its progress annually
- www.vanquisbankinggroup.com/sustainability/our-policies.
Supporting policies: Anti-Bribery and Corruption Policy, Corporate Hospitality
Policy and Whistleblowing Policy.
Due diligence: The Group has a zero-tolerance approach to bribery and
corruption and all colleagues undertake mandatory training. The Audit
Committee oversees compliance with the Corporate Hospitality Policy
and the Board oversees the Whistleblowing Policy.
Risks and risk management: Conduct and regulatory risk (page 63).
Measurement: Completion of mandatory training is monitored;
whistleblowing reports are overseen by the Board; and any matters relating
to corporate hospitality are monitored by the Audit Committee.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
54
Risk management and principal risks
Building an effective and sustainable
In 2022, we successfully implemented the
Group’s risk strategy and Risk Harmonisation
Programme. This has enabled the Risk
function to provide a greater level of insight,
challenge and support to the Group in
helping put our customers on a path to a
better everyday life. Vanquis Banking Group
now has a strong risk awareness, culture
and control environment to support the
management of its risks consistently and
effectively. In 2023, we will embed these
enhancements and generate further
Group Chief Risk Officer
Vanquis Banking Group has heavily invested in upskilling
the Risk function over the last two years and will continue
this through the implementation of risk investment priorities,
which form part of Vanquis Banking Group’s Risk Strategic
Framework 2023-2026. The Risk function is structured to
ensure we have sufficient expertise to provide support and
robust challenge across our principal risks. We also have a
fit for purpose process for detecting and reporting emerging
risks. In an economic environment where credit risk is top
of mind, we constantly review our credit risk capability and
strength in terms of succession planning and to address any
gaps in knowledge, experience and diversity. We have also
successfully implemented a Group-wide integrated Risk
Management System which enhances efficiency and enables
the function to be more strategic in its activity.
We have organised the Risk function and wider business to
understand and proactively prepare for regulatory change.
We continuously scan the horizon to ensure we are aware of all
relevant new and forthcoming regulation and communicate
the output of this activity with the business on a regular
basis. The current economic environment and ‘cost of living
crisis’ is very much top of mind, and we have enhanced and
intensified our credit risk monitoring and reporting to help
identify and mitigate the risks we are exposed to in relation to
this. We maintain a positive and proactive relationship with
our regulators and meet regularly to discuss our approach on
a wide range of topics, including our approach to regulatory
obligations and the performance of our book across each of
our products. We have prepared for the implementation of
the FCA’s Consumer Duty regulation, which come into effect
in 2023, to ensure we can demonstrate delivery of customer
centricity and optimal customer outcomes.
In response to the current economic environment and ‘cost
of living crisis’, our focus for 2023 is primarily on credit risk
to ensure the business we write is both sustainable and
supports good consumer outcomes. We are also challenging
and overseeing the implementation of the IT risk strategy as
Vanquis Banking Group moves off its legacy systems and
onto a modern cloud-based platform (Gateway). The Group
demonstrated a strong execution capability throughout
2022, which will remain a key requirement as we continue to
execute significant strategic and operational change in 2023.
The improvements made with respect to risk management
are yielding benefits and we will continue to embed these
throughout 2023.
Q&A
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Strategic report
We continue to enhance our risk
management capabilities through
to support the management of our
strategic risk pillars.
Group Chief Risk Officer
During 2022, the Group continued to strengthen its risk
management capabilities and is embedding these into
business-as-usual practices. This has been delivered primarily
through the Risk Harmonisation Programme which sought
to implement a consistent and best practice Enterprise Risk
Management Framework (ERMF) and associated policies,
tools, systems and processes.
Risk management is recognised as an integral component
of good management and governance. In the context
of Vanquis Banking Group, it is critical to enable us to
optimise our shareholder return while maximising our
business opportunities and positive outcomes for all our
key stakeholders, which include shareholders, customers,
colleagues and regulators. The Group Risk Management
Framework plays an important role in supporting the Group
Board and Executive in implementing an integrated business
strategy. The Framework is based around an ‘enterprise’
approach, enabling a single view of all risks and managing
those risks in a consistent way up, down and across
the enterprise.
Our Purpose, strategic drivers and behaviours combine to
drive us to always do the best we can for our customers
and colleagues. We promote a risk culture that supports
appropriate risk awareness, behaviours and judgements
in the level of risk we are willing to take. Our culture is
underpinned by an appropriate balance between risk and
reward, with accountabilities reinforced through the Senior
Managers and Certification Regime (SMCR). Risk objectives are
also included as part of non-financial measures in Group and
product executive scorecards and we have embedded a Risk
Adjustment Framework to formally record the linkage between
risk management and reward. We have further strengthened
this approach by mandating all employees, irrespective of
seniority and business area, to have a risk objective as part
of the Group performance management process. Supporting
this, the Risk function delivered significant levels of risk training
to risk and control owners throughout 2022.
The Group defines its risk appetite as the amount and type
of risk the organisation is prepared to seek, accept, or tolerate
at any point in time, and measured over a rolling 12-month
period. Our risk appetite is holistic and covers the 13 principal
risks detailed later in this report. The Board is responsible
for approving the Group’s risk appetite statements at least
annually with the supporting Board-level metrics cascaded
into more detailed business appetite metrics, limits and
thresholds at a product level.
The Group has continued to make significant progress
on key initiatives to strengthen and embed its overall
risk governance, frameworks and capabilities.
– The Risk function was fully centralised in 2022,
consolidating the legacy divisional risk teams,
removing siloed operating models, and harmonising
best practice ways of working. The Risk Leadership
team was enhanced with the appointment of a
Chief Conduct and Compliance Officer and Chief
Credit Officer. This also included recruitment and
reorganisation to enhance oversight of key risk
areas such as treasury, operational, conduct
and information technology risks.
– We have implemented an integrated Risk
Management System (Riskonnect) that provides
a central and secure repository of risk information
across our three lines of defence. Implementation
of the system has significantly enhanced our risk
management capability, improved risk and control
effectiveness, and realised resource efficiencies
with the automation of processes and reporting.
– The Group Risk Management Framework and
supporting policies, which include the processes for
identifying and measuring risks, were consolidated,
improved and embedded into operational practice
across the Group.
– The Risk and Control Self-Assessment (RCSA)
processes for IT and non-IT (operational) risks were
subject to a budgeted programme of improvement
activity, jointly sponsored by the Chief Operations
Officer, Chief Information Officer and Chief Risk
Officer. The objective of this activity was to enhance
the accuracy, completeness and reliability of risk
and control data and to streamline the end-to-end
process in readiness for RCSA transitioning onto the
newly implemented Risk system.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
56
Risk management and principal risks continued
We’re here to help put people on a path to a better everyday life
Credit
Capital
Legal and governance
People
Operational
Strategic execution
Market
Funding and liquidity
Conduct and regulatory
Climate
Technology and information security
Financial crime
Model
Maintaining a secure and efficient
capital and funding structure
Delivering sustainable growth
and returns to our shareholders
Optimising our reputation
and becoming the trusted bank
for the underserved
Establishing a strong risk
and customer-centric culture
Maintaining operational resilience
and business capabilities
Managing execution risk associated
with strategic and operational
change activity
The Group Risk Appetite Framework creates a clear link between Vanquis Banking
approach through which the Group’s risk appetite is established and communicated.
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Strategic report
We will maintain sufficient capital, both in quantity and quality, to meet regulatory requirements and will hold
a management buffer as agreed with the Board.
The Group will manage our credit risk exposures through effective underwriting processes, systems and controls
to support appropriate lending decisions.
Our funding risk appetite is to maintain a stable and prudent funding profile without any significant reliance on any single
source of funds, retaining a sufficient level of unencumbered assets and unutilised funding sources as contingency.
Our liquidity risk appetite is to maintain sufficient liquidity resources to be able to meet our liabilities as they fall due,
whether in normal conditions or stress, while also meeting our regulatory requirements.
We will seek new business opportunities, both organic and inorganic, which remain aligned to our customer, regulatory
and commercial objectives, and execute in controlled and sustainable manner.
We will aim to avoid any material legal breaches. In the event they do occur, we will, where possible, correct them
promptly and in all cases carry out necessary management to mitigate risks and learn from our mistakes. We will
maintain oversight of our business through robust and clearly documented governance and delegation arrangements.
We will ensure that under a severe and adverse change in interest rates, any risk to our capital (economic value)
or earnings remains within levels agreed with the Board and for which Pillar 2A capital is held.
We will operate a strong and risk-proportionate set of systems and controls to detect and prevent financial crime breaches.
In the event that they do occur, we will investigate them promptly and learn from control failings, gaps or issues. We will
maintain oversight of our business through robust and clearly documented governance and delegation arrangements.
We will deliver fair outcomes for our customers at all stages of the customer lifecycle. We will aim to avoid any material
regulatory breaches and, in the event that they do occur, we will correct them promptly and learn from our mistakes.
We will maintain a properly engaged and skilled workforce who are aligned to our Purpose and Group culture.
We will maintain robust, resilient technology platforms/systems and services with strong information security and data
controls to prevent significant customer detriment, regulatory breaches or reputational damage.
We will limit operational losses as a result of control failures attributed to people, processes and systems including
those over external suppliers.
We will understand, review and address our exposure to climate risks, meet our commitments on climate targets and
reporting in line with relevant Government legislation and recommendations, and seek new opportunities arising from
climate change. We will ensure that our climate targets are set in line with our commitment to support the UN’s Business
Ambition Campaign to hold the increase in global temperatures to 1.5°C above pre-industrial levels.
Through strong governance, material risks of using models will perform in line with expectations.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
58
Risk management and principal risks continued
The Vanquis Banking Group risk governance structure is outlined below. In combination, the various Board,
executive and risk committees strengthen our ability to identify, assess, manage and report risks, while
supporting Vanquis Banking Group in responding to the changing external and regulatory environment.
Reviews Vanquis Banking Group’s Risk Management Framework annually to ensure that it remains fit for purpose
and complies with relevant laws and regulations including the 2018 UK Corporate Governance Code.
Board committee responsible for ensuring that there
is an appropriate Risk Management Framework
embedded across the Group, monitoring key risk
positions and trends, and providing oversight and
advice to the Board in relation to the current and
potential future risk strategy and exposures.
Board committee responsible for reviewing Vanquis
Banking Group’s culture and business processes to
ensure they are focused on delivering fair customer
outcomes, overseeing the Group’s delivery and
embedding of its Blueprint and ensuring the Board
meets its corporate governance requirements under
the 2018 UK Corporate Governance Code.
Executive Committee, chaired by the CEO, responsible for developing, proposing
and implementing Board approved strategy. In doing so, it is responsible for managing
the Group strategic risks and overseeing product risks.
Vanquis Banking Group operates a 3LOD model to articulate key accountabilities and responsibilities
for managing risk and to support effective embedding of risk management across the organisation.
Owns the risk and is responsible for identifying, assessing, monitoring and reporting risk within its respective areas
whilst ensuring that appropriate internal controls, processes and systems are in place to deliver against business
strategy and objectives.
Establishes the Risk Management Framework and policies and supports the first line in developing minimum control
standards and expectations to manage risk. Provides independent oversight of governance, risk management and controls
across the Group to ensure risks are identified, measured, managed and reported appropriately.
Provides independent and objective assurance on the design adequacy and operational effectiveness of internal controls,
and overall effectiveness of Vanquis Banking Group’s risk governance and risk management practices, and provides
assurance on whether the first and second lines of defence fulfil their respective responsibilities.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
59
Strategic report
business model and have formally been articulated as part of its Risk Appetite Framework. Principal
risk categories and associated risk appetite statements are reviewed and approved by the Board
1
2
3
The risk that the Group
fails to maintain
the minimum
regulatory capital
requirements and a
management buffer on
a consolidated basis
to cover risk exposures
and withstand a
severe stress as
identified as part of
the Internal Capital
Adequacy Assessment
Process (ICAAP).
– The Group and Bank maintain capital ratios in excess of regulatory requirements. The capital risk metrics are
regularly monitored at Asset and Liability Committee (ALCO), the Risk Committee and the Board, and are subject
to other internal management reviews. This includes ensuring that capital resources are sufficient for planned
changes in the balance sheet, and consideration of changes in the regulatory environment. On 8 March 2023
the Group announced an update about our capital requirements from the PRA, following conclusion of its
Capital Supervisory Review and Evaluation Process. The outcome was a reduction in the Group’s Total Capital
Requirement by more than a third, from 18.3% to 11.9%.
– In line with the PRA’s requirements, the Group’s Internal Capital Adequacy Assessment Process (ICAAP) is updated at
least annually. Challenge and oversight of the ICAAP occurs at ALCO and Risk Committee before approval by Board.
– The 2022 ICAAP is the first assessment since the closure of the Consumer Credit Division (CCD). As CCD
has been removed from the assessment, the associated capital requirements have reduced. The ICAAP
demonstrated that the Group and Bank are more than adequately capitalised.
– The methodology for assessing capital risks takes the Pillar 1 requirements for credit, operational and market
risks as a starting point. The assessment then considers whether the Pillar 1 requirement is sufficient to cover
management’s own assessment of the risks (such as credit concentration, operational, pension and interest
rate risk). Where it is considered that additional capital is required, this is held as a Pillar 2A requirement.
The combination of Pillar 1 and Pillar 2A requirements form the total capital requirement (TCR).
– To protect against the risk of consuming Pillar 1 and Pillar 2A requirements, firms are subject to regulatory
capital buffers. Where relevant a firm-specific PRA buffer is also applied.
– The overall capital requirement (OCR) for the Group and Bank is comprised of: (i) the TCR (covering Pillar 1
and 2A) set by the PRA after review of the ICAAP; (ii) the combined buffers; and (iii) a PRA buffer set by the PRA.
– At 31 December 2022, the Group’s CET1 ratio was 26.4% (2021: 29.1%), the TCR was 37.5% (2021: 40.6%) and the OCR
was 21.8% (2021: 20.8%), excluding any confidential buffers, if applicable. The Group and Bank also monitors the
Leverage Ratio which was 21.0% (2021: 18.1%). By 1 January 2022, around 75% of all transitional adjustments had
been absorbed through capital resources, with the remaining transitional adjustment to be fully unwound on
1 January 2023. On a fully loaded basis, the Group capital resources are in excess of its capital requirement.
– In December 2021, the Financial Policy Committee (FPC) announced an increase to the UK Countercyclical
Capital Buffer (CCyB) rate to 1%, to be implemented by 13 December 2022. In July 2022, the FPC confirmed
a further expected increase to 2%, effective 5 July 2023. The impact of this on the Group’s OCR is expected
to be partly offset by a confirmation from the PRA that the temporary 0.56% buffer (being the CET1 portion
of the PS15/20 2A reduction) imposed due to uncertainty arising from Covid-19 will be removed, effective
31 December 2022. The Group and Bank already have sufficient capital resources to fully absorb the net
increase of 1.44%.
– The Group and Bank have elected to adopt the transitional adjustments for IFRS 9. The transitional adjustments
have historically had a material impact on the Group’s and Bank’s regulatory capital position due to high levels
of provisioning. By 1 January 2022 around 75% of all transitional adjustments had been absorbed through capital
resources. With the remaining transitional adjustment to be fully unwound on 1 January 2023.
– Given the robustness of the Group’s financial position and the Group’s first half performance, an interim
dividend was announced as part of the 2022 interim results. Prior to this the Group had not paid a dividend
since the 2019 interim dividend.
– If the Group or Bank was to encounter a significant stress on capital resources, a Recovery Plan is maintained
which includes options to ensure that they can remain sufficiently capitalised to remain viable. Recovery Plan
Early Warning Indicators (EWIs) and Invocation Trigger Points (ITPs) are regularly monitored and reported against.
During 2022, the Recovery Plan was enhanced to ensure compliance with latest regulatory guidance, as well as
ensuring that all recovery options were appropriately considered. The Group and Bank continue to have a wide
range of recovery options available.
– As part of the intra-group funding arrangement, a Core UK Group (CUG) waiver was approved in November 2022
which allows Vanquis to utilise retail deposits to fund the different parts of the Group, resulting in lower cost
of funds for the non-bank group. As part of considerations over Vanquis Bank’s CUG waiver application, a Capital
Support Agreement (CSA) was granted by Moneybarn in favour of Vanquis Bank. The CSA, in circumstances
where Vanquis Bank is failing to meet its solo capital requirements, requires Moneybarn to contribute any
excess capital, or liquidity, it holds to Vanquis Bank. In addition, Moneybarn was capitalised as if it were
a regulated entity, based on the Group’s 2022 ICAAP.
– The Group’s Pillar 3 disclosures contain a comprehensive assessment of its capital requirement and resources.
Pillar 3 disclosures for the year ended 31 December 2022 are published separately on the Group’s website,
www.vanquisbankinggroup.com.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
60
§
1
2
3
The risk that the Group has
insufficient financial resources
to meet its obligations (cash
or collateral requirements)
as they fall due, resulting in
the failure to meet regulatory
liquidity requirements, or is only
able to secure such resources
at excessive cost.
– Funding and liquidity risks are managed within a comprehensive risk framework. This framework
ensures that the Group and the Bank maintain stable and diverse funding sources and a sufficient
holding of high-quality liquid assets such that there is no significant risk that liabilities cannot be met
as they fall due. Funding and liquidity requirements are regularly monitored to support the strategy
of the Group and Bank.
– Funding and liquidity risk is managed by the Group’s Treasury function and is overseen by the
ALCO Funding and liquidity metrics are monitored daily through daily liquidity reporting and monthly
at ALCO meetings. Metrics are also included in the information packs presented to the Group’s ExCo,
Risk Committee and Board.
– The primary metrics used to monitor and assess the adequacy of liquidity is the Overall Liquidity
Adequacy Rule (OLAR) (which is the Board’s own view of the Group and Bank liquidity needs as set out
in the Board approved Internal Liquidity Adequacy Assessment Process (LAAP)), the Liquidity Coverage
Ratio (LCR), and Net Stable Funding Ratio (NSFR). Liquidity is managed by working to ensure compliance
with the most binding metric and is monitored on a solo and consolidated basis.
– During 2022, a significant amount of work was undertaken to update the ILAAP. The 2022 Board
approved ILAAP is the first ILAAP prepared for the consolidated Group and excludes the CCD which
was closed in December 2021. The ILAAP demonstrates that the Group and Bank have sufficient
high-quality liquid assets to meet severe but plausible stress scenarios.
– Treasury conducts regular and comprehensive liquidity stress testing to ensure that the Group
and Bank’s liquidity position remains within the Board risk appetite. Stress testing covers idiosyncratic,
market-wide and combined stress scenarios, including reverse stress testing.
– The Group and Bank have maintained liquidity ratios in excess of regulatory and internal requirements
throughout the year and continue to hold significant levels of high-quality liquid assets (HQLA).
The liquidity position was managed to more normalised levels following action that was taken during
the Covid-19 pandemic.
– Throughout the year, the Bank has demonstrated that it continues to have access to the retail deposit
market through fixed rate deposits. The Bank is seeking to widen the range of retail deposit products
that it offers, increasing the pool of retail deposits it has access to as well as helping to alleviate
upward movements in funding cost.
– Following the approval of the CUG waiver, retail deposits will provide most of the funding for the Group,
resulting in lower cost of funds. Wholesale funding sources will be maintained to ensure diversity of
funding sources and provide contingent funding options.
– If the Group or Bank was to encounter a significant stress on liquidity resources, a Recovery Plan
is maintained which includes options to ensure that they can remain sufficiently liquid to remain
viable. Recovery Plan Early Warning Indicators (EWIs) and Invocation Trigger Points (ITPs) are regularly
monitored and reported against. During 2022, the Recovery Plan was enhanced to ensure compliance
with latest regulatory guidance, as well as ensuring that all recovery options were appropriately
considered. The Group and Bank continue to have a wide range of recovery options available.
People and Culture
1
Growth and Sustainability
2
Customer and Community
3
Risk management and principal risks continued
Principal risks continued
Risk improving
(overall level of risk is decreasing)
Risk stable
(no change)
Risk deteriorating
(overall level of risk is increasing)
Vanquis Banking Group plc Annual Report and Financial Statements 2022
61
Strategic report
§
1
2
3
The risk that the net value of, or
net income arising from, assets
and liabilities is impacted as
a result of changes in market
prices or rates, specifically
interest rates, currency rates
or equity prices.
– Market risk is managed by the Group’s Treasury function and is overseen by the ALCO. The Group
and Bank do not take significant unmatched positions and do not operate trading books.
– The Group and Bank use interest rate sensitivity gap analysis to inform the Group and Bank of any
significant unmatched positions.
– The interest rate risk position is reported on a monthly basis to the ALCO and includes risk appetite
metrics set for both earnings at risk (EaR) and market value sensitivity (MVS). These are assessed
against a 100bps and 200bps parallel shift in rates respectively.
– The Group and Bank also monitor their exposure to economic value of equity (EVE), against a 200bps
parallel shock in interest rates, as well as the six standardised shocks prescribed by the Basel
Committee on Banking Supervision (BCBS).
– Throughout 2022, a significant amount of work has been undertaken to validate the interest rate risk
position on a behavioural basis and introduce the capability to transact interest rate derivatives
to manage the residual interest rate risk position. This culminated in the transaction of interest rate
derivatives (SONIA linked) in the second half of the year.
– The Group and Bank monitor their exposure to basis risk, with Bank of England base rate and SONIA
the only external reference rates used. The Group does not have any exposure to LIBOR.
– The Group continues to monitor potential implications for the strategy in response to financial
market turbulence and undertakes reviews of product pricing to ensure it is consistent with markets
and cost of funds.
§
1
2
3
The risk of unexpected credit
losses arising through either
adverse macroeconomic
factors or parties with whom the
Group has contracted failing to
meet their financial obligations.
– Credit risk remains a key focus for the Group given the current macroeconomic environment.
– The Group continues to monitor the impact of the cost of living crisis on portfolio performance,
and internal measures have been put in place to help mitigate potential risks. These include, but are
not limited to, alignment of creditworthiness assessments to the latest official inflationary outlook,
production of targeted management information, and enhanced forbearance programmes. Ongoing
executive focus is maintained through a Cost of Living Forum, jointly chaired by the CRO and the COO,
together with standard Risk Committee reporting.
– The Group’s credit risk appetite is under regular review by the Credit Committee and Risk Committee
to ensure that it remains aligned to current market and economic conditions.
– A cross-functional working group is in place to create a centre of excellence for calculation of
provisions under IFRS 9. The working group ensures that there are suitably skilled resources with clear
accountabilities, effective governance arrangements, optimised models, aligned activities and
effective management information and insights across the Group.
– Performance of risk models is being closely monitored by the Group, with adjustments implemented
where any continued deviation from expected performance is evidenced.
– The Group continues to pursue opportunities to supplement existing data sources to enhance
both credit and affordability risk, i.e. open banking.
1
2
3
The risk of making and/
or executing poor strategic
decisions related to acquisitions,
products, distribution, etc. as a
result of ineffective governance
arrangements, processes
and controls.
– The Board and its sub-committees make risk-based decisions in the formulation of their business
strategy, in line with their Delegated Authority Framework and Risk Appetite Framework and subject
to independent oversight from the Risk function.
– Board Governance Manual and Delegated Authorities Matrix (DAM) is in place to provide a framework
for key decision making at all levels across the Group.
– Executive director scorecards are in place, with reward incentives based on a combination of financial
and non-financial measures.
– Group Risk Appetite Framework is in place with agreed metrics and thresholds approved by the Board.
– Strategic and emerging risks are reported to the GEC and GRC on any areas of concern.
– Risk overlay is completed annually by the Group CRO on behalf of the Remuneration Committee
(RemCo) to provide recommendations on adjustments to variable reward where governance has failed.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
62
§
1
2
3
The physical risk of the impacts
of climate change and the
business risk posed to the Group
and its counterparties related
to non-compliance costs and
financial loss associated with
the process of adjusting to a low
carbon economy.
– Group-wide Climate Strategy and Policy is in place to ensure appropriate governance, controls
and processes are in place to support compliance with TCFD requirements and broader ESG strategy
(including net-zero targets).
– Climate Risk Committee is in operation, supported by Climate Risk and Environmental Working Groups,
facilitating the integration of climate considerations into the Group’s broader Risk Management
Framework through its reporting lines into the Customer, Culture and Ethics Committee and Group
Executive Committee.
– Quantitative Climate Risk Scenario Analysis and Stress Testing Framework is in place to inform
forward-looking strategy, with scenarios proposed to identify potential financial impacts of
transition and physical climate-related risks. ICAAP activity continues to take account of material
climate-related financial impacts, meeting PRA requirements.
– The Group continues to offset its direct operational carbon footprint via sustainable development
projects and all main Group premises maintain ISO 14001:2015 compliant status.
§
1
2
3
The risk that the Group is
exposed to financial loss,
fines, censure or enforcement
action due to failing to comply
with legal and governance
requirements as a result of
ineffective arrangements,
processes and controls.
– The Group simplified and strengthened its governance structure by collapsing and consolidating
the Vanquis Banking Group and VBL Board executive structures.
– Board Governance Manual and Group Delegated Authorities Framework is in place, setting out
key decision making at all levels across the Group.
– Board effectiveness is assessed on an annual basis with action plans in place to promote a culture
of continuous improvement.
– Explicit approval from the Board is required before any decisions and actions are made that could
result in risks materialising outside of appetite.
– Conflicts of Interest Policy and processes are in place to ensure all employees meet their
fiduciary responsibilities.
– All regulatory interactions are recorded and tracked, with regular reporting through the executive
and Board committees to ensure consistency and read across through a Group lens.
– The Group proactively engages with regulatory authorities and industry bodies on forthcoming
regulatory changes.
– Governance arrangements are continuously reviewed to ensure they are designed and operating
effectively to meet the Group’s objectives.
Risk management and principal risks continued
Principal risks continued
People and Culture
1
Growth and Sustainability
2
Customer and Community
3
Risk improving
(overall level of risk is decreasing)
Risk stable
(no change)
Risk deteriorating
(overall level of risk is increasing)
Vanquis Banking Group plc Annual Report and Financial Statements 2022
63
Strategic report
§
1
2
3
The risk that the Group’s
products and services are used
to facilitate financial crime
against the Group, customers
or third parties.
– The Group is committed to operating a strong and risk-proportionate set of systems and controls
to manage the risk within appetite.
– The second line Financial Crime Oversight team has been significantly enhanced with regards
to capacity and capability.
– A revised Group-wide financial crime assessment approach established to set control requirements
which define the standards by which financial crime risk will be managed.
– New AML, CTF and Sanctions Policy has been implemented which sets out control standards
and requirements in line with the Group’s Financial Crime Risk Assessment Methodology.
– Regulatory actions and notifications are monitored and managed in line with relevant timescales,
and regular horizon scanning takes place to identify relevant and significant regulatory change.
– A Customer Lookback Project was successfully completed in March 2022, whereby 100,000 alerts were
manually reviewed. This gave the Group confidence of Politically Exposed Person (PEP) records and
that no relationships exist with individuals subject to economic sanctions.
§
1
2
3
The risk of customer detriment
due to poor design, distribution
and execution of products and
services or other activities which
could lead to unfair customer
outcomes or regulatory censure.
– A Group-wide Conduct Risk Framework has been developed, with plans in place to further embed
its requirements across the Group. This enables the Group to demonstrate adherence to the
requirements set out within the FCA’s three-year Strategy and Annual Business Plan and includes
improved monitoring of customer outcomes across all high-risk interactions such as lending,
forbearance, vulnerability and complaints.
– A programme of activity has been established to meet the requirements of the FCA’s Consumer Duty
regulations coming into force 2023-2024. The Board and Risk Committee are provided with regular
updates to support their oversight.
– As part of risk harmonisation, the legacy divisional Conduct and Compliance teams have been
centralised and report to the Group’s Chief Conduct and Compliance Officer who continues to
consolidate consistent and best practices.
– Conduct Policies and Procedures are in place to ensure the Group has appropriate controls
and processes to deliver fair customer outcomes.
– Group Complaints Forum and reporting were established to ensure the Group is learning from
complaints trends across products, including any FOS referrals or upholds and actions of claims
management companies. This has resulted in a number of strategic changes outlined in the Group’s
emerging risks: ‘Threats to our business model’ and ‘Responsible lending’.
– As part of the Group’s response to the cost of living crisis (COLC), a number of steps have been taken,
including reviewing the range of support available to customers and setting up a Cost of Living Forum,
which closely monitors for early indicators of cost of living pressures in the Group’s book performance,
to enable any remedial action to be taken as required. The Group has proactively liaised with
regulators to share insights on the COLC impact, providing updates on the outcome of the Group’s
monitoring and adjustments to its credit risk approach throughout the year. The FCA have concluded
a review of Cost-of-Living Crisis Forbearance Outcomes which Moneybarn were selected to be part of.
The findings, received on 3 February 2023, were consistent with an internal review performed during
2022 which initiated a programme of work to enhance the effectiveness of operational areas to deliver
improved customers outcomes. This in-flight programme will be further enhanced to reflect any
additional areas of concern raised by the FCA.
– A Compliance Monitoring Programme is in place, supported by a robust methodology and approved
by the Risk Committee, to assess the adequacy and effectiveness of the control frameworks in place
and supporting fair customer outcomes and regulatory compliance.
– The Group proactively engages with regulatory authorities on a frequent basis.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
64
§
1
2
3
There is a risk that we have
insufficient operational capacity
and colleagues with the right
skills in meeting our financial,
customer and regulatory
responsibilities.
– People and HR function centralised to streamline critical people management activities across
the Group.
– People Risk Forum to support the management of key people-related risks.
– Operational Effectiveness Steering Group (OESG) implemented to govern and manage the risks
associated with structural changes.
– Succession plans completed and in place for all Executive and Senior Management.
– Communications have and continue to be shared with colleagues across the Group to keep them
apprised of business changes and to support wellbeing.
– Full health and safety risk assessment completed of all our key work locations with mitigating
actions completed.
– Recruitment, onboarding, training and exit processes have been strengthened across the Group.
– Consistent frameworks have been developed and embedded for Group reward, performance
management (Be Better) and talent management.
§
1
2
3
The risk arising from
compromised or inadequate
technology, security and
data that could affect the
confidentiality, integrity or
availability of the Group’s data
or systems.
– An IT shared service operating model has been implemented to seek commercial and cost
opportunities and manage associated risks effectively and efficiently across all product lines.
– An IT Strategic Programme is in place to deliver new architecture to embrace modern principles of
open architecture, supporting easy addition, upgrade and replacement of components and the use
of scalable cloud services, while continuing to address key areas of technical debt.
– A cyber security strategy has been developed to align security across the Group and implement
a consistent and robust service which supports the delivery of the overall business and IT strategies.
– Continued progress with the IT First Line Controls Review (FLCR), enhancing IT control effectiveness
and risk maturity across the Group and transitioning risk and control ownership into business as usual
(BAU) activity.
Risk management and principal risks continued
Principal risks continued
People and Culture
1
Growth and Sustainability
2
Customer and Community
3
Risk improving
(overall level of risk is decreasing)
Risk stable
(no change)
Risk deteriorating
(overall level of risk is increasing)
Vanquis Banking Group plc Annual Report and Financial Statements 2022
65
Strategic report
§
1
2
3
The risk of loss resulting from
inadequate or failed internal
processes, people and systems
or from external events.
– The Group’s three lines of defence model ensures there are clear lines of accountability between
management which owns the risks, oversight by the Risk function and independent assurance
provided by Internal Audit.
– The Risk Harmonisation Programme, which provides a more consistent and integrated approach
to risk management across the Group, has moved from implementation to embedding stage.
The programme is delivering a single Enterprise Risk Management Framework, consolidated Risk
Policies and methodologies, and risk reporting capability.
– An integrated Risk Management System (Riskonnect) has been implemented which provides a central
and secure repository of risk information across the Group’s three lines of defence. Implementation of
the system significantly enhances the Group’s risk management capability, improved risk and control
effectiveness, and realised resource efficiencies with the automation of processes and reporting.
– The Risk and Control Self-Assessment (RCSA) process has been subject to a budgeted programme
of improvement activity, jointly sponsored by the Chief Operations Officer, Chief Information Officer
and Chief Risk Officer. This programme has enhanced the accuracy, completeness and reliability
of risk and control data.
– A fully standardised model for supplier management is being embedded, which includes the
implementation of a new Supplier Relationship Management (SRM) Framework, Change Governance
Framework, Portfolio Working Group and Transformation Executive Committee, and alignment
of the Operational Resilience and Supplier and Third-Party Risk Management Frameworks.
– Work is progressing on the implementation and embedding of a harmonised change management
control environment across the Group.
§
1
2
3
The risk of financial losses
where models fail to perform
as expected due to poor
governance (including design
and operation).
– Model Risk Management Framework and Policy, Target Operating Model and supporting modelling
standards are in place.
– Material models across the Group are independently validated as required in the policy.
– Group model inventory, containing key models across the Group, is reviewed and updated on a regular
basis and has all the necessary information to enable effective model risk reporting and planning.
– High-risk issues and findings on material models are addressed urgently and outstanding model risk
issues and findings are monitored and reported to relevant governance forums across the Group.
– Group Model Governance Forum meets regularly and effectively provides model risk oversight, driving
a standardised approach to model development and governance across the Group.
– Existing Group Model Risk Management Framework has been assessed against the PRA’s proposed
Model Risk Management Principles (CP6/22) and found no material gaps.
– Enhancements made to the existing IFRS 9 models with further improvements planned
on the governance, performance monitoring and methodology of these models.
66
Relations with regulators
– Strong proactive relationships with regular lines of
communication are in place with both the FCA and the
PRA which are kept abreast of our strategic initiatives, key
risk management activities and response to regulatory
developments, in particular the FCA’s forthcoming
Consumer Duty regulations.
– The Group have attended a number of round table
events hosted by the FCA to review the consumer duty
requirements and we provide regular updates on how we
are progressing with our plans to implement the consumer
duty requirements by July 2023.
– We continue to have regular dialogue with the FCA on how
we are supporting our customers through the current cost
of living crisis.
– Following the PRA’s Periodic Summary Meeting (PSM),
we have successfully completed all actions that we
agreed with the PRA. In summary, the actions related
to the embedding of governance changes and the
Risk Management Framework and continuing to be
proactive in engaging with the PRA on the business
model and strategy, particularly any structural changes
or financial arrangements. Over the course of the year,
we have continued to proactively engage with the PRA
on developments related to the actions, as demonstrated
through our engagement regarding the successful
waiver application, regular updates on the monitoring
of our book performance and further embedding of
the Risk and Governance Framework, including the
implementation of the new Risk System.
and proactive relationships with our regulators.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
67
Strategic report
In accordance with the 2018 FRC Corporate Governance Code,
the directors confirm that they have a reasonable expectation
that the Group will be able to continue to operate and meet
its liabilities as they fall due over the next three years to
31 December 2025 (the Viability Period). The Viability Period
represents the period over which the Board has a reasonable
degree of confidence over anticipated events, including
prospects for the macroeconomy, and also provides an
appropriate outlook over the medium to long term.
In making the Group viability statement, the directors
have made an assessment of the Group’s current financial
position and prospects, as outlined within the Strategic Report,
together with the principal risks and other factors likely to
affect the Group’s future performance and development.
This assessment is made following consideration of a wide
range of information, including:
– the Group’s corporate plan, which sets out financial,
capital, liquidity and funding projections, together with
an overview of relevant risks;
– the principal and emerging risks which could impact
the performance of the Group;
– a severe but plausible stress testing scenario, which
is designed to assess the potential impact of certain
underlying risks on the Group’s capital and funding
resources, together with the availability and effectiveness
of mitigating actions; and
– reverse stress testing analysis, which is designed to assess
the point at which Group is no longer a viable concern.
The Group’s corporate plan was approved by the Board in
December 2022. In doing so, the Board reviewed detailed
forecasts for the three year period to December 2025 and
also considered less detailed forecasts for 2026 and 2027.
These higher level outer year forecasts do not contain any
information which would cause different conclusions to be
reached over the longer-term viability of the Group.
The Group’s annual planning process takes into account
the Group’s strategic objectives and business model. The
business model focuses on relatively short-term lending
to consumers and operates conservative underwriting.
The plan makes certain assumptions about the regulatory
environment, future economic conditions and anticipated
changes within the markets in which the Group operates
and also makes an assessment of the Group’s ability
to fund new business growth.
The Board obtains independent assurance from Group Risk
over the alignment of the corporate plan with the Group’s
strategy and the Board’s risk appetite. Specific focus is
placed on capital risk as well as liquidity and funding risk.
The assessment also considers the key risks which may
impact delivery of the Group’s operating plan. The Group’s
principal risks are included on pages 59 to 65.
The corporate plan is based on a macroeconomic scenario
which was in line with market consensus estimates and which
assumes that the UK economy would continue to weaken,
with expectations of a recession throughout 2023 driven by
lower real wages, further increases in the UK Bank Rate and
a higher tax burden. Inflation is expected to remain elevated
in early 2023 before subsequently falling back towards
the end of 2023, in part driven by the diminished impact
of the exceptional increases in energy costs seen in 2022.
The plan assumes that the UK unemployment rate rises in
2023 and 2024, peaking above 6% in 2025 before a gradual
decline thereafter.
Board approval of the corporate plan follows a number of
specific reviews of the plan provided by Group and divisional
management, together with other regular briefings on and
discussion of new strategies, business developments and
current financial performance. These reviews consider
a range of market opportunities and developments,
together with associated risks from within the Board’s
risk appetite framework.
As the Group has adopted a bank funding model, it no longer
pre-funds maturities 12 months in advance. Instead, the
Group now manages its liquidity to meet the Overall Liquidity
Adequacy Rule (OLAR) and to ensure that it can meet its
liabilities as they fall due. The level of liquidity required by the
OLAR is determined by the Internal Liquidity Adequacy Process
(ILAAP) and is based on an analysis of its business as usual
forecast cash requirements but also considers their predicted
behaviour in stressed conditions. In recognition of the waiver
received in November 2022, which allows Vanquis Bank Limited
to fund the vehicle finance business, the ILAAP also includes
an assessment of the liquidity needs of the wider Non-Bank
Group. The Group has sufficient access to liquidity resources,
including retail deposits, secured funding on its assets and
access to wholesale markets. Furthermore, the Group has
plausible options available to it, should the need arise, to
either reduce the liquidity requirements or to increase the
amount of liquidity it has (or can raise).
The corporate plan has been stress tested using a severe
macroeconomic scenario which is broadly consistent
with the ‘rates-up’ scenario published by the PRA on
14 October 2022. The stress test scenario envisages that
the UK economy enters a period of stagflation in 2023 with
inflation rising to approximately 17% and the UK Bank Rate
rising to 6%. As a result, the UK unemployment rate rises
to approximately 8.5%. The stress test scenario takes into
account the availability and effectiveness of mitigating
actions which could be taken by management to avoid
or reduce the impact of the macroeconomic stress. The
corporate plan has also been reverse stress tested to the
point of non-viability after reflecting available mitigating
actions. The viability assessment concluded that the Group’s
viability only comes into question under an unprecedented
macroeconomic scenario.
The directors also considered it appropriate to prepare the
financial statements on the going concern basis, as set out
on page 118 and page 158.
Viability statement
Vanquis Banking Group plc Annual Report and Financial Statements 2022
68
Our
Governance
Report 2022
Welcome to our Governance Report for 2022.
Compliance with the UK Corporate Governance Code
For the year ended 31 December 2022 the Board considers that the appropriate corporate governance standards were in place.
For the period under review, the Board believes that the Company complied in full with the provisions of the 2018 UK Corporate
Governance Code (the Code).
This report explains the main aspects of the Company’s governance structure to give a greater understanding of how the
Company has applied the principles and complied with the provisions of the Code. The Corporate Governance Statement also
explains compliance with the FCA’s Disclosure Guidance and Transparency Sourcebook. The UK Corporate Governance Code
is published by the Financial Reporting Council (FRC) and is available on its website, www.frc.org.uk.
Further information on the Company’s corporate governance arrangements and compliance with the Code can be found
as follows:
Page
Code
principle
Board leadership and Company Purpose 69
Chairman’s introduction to governance 69
Our Board 71 A
Setting our strategy 74 C
Promoting long-term sustainable success: Board focus areas during 2022 76 A
The Board: our culture 79 B
Stakeholders and decision making 82
Stakeholder engagement and decision making 82 D, E
Effective engagement with shareholders and stakeholders: investor relations 87 D
Division of responsibilities 88 F, G, H, I
Composition, succession and evaluation 91
Board composition 91 J, K
Director induction and training 92
Assessing Board performance – annual Board evaluation 93 L
Nomination Committee Report 95 J, K
Customer, Culture and Ethics Committee Report 100 B, D
Audit, risk and internal control 103
Audit Committee Report 103 M, N
Risk Committee Report 108 O
Directors’ Report 112
Directors’ Remuneration Report 119 P, Q, R
Vanquis Banking Group plc Annual Report and Financial Statements 2022
69
Chairman’s introduction
to governance
Dear Shareholder
I am pleased to introduce the Corporate Governance Report
for 2022 and reflect on the excellent progress we have made
continuing to position the business for success toward our
Mission to be the first-choice bank for people excluded from
accessing financial services from traditional lenders. You
can read in detail about our story and our strategy in our
Strategic Report.
As we reported to you last year, 2022 has been the first year
we have operated a largely common Board membership for
Vanquis Banking Group plc and Vanquis Bank Limited. I am
happy to report that the structure has proven successful,
delivering the benefits of reduced administration and more
aligned and efficient decision making. An internal audit of
our governance structure has confirmed its effectiveness.
In addition, the Board has undergone an independent
effectiveness evaluation this year, the results of which are
discussed on pages 93 and 94. There were several strengths
noted in the report and I am particularly proud of the healthy
dynamic and lively discussions that were noted. I would
also like to thank the Board Committee Chairs who were all
complimented on fulfilling their roles to a high standard.
Our environment doesn’t stand still and as a Board we continue
to adapt, learn and strive for continual improvement. Reflecting
many of the Company’s directors’ new roles on the Vanquis
Bank Board, the output from our Board Skills Matrix process
and our 2021 Board evaluation process, a comprehensive
Board training plan has been executed throughout the year
addressing specific areas relevant to the directors of a regulated
bank. You can read about ongoing director training on page 92.
Our governance arrangements will continue to be the guiding
framework by which we make our decisions and that support
us to run our business in a well organised manner.
Our Purpose and culture
At the heart of everything we do is our Purpose of ‘helping to put
customers on the path to a better everyday life’. Our strategy
has been reviewed and refreshed this year in light of our evolving
business model and we have expanded it to articulate our
vision, Mission and areas of strategic focus. Our strategy
rightly puts our customers at the heart of everything we
do and, from a governance perspective, we are focused
on ensuring we have a framework in place that delivers this
customer-centric approach. We progressed well toward this
aim when we established our CCE Committee in 2019. As part
of our programme to implement the FCA’s new Consumer
Duty Regulation, we are taking the opportunity to review our
governance framework. Any enhancements we make will be
designed to preserve customer outcomes as the predominant
feature of our oversight responsibilities. Enhanced reporting
will help the Board continue to embed customer outcomes
at the heart of our business and support the Board to oversee
our commitment to help our customers strengthen their
financial future. You can read more about how we support
our customers on page 3 of our Strategic Report.
It is the Group’s ambition to create a truly inclusive workplace.
I am impressed by the highly active Affinity Groups that make
up the Group’s inclusion community and note particularly the
diverse and informative wellbeing webinar support sessions
that have been well attended by our colleagues. Our inclusion
community continues to evolve with a Social Mobility Affinity
Group established in November 2022.
I have enjoyed spending time with
Bradford this year. Our colleagues
to deliver our Purpose and good
customer outcomes.
Patrick Snowball
Chairman
Board leadership and Company Purpose
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
70
Our Purpose and culture continued
You can read more in our Sustainability update on page 39
and 40 and about the Board’s role in shaping and overseeing
our culture on page 79 to 81 and in our CCE Report on page
100. You can also read about the Board’s activities in relation to
the oversight of inclusion and diversity in our leadership team
and wider workforce in our Nomination Committee Report
on page 95 to 99.
Effective risk management and governance
I am encouraged by the improvements to the Group’s overall
risk profile and particularly the improved conduct risk position,
which has been the result of several years of work. The Board,
through its Risk Committee, has paid particularly close
attention to credit risk in response to the cost of living crisis.
The Board requested enhanced credit risk reports throughout
the turbulent market conditions and will continue to be mindful
of the financial challenges facing our customers as a result.
The Group’s principal risks remained consistent throughout the
year and the Risk Harmonisation Programme is delivering on its
objective to provide an integrated and stable approach to risk
management across the Group. With execution risk also top of
mind, the Board has continued to request specific second and
third line assurance over prominent projects. These include the
First Line Control Review and the IT Transformation. The Board’s
reporting templates require a risk assessment to be completed
on every paper which helps to inform the decision making
process. You can read more about Risk Management, our
Principal and Emerging Risks, including trends and mitigations
on page 54 to 66. The report from our Risk Committee can be
found on page 108.
Growth and sustainability
This year we have brought our businesses together under a
unified leadership and governance structure with centralised
support functions to provide efficient services across our
three product areas. The Board has overseen the execution
of these plans which aim to position the Group for long-term
and sustainable growth. Much management time and effort
have gone into planning a careful transition to a modern IT
infrastructure and the Board and Risk Committee remain close
to this programme. The Chief Technology Officer has reported
to several Board and Risk Committee meetings on the progress
against the IT transformation plans. The Board draws on its
wealth of experience and any further resources as required,
in order to guide and support management to deliver a
programme of this scale to the benefit of its stakeholders.
In January 2023 we announced that we had taken the decision
to rename our Company ‘Vanquis Banking Group plc’. This is
the next step to help fuse our group of businesses together
and demonstrates to our stakeholders the progress we have
made toward our Mission. The Board considered this in detail,
particularly the stakeholder implications, and you can read
more about this principal decision and the Board’s consideration
of stakeholders implications on page 75.
Board composition, succession and effectiveness
On 26 January 2023 we announced that Malcolm Le May
had decided to step down as CEO and we had appointed
Ian McLaughlin, who is due to join the Group as CEO during
summer 2023, subject to regulatory approval. My deepest
thanks go to Malcolm for his enormous contribution to the
Group during his tenure. I was also pleased to announce
Melanie Barnett as our new General Counsel and Company
Secretary. You can read about Ian and Melanie’s appointments
on page 97 of our Nomination Committee Report.
On 9 March 2023 we announced the appointment of
Michele Greene as non-executive director and I would like to
take this opportunity to welcome Michele to the Board. I am
confident that the Board’s composition is appropriate to fulfil its
role effectively. You can read more about Michele’s appointment
and the Nomination Committee’s work on Board composition
on page 95 to 99.
Andrea Blance, our Senior Independent Director and Remuneration
Committee Chair, reaches the end of her second three-year
term in 2023 and three of our non-executive directors will
be approaching the end of their second three-year terms in
2024. As such I, along with the Nomination Committee, have
been taking actions to ensure proactive and robust plans
are in place for succession. All of our directors will stand for
re-election at our 2023 AGM and our non-executive directors
continue to be independent, as set out on page 90. Diversity and
inclusion is a strong focus area for our Nomination Committee
when reviewing our talent and succession plans and our talent
pipeline. You can read more about both these activities in the
Nomination Committee Report on page 95 to 99.
This year’s Board evaluation was externally facilitated by
Independent Audit. I am incredibly proud of all the Board has
achieved together with the help of all our colleagues since
I joined the Company, and you can read more about the
process and the findings of this year’s evaluation on pages 93
and 94, alongside progress that we have made to address our
2021 evaluation actions.
Environment and community
I am very proud of the Group being externally recognised for its
environmental and social responsibility achievements which is
testament to the hard work and effort of our colleagues. You can
read more about this in our standalone Sustainability Report.
In 2021 we identified climate risk as a principal risk and
management established a Climate Risk Committee. We
continue to evolve our reporting capability to meet the Task Force
on Climate-related Financial Disclosures (TCFD) requirements
overseen by our Audit Committee. The Board has further
commissioned research to deepen our understanding of
our Level 3 GHG emissions. The appropriate governance
arrangements are in place in this evolving area to oversee
the targets we have set and the publication of our
environmental data.
We have built strong relationships within our communities
as described in our Sustainability Report and I am pleased
to report that our Vanquis Banking Group Foundation furthers
this aim. The Board has considered the Foundation’s funding
and strategy and welcomes the alignment of its target causes
to the Group’s Purpose and values.
Management continues to evolve our stakeholder practices and
policies guided by our Board approved stakeholder engagement
strategy. Please see our business model on page 20 and the
stakeholder section on page 82 to 85 for further information.
Dividend
I am delighted to report that the Board has proposed a final
dividend of 10.3p per share to shareholders in respect of 2022
after taking into account regulatory capital requirements,
levels of sustainable receivables growth and the resultant
IFRS 9 impairment provisions. Our Board is focused on delivering
stable and sustainable dividends in future periods.
AGM
Our 2022 AGM was held at our Head Office in Bradford and we
were able to invite shareholders to attend in person. We also
provided the opportunity to follow the meeting remotely via a
live webcast and to submit questions to the Board in advance of the
meeting. This year we will retain the live webcast arrangements
and hold our AGM in London at the offices of Clifford Chance,
10 Upper Bank Street, London, E14 5JJ on 25 May 2023 at 11.30am.
I look forward to meeting shareholders at our next AGM.
Patrick Snowball
Chairman
30 March 2023
Board leadership and Company Purpose continued
Chairman’s introduction to governance continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
71
Our
Board
Patrick Snowball
Chairman
Appointed:
21 September 2018
Tenure: 4 years
Career and experience:
Patrick was CEO of Suncorp Group Limited,
an ASX 20 Australian financial services group,
between 2009 and 2015 where he successfully
led the turnaround of the group following the
global financial crisis. Before joining the Board,
Patrick was Chairman of IntegraFin Holdings
plc between 2017 and 2018 and was Chairman
of Sabre Insurance Group plc until September
2020. Prior to this Patrick was a Non-Executive
Director at Jardine Lloyd Thompson Group
plc from 2008 to 2009, Deputy Chairman at
Towergate Partnership between 2007 and
2009 and a member of the FSA Practitioner
Panel from 2006 to 2008.
Patrick’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Patrick’s unique career and experiences bring
a wealth of skills to the Board. In particular,
as Chairman, his previous leadership and
demonstrable success in driving change,
strengthening governance, creating strong
and effective boards, and instilling stability
through a positive culture are key strengths
he brings to the Board.
– Experienced chairman, non-executive
director and chief executive officer.
– Extensive experience of the
financial services industry and the
regulatory environment.
– Wealth of knowledge of the challenges
faced by the financial services sector,
acquired over a 30-year career.
– Long track record in leading companies
to develop and deliver growth plans.
– Change project management, typically
involving digital transformation and
brand building.
– Building strong customer relationships
and leveraging data and insights, as
well as leading and developing wider
stakeholder engagement.
Current external appointments:
– Director at The Old Dove Dairy Limited.
N
Malcolm Le May
Chief Executive Officer
Appointed as CEO:
1 February 2018
D
Nomination Committee
N
Audit Committee
A
Risk Committee
Ri
Remuneration Committee
Re
Customer, Culture and Ethics Committee
C
Disclosure Committee
D
Committee Chairman
Committee key:
Neeraj Kapur
Chief Finance Officer
Appointed:
1 April 2020
Tenure: 3 years
Career and experience:
Neeraj was Group Chief Financial Officer
of Secure Trust Bank plc, a UK retail and
SME bank. He is an experienced chief
financial officer with a strong retail banking
background, including consumer finance
and savings products expertise. He brings
versatility and intellectual agility to the Board
and Group Executive Committee.
D
Tenure: 9 years
Career and experience:
Malcolm joined the Group as an Independent
Non-Executive Director in 2014, becoming
Interim Executive Chairman in November
2017. Malcolm provided effective leadership
to the Board, working with it to redefine roles
and responsibilities, and initiated a process
to ensure the Board had the right mix of skills,
experience and diversity. Prior to joining the
Group, he held several senior positions within
banking, including as Co-Head of Banking
for Barclays in New York, Head of European
Investment Banking at UBS and Deputy
CEO at Morley Fund Management (now
Aviva Investors).
Malcolm’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Malcolm’s extensive career, his deep
knowledge of various businesses and
sectors, his understanding of the regulatory
environment and turnaround situations and
his proven leadership skills are considered by
the Board to be invaluable qualities that make
him best placed to lead the business, as well
as effectively contributing to the Board.
– A deep knowledge and experience
of the financial services industry and
regulatory environment.
– Relationships with key stakeholders, such as
investors and the Group’s banks, enabling
the Group access to funding.
– The strengthening of the Group’s
governance framework and the
realignment of the Group’s culture
more closely to the developing needs
of the customer.
Current external appointments:
– Non-executive director of IG Group Holdings
plc (including non-executive chairman of
North America IG).
– Trustee at the Grange Festival.
– Trustee at Peace at the Crease.
Neeraj’s contribution to the Board,
key strengths, skills and reasons
for re-election:
As a qualified accountant, Neeraj is
technically strong and has a diverse
background that has included time as a pilot
in the RAF and an entrepreneur running his
own business and working in a large-scale
regulated bank. Neeraj has a strong retail
banking background, including consumer
finance and savings products expertise,
and has experience in accounting, finance,
professional services, governance, operations,
marketing and risk.
– Experienced chief financial officer.
– Significant experience in leading
end-to-end finance functions, including
for a bank and other corporates, as well
as managing accounts for individuals and
small business owners.
– Proven ability to build effective working
relationships with key stakeholders,
including regulators, investors and analysts.
– Deep understanding of, and strong
experience in, the Group’s sector.
Current external appointments:
– Trustee at Combat Stress.
– Trustee at The Worshipful Company
of Chartered Accountants.
– Member of the finance audit and risk
committee of the RAF Club.
Andrea Blance
Senior Independent Director
(SID)
Appointed:
1 March 2017
Tenure: 6 years
Career and experience:
Andrea has extensive board and financial
services experience. She spent her executive
career at Legal & General Group plc,
where she was a member of the group
executive committee and held a range of
senior leadership roles, including Divisional
Chief Financial Officer, Group Financial
Controller, Group Chief Risk Officer and
Strategy and Marketing Director. Andrea’s
past non-executive roles include Senior
Independent Director and Audit Committee
Chair at Reassure Group plc, Risk Committee
Chair at Scottish Widows plc and Lloyds
Banking Group Insurance, Non-Executive
Director at The Mentoring Foundation and a
member of William & Glyn’s pre-IPO board.
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Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
72
Board leadership and Company Purpose continued
Our Board continued
Elizabeth Chambers
Independent
Non-Executive Director
Appointed:
31 July 2018
Tenure: 4 years
Career and experience:
Elizabeth is an experienced board director,
senior financial services executive, strategist
and marketing leader in the UK and globally.
Her previous board experience includes
being a Non-Executive Director at Hastings
Group plc, Dollar Financial Group, Hibu plc
(formerly Yell Group) and The Home and
Savings Bank. Elizabeth served on the board of
Western Union International Bank and boards
relating to consumer finance joint ventures
between Barclaycard and other brands,
such as Argos and Thomas Cook. She has
extensive executive experience through roles
including Chief Marketing Officer at Barclays
and Barclaycard.
Elizabeth’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Elizabeth brings more than 30 years of
experience in strategy, marketing and product
development across a range of financial
services. As an executive, she has a long
track record of driving revenue growth and
solving complex business challenges at major
global financial institutions. In various roles
she has led businesses through brand and
reputation transformations, strengthened
customer acquisition and engagement, built
innovative digital businesses, and led major
business turnarounds.
– C-suite marketing and communications
executive, board director and strategist.
– Proven people leader.
Paul Hewitt
Independent
Non-Executive Director
Appointed:
31 July 2018
Tenure: 4 years
Career and experience:
Paul is an experienced chief financial
officer, chairman, non-executive director
and audit committee chair who operates
in a number of different sectors. Paul’s past
non-executive director roles include chairing
the audit committees of Tokio Marine, Kiln,
NEST Corporation, Tesco Bank, Collins Stewart
Hawkpoint, Charles Taylor Plc and GMT Global
Aviation. He began his executive career in
finance, working for over 20 years as a finance
director of various companies, culminating
in becoming Deputy Group Chief Executive
and CFO of the Co-operative Group between
2003 and 2007.
Paul’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Paul’s varied and wide-ranging career is built
on a successful career in finance. He has a
track record of creating and realising value
for shareholders and has worked across a
number of sectors including financial services,
technology, healthcare, retail and business
services. Through his non-executive roles
he has helped several management teams
adapt their business models to respond to,
and anticipate, changes in their competitive
and regulatory environments. In both his
executive and non-executive career he has
had extensive experience of transactions and
ensuring that businesses have an appropriate
financial structure.
– Experienced non-executive director,
chairman and chief financial officer.
– Broad experience of the financial services
industry and the regulatory environment.
– Strong track record in delivering good
returns for shareholders.
– Extensive experience of transactions.
– Broad experience as both an executive
and a non-executive of developing and
challenging business strategies.
N A Ri
Angela Knight
Independent
Non-Executive Director
Appointed:
31 July 2018
Tenure: 4 years
Career and experience:
Angela has extensive experience in both the
public and private sectors. Prior to joining
the Board, Angela was CEO at Energy UK,
the British Bankers Association (BBA, now
the UK Finance) and APCIMS (now Personal
Investment Management and Financial Advice
Association). She was previously a Member
of Parliament and Treasury Minister between
1992 and 1997 and was the Chairman of the
Office of Tax Simplification from December
2015 to March 2019. Previously Angela was also
a Non-Executive Director at Taylor Wimpey
plc and Senior Independent Director at
TP ICAP plc.
Angela’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Her experience in the public sector means
Angela has a strong understanding of the
expectations of regulators and other public
stakeholders. This combination means
she is a skilled director who knows how to
manage organisations and how to challenge
management to deliver. Angela’s thought
leadership, technical and policy skills, as well
as a deep understanding of the financial
sector, are demonstrated through her
leadership of the repositioning of Energy UK
in the energy sector and of the BBA through
the banking crisis.
– Experienced Government Minister, CEO,
chair and non-executive director.
– Wealth of knowledge of the financial
services sector.
– Deep knowledge of regulated industries.
– Adept at solving difficult problems with
effective solutions.
– Understanding of public presentation, in
particular as a proficient public speaker.
Current external appointments:
– Non-Executive Director at Arbuthnot
Latham & Co.
– Non-Executive Director at Encore Capital
Group, Inc.
– Chair at Pool Reinsurance Company Limited.
N A Ri
– Broad and deep knowledge of financial
services, including credit cards and
payments products, a wide range of
customer loan segments and marketing
in a regulated environment.
– Substantial expertise in turnarounds, as well
as M&A and cultural change.
– Wide exposure to international operations
and the unique challenges of leading them.
Current external appointments:
– Non-Executive Director of University of
Colorado Health Authority (non-profit).
– Non-Executive Director of Evelyn Partners
and its subsidiaries.
– Non-Executive Director of TSB Bank Plc.
– Advisor to Currensea Limited.
– Operating Partner for Searchlight Capital
and its portfolio companies.
– Has helped several management teams
adapt business models in anticipation of
changes in their environments and markets.
Current external appointments:
– Non-Executive Director of Ombudsman
Services Limited.
– Non-Executive Director of ICNH Limited
(trading as DrDoctor).
– Non-Executive Director of E-Negotiation
(trading as Amicable).
– Non-Executive Director of Optalitix Limited.
Andrea’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Andrea brings a wealth of relevant experience,
including her understanding of governance,
the regulatory environment and conduct
risk. She has extensive experience of strategy
and customer marketing, complex change,
finance and reporting, IR and stakeholder
management.
– Experienced senior independent director,
non-executive director, board committee
chair and senior leader.
– Deep understanding of the financial
services industry.
– Track record of working with businesses
at different stages of development
and supporting both growth and
recovery strategies.
Current external appointments:
– Non-Executive Director at Hargreaves
Lansdown plc.
– Non-Executive Director at Aviva plc.
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Vanquis Banking Group plc Annual Report and Financial Statements 2022
73
Graham Lindsay
Independent
Non-Executive Director
Appointed:
1 April 2019
Tenure: 4 years
Career and experience:
Graham has held a number of senior
executive roles, including responsibility for
the Lloyds branch network and as Corporate
Responsibility Director. Graham joined the
Wonga UK board in 2016 as part of the new
leadership team engaged to improve the
business and deliver change. Graham sat
on the board of the Institute of Banking &
Financial Services and on the Professional
Standards Board. He is Senior Independent
Director at One Family, a mutual life
assurance business.
Graham’s contribution to the Board,
key strengths, skills and reasons
for re-election:
Graham brings to the Board extensive
experience in commercial and retail
banking following a 40-year career at Lloyds
Banking Group and a deep understanding
across various distribution channels.
Graham has had demonstrable success in
focusing organisations on their customers,
ensuring they are at the heart of decision
making and product design. Graham also
has a strong appreciation of the Group’s
regulatory environment.
– Extensive customer knowledge, strong
customer focus and a track record of
enabling and overseeing businesses
to ensure that they put the customer
at the heart of what they do.
– Significant stakeholder
engagement experience.
Current external appointments:
– Senior Independent Director at OneFamily
and Chair of the Pension Trustee Board.
– Vice Chair and Trustee at the Brain
Tumour Charity.
N Re C
Margot James
Independent
Non-Executive Director
Appointed:
27 July 2020
Tenure: 2 years
Career and experience:
Margot served as a Member of Parliament
between 2010 and 2019 and has held a number
of ministerial offices, latterly as Minister of
State for the Department of Digital, Culture,
Media & Sport, where she championed the
Melanie Barnett
General Counsel and Company Secretary
Appointed:
19 August 2022
Tenure: less than a year
Career and experience:
Melanie is a senior corporate lawyer and
formerly Head of Corporate, Group Corporate
Structuring at HSBC Holdings plc, with two
decades of multi-jurisdictional experience
across a broad range of transactional and
regulatory matters.
Melanie achieved a First Class Honours Degree
in Law at Exeter University and LPC Distinction
at the University of Law. Her career started at
Norton Rose Fulbright in 1998, qualifying as
a solicitor in 2000. Over the next eight years,
Melanie specialised in Corporate Finance work,
progressing to Of Counsel in 2007.
In 2008, Melanie transitioned to HSBC Holdings
as Associate General Counsel in the Group
Legal team, prioritising the Group’s proprietary
M&A transactions and general corporate and
public markets advice. Melanie progressed
to become Head of Corporate, Corporate
Structuring in 2013, where she led the legal
team on the demerger of HSBC Bank plc in
the UK to create HSBC’s ring-fenced bank in
response to the ‘Too Big To Fail’ regulatory
agenda, as well as the legal aspects of
HSBC’s global recovery and resolution
planning, including significant restructuring.
Melanie joined Vanquis Banking Group in
September 2020.
Melanie’s contribution to the Board, her key
strengths and skills and reasons for election:
Melanie’s legal experience has been gained
predominantly in corporate finance, M&A,
public markets and restructuring work
and providing all aspects of corporate,
commercial and regulatory advice. Melanie
brings extensive experience and knowledge
of the financial services sector.
N Re C
interests of both industry and consumers in
the digital world. In her role as Parliamentary
Under Secretary of State at the Department
for Business, Energy & Industrial Strategy,
Margot had responsibility for small businesses,
consumers and corporate governance,
including labour markets and the retail sector.
Margot’s contribution to the Board, key
strengths, skills and reasons for re-election:
Margot has a wide-ranging successful career
in both the public and private sectors. Her
public sector experience provides Margot with
a strong understanding of the expectations
of regulators and other public stakeholders,
as well as strong knowledge of corporate
governance, labour markets and the UK’s
technology and retail sectors. She has a track
record of driving value for shareholders and
has a demonstrable record as a successful
entrepreneur and CEO.
– Experienced Government Minister
and Member of Parliament.
– Results-focused entrepreneurial
business owner.
– Strong track record as a CEO
and business leader.
– Non-executive director and
chair experience.
– Deep governance knowledge.
– Strong relationships with wider stakeholders
in a variety of sectors.
Current external appointments:
– Executive Chair WMG at the University
of Warwick.
– Emeritus Governor of the London School
of Economics.
– Non-Executive Chair
at Taso Advisory.
Michele Greene
Independent
Non-Executive Director
Appointed: 9 March 2023
Tenure: less than 1 month
Career and experience:
Michele is a highly experienced finance
professional at executive and Board level.
She has held senior roles at Virgin Money
and MBNA Europe Bank and, prior to that, she
worked across various finance functions at
Goldman Sachs, Credit Lyonnais and KPMG
Dublin. At Virgin Money, Michele was Director
of Strategic Development, where she was
responsible for establishing a credit card
business on a newly built IT platform and was
subsequently appointed as the Managing
Director of the Virgin Money Digital Bank. Prior
to that she was the Chief Financial Officer of
MBNA Europe Bank between 2005 and 2013. In
2018 Michele co-founded of Mololo Limited,
a boutique advisory company specialising
in helping companies in the payments and
unsecured lending space.
Michele’s contribution to the Board, key
strengths, skills and reasons for re-election:
Michele has over 25 years’ experience
of financial services and retail banking,
particularly in the areas of payments and
digital innovation. Michele has built significant
experience in the development and growth
of successful banking businesses.
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– Extensive experience of financial services
and retail banking, particularly in the areas
of payments and digital innovation.
– Chartered Accountant and experienced
business executive and finance professional
with a strong track record as a CFO and MD.
– Deep knowledge within the consumer
credit, card payments and digital
banking sector.
– Proven ability to build effective working
relationships with key stakeholders,
including regulators, investors and analysts.
– Non-executive director and chair
experience.
Current external appointments:
– Executive Director and co-founder
of Mololo Limited.
– Non-Executive Director of Bank of Ireland
Group plc.
– Non-Executive Director with J&E Davy
Unlimited.
– Non-Executive Director of East End
Fair Finance Limited.
Governance
Board leadership and Company Purpose continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
74
The Group remains committed to our strategy, which you can read about on pages 22-25:
Setting
our strategy
The refresh of our strategic drivers is detailed on pages 22-25.
The Group’s strategic drivers were refreshed to more clearly
articulate the Group’s vision and Mission, though our Purpose
remains consistent with prior years: the Group continues to
exist to put people on a path to a better everyday life and this
is supported by our strategy. The Board reviewed the Group’s
strategy and monitored its implementation throughout the
year. An in-depth review was undertaken of the Group’s strategy
at the Annual Strategy Conference, which you can read more
about below. On page 76 you can see a review of Board
activities during the year and how these link to the Group’s
strategy and on pages 51, 75, 77 and 85, the key strategic
decisions made by the Board during the year are detailed.
The Group recognises the importance of fostering an inclusive
culture to execute our strategy in a sustainable manner. Further
details on the alignment of our culture with our strategy are
on page 79.
In continuing to develop our vision and Mission, the Group
has recently enhanced the cultural framework through the
addition of a clear articulation of the values and behaviours
which should guide decision making.
Effective governance supporting delivery
of strategic aims
In accordance with our Purpose, vision, Mission, and strategy,
the Board oversaw the embedding of the integrated operating
model, as approved and reported in 2021. Throughout the year,
the Board of Vanquis Bank Limited operated alongside that of the
Company. This has delivered a streamlined governance structure
and reduced duplication, thus enhancing strategic oversight.
Both the Board and the Nomination Committee received regular
updates on the embedding of this operating model, which was
also facilitated through the formation of dedicated, executive-led
sub-committees. As part of a continuation of this strategic aim,
the Board approved the re-naming of the Group as detailed
on page 75.
As documented in the Matters Reserved for the Board,
the Board has sole responsibility for setting the Group’s
strategy, reviewing its implementation, and overseeing
the Group’s operations through the effective monitoring
of internal controls and risk management. The Board has
delegated authority, as appropriate, to the Group CEO and
its committees (see page 88, as articulated in the Group’s
Delegated Authorities Manual). This supports effective
decision making through minimising duplication, ensuring
those with relevant expertise scrutinise any proposal and the
clear delineation of responsibilities. This effective delegation
matrix ensures that Board attention is focused on matters of
strategic importance, whilst the design of the Group’s Board
papers ensure that long-term considerations and the impact
on the Group’s principal risks are considered as part of any
strategic decision making.
Committees supporting strategy
In carrying out their roles, the Board committees support the
delivery of our strategy. The role, remit and activities of each of
the committees of the Board are summarised on page 88 and
in the committee reports on pages 95 to 111. The Committee
Chairs report to the Board at each meeting on the work of
their committee and escalate any concerns or risks for the
Board’s attention. KPIs are regularly reported to the Board,
through management reports, to monitor the implementation
of our strategy. The Group CEO and CFO produce separate
reports to the Board, which include KPIs relating to operational
performance, financial performance and performance against
budget and strategy.
The Executive Committee, comprised of senior management
and chaired by the CEO, is responsible for developing,
proposing and implementing Board approved strategy in line
with the culture, Purpose and values of the Group. In doing so,
it is responsible for managing the Group’s strategic risks and
divisional risks alongside the Risk Committee where these risks
are overseen in greater detail.
Long-term sustainable growth
Sustainable growth underpins all three elements of the Group’s
strategy. In June 2022, the Group held its annual Group Strategy
Conference (the conference), attended by the Board and the
Group Executive Committee. The agenda for the conference
was developed by the Group Executive Committee, with input
and direction from the Board. A key theme of the conference
was the continued transformation of the Group, following the
wind-down of the CCD business and the re-naming (see page 75).
Consequently, discussion at the conference focused on the
transformation of the customer service model to ensure cohesive
customer outcomes (page 3-5) and the unification of the Group’s
technology systems (page 51) as part of the continued embedding
of the refreshed operating model. The macroeconomic
conditions and uncertainties experienced during 2022 were
also a key area for discussion. The potential impact of the
economic environment on the Group’s long-term sustainability
and prospects for growth remained under scrutiny throughout
the year, with updated budget assumptions being presented
to the Board periodically. The output from the conference was
integrated into the Group’s budget and five-year plan, thus
informing the implementation of strategy.
Customer and
Community
3
People and Culture
1
Growth and
Sustainability
2
Vanquis Banking Group plc Annual Report and Financial Statements 2022
75
Principal decision: Re-naming of the Group
The Board approved the re-naming of the Company to Vanquis Banking Group plc.
Decision making process
In recent years, the Group has evolved how, and to which customers,
it provides credit. This has resulted in credit quality across the Group
improving significantly, as illustrated by the Group’s current average
credit risk more than halving since 2019. During 2021, the Group’s
evolution continued and involved the closure of its home-collected
credit business, which carried the ‘Provident’ brand. The Group chose
to focus on its credit cards, vehicle finance and personal loans
operations in the mid-cost and near-prime parts of the market.
Accordingly, the Group has decided to change its name to Vanquis
Banking Group plc in recognition of its new and future mix of lending
products and its repositioning as a specialist banking group. In June
2022, the Board considered in depth the rationale for, and implications
of, the re-naming at the annual Group Strategy Conference. In
September 2022, the Board considered an implementation plan for
the re-naming which outlined the statutory requirements, regulatory
implications, stakeholder impact and proposed customer messaging.
The Board approved the re-naming in principle and, considering
the relevant expertise of its members, established a ‘Re-naming
Sub-Committee’ of the Board to oversee the implementation. The
Board recommend that the management team seek third-party
guidance and advice where required. In January 2023, the Board
approved the announcement of the re-naming in the Company’s
fourth quarter trading update.
Long-term consequences
The Board considered the long-term consequences of the re-naming
in the context of the Group’s wider strategy, vision, and Mission and
how the Group has evolved how, and to which, customers it provides
credit to. The Group’s strategic Purpose is to be the first-choice bank
for people who can’t access traditional lenders and the renaming of
the Group puts its Purpose as a bank at the forefront of its branding.
The Board scrutinised the potential risks of the re-naming which
included the risks inherent in any significant change, IT infrastructure
implications and possible reputational consequences. The Board
agreed that the risks could be mitigated through strong project
management and noted that the re-naming would have no structural
implications for the Group’s businesses. The Board further noted that
the re-naming and improved clarity around the Group’s Purpose
as a banking group facilitated the potential expansion of the brand
and thus improved the prospects for growth.
Stakeholder implications
The Board considered the implications for all stakeholder groups
and had due regard to its s.172 duties throughout the decision
making process. The Board considered the market and investor
perception of the re-naming, noting that, notwithstanding the
challenges detailed below, the re-naming aligned more closely
with the Group’s Purpose and strategy. Customer impact was
considered, and qualitative research provided, which indicated
that customers would welcome the re-naming and highlighted
the positive perception of the Vanquis name. The Board discussed
colleague attachment to the Provident name, as well as those of
the Group’s subsidiary businesses, and acknowledged the need to
balance a respect for the Group’s history with a forward-looking,
growth mindset. The Group engaged with the regulators at an early
stage in the re-branding process to ensure that the regulators had
no objections to the re-naming and to understand the regulatory
requirements for the change.
Challenges
The Board recognised that, whilst the re-naming aligned more
closely with the Group’s Purpose and the refreshed strategic pillars
and drivers, there was colleague and customer attachment to the
Provident brand and a need to value and respect the Company’s
long history. The Board noted the multitude of actions required
following the re-brand including colleague email address changes,
website updates and supplier contract amendments, and
recognised that a transition period of up to three months would be
required to fully embed the re-brand. The cost of the project was
considered in the context of the long-term benefits.
The Company changed its name to Vanquis Banking Group plc
on 2 March 2023.
Links to stakeholders Links to strategy
2 3
Links to risks
P5
Links to s.172
Links to strategy
Find our key risks
on page 59
P
Links to risks
1
People and Culture
2
Growth and Sustainability
3
Customer and Community
Links to s.172Links to stakeholders
Customers
Investors
Colleagues
Regulators
Debt providers
Communities
Government
Suppliers
Pensioners
Acting fairly as between members
The likely consequences of any
decision in the long term
The interests of employees
Business relationships with
suppliers, customers and others
The impact on the community
and the environment
Maintaining a reputation for high
standards of business conduct
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
76
Board leadership and Company Purpose continued
Promoting long-term sustainable success:
Board focus areas during 2022
Board meetings follow a carefully considered agenda that is agreed by the Chairman, in conjunction
with the CEO and General Counsel and Company Secretary.
Agendas includes items scheduled in advance into our annual agenda planners, but also items in response to immediate
issues arising or matters raised in previous meetings or outside of meetings. Typically, our Board meetings include reports
on operational and financial performance, governance matters and chosen deep dives into areas of strategic importance.
The following pages provide examples of key Board activities during the year to provide an insight into the Board’s deliberations
and priorities and how the directors promoted the success of the Company.
Strategy
1
2
3
Links to s.172
Links to
stakeholders
Reviewed the outcome of a review of our cards business and cards platform strategy
Oversight of the cards business and platform strategy, including the key opportunities for our cards
business, and the actions required to implement the strategy and deliver value for customers. The Board
monitored progress against the cards strategy and the actions implemented to deliver it.
Reviewed the Group’s loans business and loans platform strategy
Oversight of the loans business strategy, including the market opportunity, affordability processes,
technology plans and the outcome of the loans product pilots undertaken. The Board approved the
technology plan to move the open market loans product onto the Group’s new IT architecture and
approved the financial plan for the loans business.
Reviewed our vehicle finance business review and strategy
Oversight of the vehicle finance business, including an update on the Vehicle Finance customer base, how the
business’ good reputation has supported its success, the competitive landscape and growth opportunities.
Re-naming of the Company and Group
See page 75. regarding the decision to change the name of the Company and Group.
Reviewed the Group’s external and internal communications strategy
Oversight of the Group’s external and internal communications strategy and how this was aligned to the
Group’s Purpose and societal role. The Board considered who the Group’s stakeholders were and how the
Group was perceived by them. The Board also considered how it measured the delivery of the its Purpose.
Reviewed proposal for launch of new secured product offering
Oversight of a proposal, which was approved by the Vanquis Bank Limited Board in November 2022,
for the launch of a new secured product offering of second charge mortgages. This included oversight
of the risks and opportunities and the regulatory and customer considerations.
Budget, financing and performance
2
3
Links to s.172
Links to
stakeholders
Reviewed operational and financial performance at each meeting
Oversight of the financial and operational performance of the Group against the agreed budget and plan.
Reviewed the Group’s ICAAP document
Approval of the Group’s 2021 ICAAP document and oversight of the approach to preparation of the 2022
ICAAP. The Board also reviewed and approved updates made to the ICAAP document during the year.
Reviewed budget
Approval of the Group’s budget, ensuring adequate resources were in place for the Company to
meet its objectives. In approving the budget, the Board considered a range of issues, including: the
macroeconomic and strategic context; the basis of preparation and forecasted performance; the
technology and change investment activity; investor expectations; and the risks and opportunities.
Reviewed intra-group funding
See page 85 regarding the decision to make changes to the Group’s intra-group lending approach
following the Group’s Core UK Group waiver application.
See key on page 75 for links to strategy, risks, s.172 and stakeholders
Vanquis Banking Group plc Annual Report and Financial Statements 2022
77
Principal decision: Dividend pay-out ratio
As enabled by the Group’s strong capital position, on 31 March 2022 the Board announced an interim dividend in relation to the 2021
financial year and its anticipation that the Group would move towards a pay-out ratio of circa 40% of adjusted earnings from the
2022 full year onwards.
Decision making process
Reflecting the Board’s confidence in the Group’s ability to deliver
attractive and sustainable growth and returns for shareholders, the
Board considered a proposal that the Company communicate to
the market its expectation that it would move to a dividend pay-out
ratio of circa 40% of adjusted earnings from full-year 2022 onwards.
In making its decision, the Board considered the strategic and
macroeconomic context, including the wind-down of CCD and the
expectations of the macroeconomic environment on impairment.
Long-term consequences
The Board reviewed the affordability of the dividend pay-out ratio
proposed, including the Group’s profitability, liquidity and capital
position. It was agreed that the Group had sufficient resources
and that the Group’s capital plan was supportive of the progressive
dividend pay-out approach. The future direction of the Group
was also considered. The risks of the proposed approach had
been assessed, in addition to the Company’s going concern
and viability assessments which were reviewed by the Board
at the same meeting.
Stakeholder implications
The opinions of the Group’s brokers, investors and the market
were considered, in addition to market practice for dividend
payments of other mid-range banking groups. In setting a future
dividend strategy, the Board was required to consider the differing
expectations amongst its shareholders regarding dividend
payments and agree the appropriate approach for its shareholders
as a whole.
Reputation
The Board considered the reputational impact of returning to dividend
payments, noting that it demonstrated, including to regulators,
the Board’s confidence in the performance and future prospects
of the Group.
Links to stakeholders Links to s.172 Links to risks
P1
P2
IT, cyber and resilience
2
3
Links to s.172
Links to
stakeholders
Reviewed the Group’s IT transformation strategy, risks and cyber security strategy
– Oversight of the Group’s IT transformation strategy and operating model, and how this supported the
delivery of the Group’s overall strategy. The Board sought to ensure appropriate prioritisation, planning,
resourcing and risk management in relation to the delivery of the Group’s IT change programme.
– Oversight of the Group’s IT opportunities, successes, challenges and risks. The Board was able to
provide challenge to ensure that appropriate mitigating actions were in place to address areas
of IT and information security risk.
– Oversight of the cyber security risk posed to the Group and financial services sector and of the Group’s
strategy and activities to respond to cyber security risk and strengthen the Group’s security. The Board
considered the regulatory environment and expectations in relation to cyber security, the Group’s cyber
security operating model and its cyber insurance arrangements.
Reviewed the Group’s operational resilience arrangements and plans
To meet requirements set out in the 2021 FCA and PRA Operational Resilience Regulations, the Board
reviewed and approved an operational resilience self-assessment and the resulting action plan to
ensure compliance by the requisite deadline set out in the regulations. The Board monitored progress
of the action plan. The Board also oversaw the Group’s business continuity management arrangements
and enhancements to these during the year.
Governance and risk
1
2
3
Links to s.172
Links to
stakeholders
Received regular risk updates from the Group Chief Risk Officer
Oversight of the of the Group’s principal risks and the position against risk appetite, key risk priorities
and regulatory matters, including regulatory engagement activity. This allowed Board oversight of any
changes made to our principal risks and risk appetite determined by the Risk Committee. See page 108
for more information on our Risk Committee’s role and activities.
Reviewed changes to the Group’s corporate governance framework to reflect the
substantial alignment of the Company and Vanquis Bank Limited Boards
Approval of changes to the Group’s Governance Manual, Delegated Authorities Manual and Board
appointment process to reflect the changes to the Vanquis Bank Limited Board, as announced in
January 2022, and to support the creation of a simpler, more efficient Group governance structure, whilst
streamlining and enhancing our handling of corporate governance.
Reviewed our ESG priorities and progress
Oversight of the Group’s environmental, social and governance priorities and the progress made, including
the important role the Group plays in highlighting the impact of such issues, including low carbon initiatives,
on its customer base. Consideration was given to the Group’s approach to environmental targets and
scope 3 greenhouse gas emissions reporting. The Board provided oversight of the Group’s community
investment strategy. Please see pages 36 to 49 for more information on our ESG strategy and activities.
Governance
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78
Board leadership and Company Purpose continued
Promoting long-term sustainable success: Board focus areas during 2022 continued
People and culture
1
2
3
Links to s.172
Links to
stakeholders
Reviewed and discussed the outcomes of the full and ‘pulse’ Colleague Surveys
and action plan developed from results
Board informed of the themes, issues and insights provided by Colleague Surveys regarding colleague
engagement, wellbeing and views on key issues such as inclusion and diversity. The Board provided
oversight of management’s action planning approach to address opportunity areas highlighted
by colleagues through the surveys. See page 39 for more information on our colleagues.
Reviewed delivery of the executive directors, non-financial objectives
Oversight of the delivery of the Group’s non-financial scorecard, working with the Remuneration, Risk
and CCE Committees. The Board reviewed and agreed performance against the non-financial objectives
under its review. See pages 121, 130 and 131 in our Remuneration Report regarding performance against
the non-financial scorecard during the year.
Reviewed pensions funding strategy
Oversight of the funding strategy for the Group’s pension scheme.
Reviewed the Group’s property strategy
Approval of changes to the Group’s lease of its offices at 20 Fenchurch Street, reflecting its adoption
of a hybrid working model and its property strategy.
Reviewed the implementation of changes to deliver the Group’s target
operating model
Oversight of changes made to deliver the Group’s new target operating model, including the benefits of
the changes and the impact of the changes on colleagues and colleagues were being engaged on the
changes. The Board was also updated on how our management governance framework would change
to reflect our new operating model.
Reviewed whistleblowing activity and processes
Oversight of whistleblowing activity and analysis of that data. The Board also received an update on
the processes and controls in place across the Group in relation to whistleblowing and enhancements
to these identified for implementation during the year.
Customer and regulatory
1
2
3
Links to s.172
Links to
stakeholders
Reviewed the Group’s Senior Manager Function framework
Board kept apprised of the framework in place to support compliance with the SMCR, including changes
to enhance the framework support and training provided to senior managers, controlled function holders
and material risk takers to support them to meet their regulatory responsibilities.
Reviewed the overall quality of the vehicle finance portfolio
As part of its oversight of the vehicle finance business and the Group’s strategy, the Board held a ‘deep
dive’ session on the quality and arrears performance of the vehicle finance portfolio against the Group’s
strategy to focus on the mid-cost and near-prime sectors.
Reviewed the Group’s Consumer Duty implementation plan
Oversight of the development of the Group’s Consumer Duty implementation plan and approval of the
plan. The Risk Committee provided detailed oversight of the development of the Group’s Consumer Duty
implementation plan; see page 109 for more details.
Looking forward to 2023, focus areas are expected to include:
– new growth opportunities across Cards,
Loans and Vehicle Finance;
– maintaining our capital and liquidity strength;
– investment in our technological capabilities; and
– potential new lending products.
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79
The Board:
our culture
A great deal has happened since our Blueprint was introduced
and, with several significant structural challenges behind us,
we had the opportunity to strengthen our brand position and
continue towards our Mission to be the first-choice trusted
lender for customers in our market. To support this, we have
refreshed our Blueprint, so it is relevant today and fit for
the future of our business. We have developed a clear and
compelling strategic narrative to help us communicate and
engage with colleagues across the business. A refreshed set
of values and behaviours that will help strengthen our culture,
and drive competitive advantage and commercial success
has been developed. During 2022, management focused on
communicating with colleagues about the refreshed Blueprint
and key messages regarding our Purpose, Mission and culture,
through a campaign on our Purpose.
Refreshing our business values to underpin
the culture we want to create
As we continue to deliver our strategy which will ensure we can
keep on helping to put people on a path to better everyday
life, we know that our success cannot happen without our
people. We wanted to create the conditions for colleagues
and future talent to thrive, and at the heart of that lies our
Purpose and values.
Leading
by example
Embedding
our culture
Assessing
and monitoring
culture
Aligning
culture and
incentives
1
2
4 3
While we have a compelling Purpose that articulates our ‘why’,
our values and behaviours were not yet guiding decision
making across the Group, and it was agreed we needed
values that created alignment, consistency and cohesion.
To get this right we set out to explore our culture with input
from colleagues representing all parts of the business, at all
levels. This insight informed the creation of a shared set of
values that, once fully embedded, will form a fundamental
part of our brand and:
– guide decision making;
– deliver consistency; and
– bring people and teams closer together.
We gathered insight by blending qualitative and quantitative
approaches. We then defined key themes and created a set
of value statements which were tested with colleagues who
participated in the initial discovery phase. Once the values
are confirmed we will set out to launch and embed these
across the business. Over time they will form an integral part
of everything we do both informally and formally. They will
be part of our brand, our objectives and our performance
management process and ultimately be central to our ways
of working with each other and our customers.
Governance
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80
3
Assessing and monitoring our culture
The Group Designated Non-Executive Colleague Champion,
Graham Lindsay, provides a valuable link between the Board
and the Company’s workforce through the Colleague Forum
meetings, ensuring that the employee voice is relayed directly
to the boardroom. Graham also chairs the CCE Committee.
You can read more about Graham’s stakeholder engagement
in his Q&A on page 86.
The Board monitors the alignment of the Group’s culture
with our Purpose, values and strategy, through a variety of
mechanisms, cultural indicators and reporting lines including
those summarised below:
– feedback via the Colleague Forums;
– feedback on our ‘Pulse’ and annual surveys;
– monitoring the KPIs of the Blueprint Dashboard including
turnover and absenteeism rates;
– the Speak Up Dashboard, including whistleblowing cases
and colleague grievances;
– promptness of payments to suppliers; and
– gender pay gap disclosures.
The Board measures the Speak Up culture through its
annual Colleague Survey. This year we conducted the ‘Pulse’
survey in March 2022 and a Group-wide Colleague Survey
in November 2022. You can read more about our colleague
engagement initiatives on pages 82 to 83 and find the results
of our surveys on page 39. Actions are identified based on the
lowest scored questions and tracked by the Board in order
to improve engagement and make the Group a healthier
place to work.
Over the past year the Speak Up scores have improved,
notably in relation to the colleague voice and a culture where
openness is encouraged. Our Colleague Survey results are
reported to the Board, action plans are developed and focus
sessions held. The most recent survey was undertaken in
November 2022 and had a response rate of 79% (2021: 71%).
The survey implied that 81% (2021: 84%) of colleagues agreed
that “People help and support each other here” and 82%
(2021: 81%) of colleagues agreed “I can be myself at work”,
both encouraging outcomes which point to the kind of
supportive and inclusive culture we want to create.
Board leadership and Company Purpose continued
The Board: our culture continued
1
Leading by example
As a Group we aim to foster a culture where everyone is
treated with dignity and respect and feels empowered to be
themselves. Our culture is evolving but our Purpose (page 20)
remains the same. The Board is responsible for ensuring that
the governance framework supports the embedding of the
desired culture. This is underpinned by an appropriate flow of
information, enabling the Board to oversee management and
challenge performance, culture, and strategy. Our Board
understands that a strong culture, supported by good
governance, enables long-term growth and generates
sustainable value for our stakeholders. Our Board and
committees continue to align and monitor culture through
regular reporting at the meetings. The Board sets the tone and
expectations to ensure that the Group’s decision making, and
behaviours are guided by a set of values which enable the
achievement of the right outcomes for our stakeholders. You
can read about how the Board has had regard to the interests
of our stakeholders and their s.172 responsibilities to deliver
long-term growth on pages 50 and 51 and about the role and
activities of our CCE Committee on pages 100 to 102.
The changes reported last year to the Group’s operating
model have sought to support greater collaboration and
consistency across the Group, with the Group’s corporate
support teams (Finance, Legal, Enterprise Risk, Audit,
Information Technology and Data Protection) now operating
as centralised functions.
The Board recognises the importance of colleague feedback
to embedding our culture and taking action when needed.
This feedback is collated through various mechanisms such
as the Colleague and Pulse Surveys, the Speak Up Dashboard,
Colleague Forums, policies and whistleblowing tools, the output
of which is reported through various Board committees.
Our inclusion and diversity ambition remains to build and
sustain an inclusive culture and diverse workforce which will
help us to respond to the needs of our diverse customer base
and support our Purpose of putting our customers on a path
to a better everyday life. During the year management carried
out a review of the governance framework supporting the
inclusion community and have aligned a new sponsor to each
of our Affinity Groups. Our Nomination Committee oversees
our performance in relation to diversity and inclusion, and
further details can be found on pages 98 to 99.
2
Embedding our culture
In June, members of the Board visited our Bradford office
and spent time with our customer-facing colleagues, which
involved some customer call listening. In addition, there was a
‘speed dating’ session where colleagues were invited to spend
a short time getting to know a Board member on a one to one
basis. There was also an Engagement, Inclusion and Wellbeing
session held, which Graham Lindsay and Margot James attended
with members of the Group Executive Committee. This was a
panel discussion with over 60 colleagues in attendance. This
gave our Board the opportunity to introduce themselves and
also for colleagues to hear their experiences and thoughts
on engagement, inclusion and wellbeing and for colleagues
to give their feedback to the Board.
Our Designated Non-Executive Colleague Champion,
Graham Lindsay, has attended Colleague Forum sessions
during the year at our Chatham and Petersfield sites. Andrea
Blance, our SID and Chair of the Remuneration Committee,
and Patrick Snowball, Chairman of the Board, have joined
Graham at some of these events. At each event, time has been
dedicated to ensuring there is a two-way conversation and
sharing of views on different colleague matters such as flexible
working, colleague wellbeing and the cost of living challenges.
Following the move to the shared services model, the Colleague
Forums now meet as one group. In addition to attending quarterly
forum meetings, members of the Board have also attended
a number of Vanquis Banking Group offices, meeting with
colleagues for informal drop-in sessions during the course of
this year. The resumption of this activity has been well received,
following the removal of travel restrictions post-Covid-19.
We have continued to engage the Colleague Forums on
developing the hybrid working culture, the implementation
of the Group Reward Framework, harmonising our people
policies and collective consultation relating to closure
of the CCD business.
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81
Key outcomes of 2022 engagement survey
The following questions point to continued high
levels of commitment and discretionary effort from
colleagues as demonstrated by high positive response
to questions such as:
1. Our Purpose
I understand our Purpose and what we are trying
to achieve
84% (2021: 83%)
2. Your manager
My manager treats me fairly with respect
90% (2021: 89%)
3. Engagement
I care about the future of the Group and my division
83% (2021: 84%)
4. Working together
People help and support each other out here
81% (2021: 84%)
5. Be yourself
I can be myself at work
82% (2021: 81%)
Colleague forum meetings in 2022
4 (2021: 4)
Number of colleague volunteering hours
1,014 (2021: 425)
79%
of colleagues took part
in the November 2022 survey (2021: 71%)
Suppliers paid in 30 and 60 days
94% and 4%
(2021: 96% and 4%)
Colleague engagement scores
which are aligned to the Group’s
Purpose and culture
68% (2021: 69%)
Better Everyday Index, bringing our
Blueprint to life, changing the culture of our
business and taking people on the journey
60% (2021: 61%)
People metrics and KPIs
4
Aligning culture and incentives
We invest in our colleagues through recognition, reward,
development, wellbeing, the working environment and culture.
Colleagues are recognised through our new ‘Better Everyday’
recognition platform and our ‘Perks at Work’ scheme, which
offers colleagues in-store and online rewards and discounts,
online training courses and mental wellbeing courses.
The Remuneration Committee reviews workforce remuneration
policies and practices and assesses their alignment with the
culture and strategy of the Company. Gender pay gap disclosures
are also considered annually to ensure practices are consistent
with the Company’s values. Further work of the Remuneration
Committee can be found on pages 119 to 151. Andrea Blance
and Graham Lindsay engaged with colleagues on the alignment
of executive director and wider colleague reward structures.
Ensuring that we continue to support our culture with regard to
overall compensation is an important part of our non-financial
scorecard which impacts all Colleagues’ compensation. In 2023,
the culture metric is linked to our People and Culture pillar (which
contains our targets on colleague engagement, diversity and
inclusion and culture). For the large majority of our colleagues
this pillar will drive about 13% of their bonus opportunity.
We are linking risk culture to our performance, with the
enhancement of the Risk Management Framework through
the introduction of a mandatory, individual risk management
objective for all colleagues across the Group. This will further
demonstrate the importance of risk
management and support
the embedding of a risk-centric culture.
The Board and its committees provide appropriate scrutiny
and challenge of management and receive assurance over
the Group’s approaches to managing risk and business
integrity matters. The Board confirms that, through the
activities of the Risk Committee, a robust assessment of the
principal and emerging risks facing the Group including those
which have a potential impact on the strategy can be found
within the Risk Committee Report on page 110.
We recognise that colleague wellbeing is central to
the creation and embedding of our desired culture.
All colleagues are given access to dedicated
professional mental wellbeing support and have
access to an Employee Assistance Programme (EAP)
provided by Health Assured; the service is designed to
help colleagues deal with personal and professional
problems that might be affecting their home or work
life, health or general wellbeing.
We also support colleague wellbeing in a number of
other ways, such as through mental health training
and Mental Health First Aiders, as well as the ‘Thrive’
application which enables colleagues to confidentially
access materials that manage stress, anxiety and
related conditions. For more information please
see our ESG Report on page 39.
Colleague wellbeing
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
82
Stakeholders
Stakeholder engagement
and decision making
The Group is driven by its Purpose of helping to put people on a path to a better everyday life. Acting in the
interests of our key stakeholders is critical to delivering this Purpose and achieving our Mission of being the
We have invested significant time during the year to understand and proactively engage with our stakeholders, in line with our
stakeholder engagement strategy (see pages 85 and 102), as we recognise that satisfying our key stakeholders is critical to the
Group’s long-term sustainable success. The Board’s commitment to its s.172 duty can be found on page 50 and evidence of this
commitment is integrated throughout the Strategic Report and Governance Report. You can read more about our Purpose,
Mission and strategy in the Strategic Report.
Our customers are the reason why we exist and we continue
to evolve our product offering to meet the financial needs
of UK adults who are not well served by mainstream lenders.
Please see pages 26 to 35 for more information.
What are their interests and our areas of focus?
– Access to affordable financial products that meet their
needs as well as high-quality service.
Board and Company engagement
– Risk Committee and CCE Committee oversight over
management’s plans to ensure good customer outcomes
in accordance with the FCA’s Consumer Duty regulations.
– CCE Committee monitored customer KPIs (see pages
25 and 101) and listened to customer calls to review the
quality and outcome of customer calls.
– Non-executive directors listened to customer calls during
a site visit to Bradford (see page 101).
– Board oversight via management reports on the impact
of the cost of living crisis on our customers.
– Customer Panels and Net Promoter Score used to gain
insights and conduct research in areas such as the cost of
living crisis, digital banking and new forbearance options.
– Customer Satisfaction Surveys used to receive feedback
from customers.
Outcomes and impact on decision making
– Through engaging with customers on the cost of living
challenges, we partnered with IncomeMax to launch a
new Messenger online platform to offer customers digital
access to one-to-one expert advice to help manage
their income.
– Sub-committee of the Board approved an implementation
plan to demonstrate compliance with the FCA’s Consumer
Duty regulations and deliver good consumer outcomes
(see page 78).
– Forbearance options enhanced to support customers
through the cost of living crisis (see page 61).
– A minimum threshold for outstanding loan balances was
introduced arising from the CCE Committee’s feedback
on a customer call.
Links to strategy
2
3
Links to s.172
Our colleagues are the backbone of our Group and are critical
to serving our customers and delivering our customer-centric
Purpose. Please see pages 22 and 39 for more information.
What are their interests and our areas of focus?
– Culture, pay and benefits, and career development.
Board and Company engagement
– Board attendance at Colleague Forums including the
Designated Non-Executive Colleague Champion and
Chairman (see page 80).
– Designated Non-Executive Colleague Champion who
attended regular Colleague Forums and reported back
to the Board at each meeting.
– ‘Speed dating’ and panel sessions held between the Board
and colleagues at the Bradford office on topics such as
wellness, engagement and inclusion.
– Non-executive directors visited the vehicle finance
office and head office where they spent time with
our customer-facing colleagues and listened to
customer calls.
– CEO VLOGS and e-communications issued regularly
to colleagues on important Group news and updates.
– Colleague Forums met regularly to discuss key topics
and fed back to senior management and the Board
(see page 40).
– Informal drop-in session between colleagues in the head
office and the Executive Committee.
– ‘Be Open’ Colleague Surveys issued halfway through
the year and at year end to gather valuable insights
(see page 81).
– Affinity Groups were utilised to garner colleagues’ input
(see pages 37 and 38).
Outcomes and impact on decision making
– In response to feedback at Colleague Forums, we
changed our approach to hybrid working to provide more
flexibility to colleagues.
– Collective consultation on the Group’s restructure via the
Colleague Forums informed the governance and target
operating model changes that took place during 2022.
– Colleague Survey results fed back to the Board, action
plans developed and focus sessions held (see page 100).
– Actions arising from Colleague Forums were formally tracked
and monitored by the People function to ensure that feedback
was actioned.
Links to strategy
1
2
Links to s.172
Customers
Colleagues
See key on page 51 for links to strategy, s.172 and risks
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83
We care about doing right by our stakeholders; therefore
maintaining good relations with our regulators and operating
within a conduct-focused culture are vital to us. Please see
page 63 for more information.
What are their interests and our areas of focus?
– Conduct, compliance and fair treatment of stakeholders.
Board and Company engagement
– Regular calls/meetings between the Group Chief Finance
Officer, CEO and our regulators on the Group’s Mission
and strategy.
– Key regulatory interactions, insights and areas of
regulatory focus reported to the Board via the Chief Risk
Officer Report.
– Dedicated team within the Risk function has provided
coordinated and consistent engagement with our
regulators on areas such as the 2022 ICAAP, the cost of
living crisis, the large exposure waiver application, the
credit risk process and our IT infrastructure/strategy.
– Risk Committee scrutinised and recommended to the
Board the 2022 ICAAP (see page 108).
– Membership of the UK Finance and Leasing Association.
– Sponsored the National Numeracy Day which involved
engagement with the Bank of England and HM Treasury.
Outcomes and impact on decision making
– Received approval from the PRA for the Group’s large
exposure waiver application (see page 85).
– Board approved management’s operational resilience
self-assessment and remediation plan to minimise
operational disruptions in accordance with regulations
and guidance issued by our regulators.
– Board approved the 2022 ICAAP following
recommendation from the Risk Committee (see page 76).
Links to strategy
1
2
Links to s.172
Regulators and Government
Continuing to meet the recommendations of the Task Force
on Climate-related Financial Disclosures (TCFD) and manage
climate-related risk is an ESG priority for us. Please see page 40
for more information.
What are their interests and our areas of focus?
– Sustainable business, carbon reporting and contributing
to tackling climate change.
Board and Company engagement
– Board oversight over management’s sustainability
strategy, science-based targets set and progress made
on the Group’s net-zero strategy (see pages 102 and 41).
– Board approved the TCFD content included in the Group’s
Annual Report and Accounts.
– Climate risk was regularly reported to the Board via the
Chief Risk Officer Report.
– Risk Committee oversight over climate risk and approval
of climate risk metrics.
– Board oversight via management reports on the
Group’s accounting and reporting of its scope 1, 2 and 3
greenhouse gas emissions.
– Colleagues were kept informed and involved on
climate-related matters through the intranet, e-learning
and working groups.
Outcomes and impact on decision making
– TCFD disclosure published in the Group’s Annual Report
and Accounts as well as in investor materials and
regulatory documentation.
– Board approved a partnership that would allow non-prime
customers to access the electric vehicles market.
– Progress made against environmental targets was
included within the non-financial scorecard used by
the Remuneration Committee to assist in determining
the annual bonus pool for executive remuneration
(see pages 78 and 130).
– Scope 1 and 2, and 8 out of 15 material scope 3
greenhouse gas emissions (including those associated
with products and services procured and downstream
leased assets) accounted for and reported in accordance
with the UK Government’s Streamlined Energy and Carbon
Reporting policy (see page 38).
– Good progress made in setting carbon reduction targets
in alignment with the SBTi.
Links to strategy
1
2
3
Links to s.172
Environment
Listen
Learn
Respond
Investing and rewarding our workforce
Governance
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84
Stakeholders continued
Stakeholder engagement and decision making continued
We’re committed to making a positive difference to
the communities we serve in order to improve the lives
of our customer base. Please see pages 16 and 37
for more information.
What are their interests and our areas of focus?
– Removing key barriers to financial inclusion, raising
financial awareness and improving education in
the communities of our customer base.
Board and Company engagement
– Board received updates on investments made in
community initiatives that aligned with the Group’s
Purpose (see page 101).
– Board received bi-annual updates on progress made
against our ESG strategy which included oversight over
community engagement (see page 77).
– Direct engagement with longstanding community partner,
National Numeracy, on the numeracy skills agenda
through the CEO’s membership of its Leadership Council
(see page 20).
– Our Grants Panels gave colleagues a say in what charities
we donated to.
– Management continued to engage with the Group’s
community partners during the year, including
Bradford-based partners to support the city’s bid
to be UK City of Culture in 2025.
Outcomes and impact on decision making
– Board approved the launch of a Foundation, to be
launched in 2023, which will see the Group invest in its
communities with a view of improving the lives of young
people (see page 101).
– £1.4m invested to support community programmes,
money advice programmes and social research.
– We became the first official delivery partner for Bradford
being awarded the UK City of Culture 2025. This is a
four-year partnership which will have a long-lasting
positive impact.
Links to strategy
1
3
Links to s.172
Communities
Our investors are the providers of capital that enables us
to grow, deliver our Purpose and invest for future success.
Please see page 87 for more information.
What are their interests and our areas of focus?
– Return on investment, long-term growth and good
ESG performance.
Board and Company engagement
– Trading updates were provided via the London Stock
Exchange on the Group’s performance and strategy.
– Feedback from our brokers was distributed to the Board
and senior management after updates were made
to the market.
– Our CEO and Group Chief Finance Officer held regular
meetings with investors which was reported to the Board
via the CEO report.
– The AGM enabled all investors to directly question the
Board and to cast their votes for proposed resolutions.
– Management attended broker conferences and presented
to investors on topics such as our ESG strategy.
Outcomes and impact on decision making
– Investors’ views informed the Board’s decision making
regarding the dividend pay-out ratio (see page 77
for more information).
– The Group’s financial results for the 2022 financial year
were in line with market expectations.
– We received votes representing approximately 80% of our
issued share capital at our 2022 AGM.
Links to strategy
2
Links to s.172
Investors
Our trusted suppliers help us to deliver high-quality, cost
efficient and time saving services to our stakeholders. Please
see page 20 for more information.
What are their interests and our areas of focus?
– Sustainable business, low carbon emissions, and
commitment to tackling climate change.
Board and Company engagement
– Board approved the 2022 Modern Slavery Statement.
– Board reviewed and approved the Group’s corporate
policy on Human Rights and Modern Slavery.
– CCE Committee reviewed suppliers’ feedback on a
questionnaire issued by the Group to over 360 supply
account managers (see page 102).
– Consistent engagement through the Group-wide Supplier
Relationship Management Framework.
– Robust due diligence of suppliers in line with PRA guidance
to protect our customers and support operational resilience
(see page 53).
Outcomes and impact on decision making
– Our standard payment terms were 30 days which
is in keeping with the Prompt Payment Code.
– Published our 2022 Modern Slavery Statement.
– Increased director-level engagement with our most
critical suppliers.
Links to strategy
2
Links to s.172
Suppliers
85
Principal decision: A funding structure to deliver our specialist banking group strategy
The Board approved intra-group funding arrangements to support the Group’s application to the PRA for a large exposure waiver
(the CUG application). The CUG application, which was approved by the PRA in November, will allow the Group to leverage its
existing access to retail deposit funding, through Vanquis Bank, to fund all lending products going forwards, including vehicle
finance. To read more about the CUG application and our funding strategy please see page 14.
Purpose, strategy and long-term success
The CUG application was an important part of our stated
strategy of becoming a fully fledged banking group. The
intra-group funding arrangements and CUG application
provides the funding structure needed to help put people
on a path to a better everyday life, delivered through our
specialist banking group strategy.
Positive regulator engagement
Management engaged with the regulator throughout the
process of the CUG application by responding to requests
for information and acting upon feedback from the regulator.
For example, the Group put in place a capital support agreement
between Moneybarn and Vanquis Bank in response to the
regulator’s feedback.
Governance and decision making process
The Board received regular updates via the CEO report
on the status of the CUG application before it was
approved. As part of the Board’s oversight, it approved
a series of intra-group funding arrangements in
May, subject to the PRA’s approval, and established
a sub-committee of the Board to finalise the terms
of the arrangements once the CUG application had
been approved. In making this decision, the Board
received assurance from internal and external legal
counsel, as well as relevant stakeholders within
the Group (such as Finance, Tax, Treasury and Risk)
on the implications of the decision.
Links to stakeholders
Links to strategy
2
Links to risks
P4
P5
P11
P12
Links to s.172
Listen
Colleague Forums discussed
and shared their feedback on the
alignment of job levelling across
the Group as part of a new Group
Reward Framework.
Learn
Colleagues requested further
clarity on the Group Reward
Framework and increased
transparency on pay and benefits.
Respond
Remuneration Committee Chair
presented to the Colleague Forum
on the alignment of workforce
pay with executive director
pay. The benefits framework
by level was published on the
colleague intranet.
Listen
Executive Committee held
a drop-in session with
Bradford colleagues.
Listen
CCE Committee reviewed
the 2021 stakeholder
engagement strategy.
Learn
Executive Committee learnt
that colleagues had issues with
parking and using the onsite gym.
Learn
CCE Committee reviewed
progress made against
the 2022 stakeholder
engagement objectives.
Respond
Action was taken to refresh the car
parking booking process and reopen
the gym for colleagues to use.
Respond
2023 stakeholder engagement
objectives were agreed by CCE
Committee and management.
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
86
Having a Designated Non-Executive Colleague
Champion directly engaging with colleagues promotes
a culture of openness, inclusivity and transparency;
that’s the feedback we have received from colleagues.
Graham Lindsay
Designated Non-Executive Colleague Champion
What is your role as Designated Non-Executive
Colleague Champion?
colleagues to understand their interests and ensure they are
considered in the Board’s discussions and decision making.
Colleague Forum events and panel sessions, chatting to
colleagues on visits to offices and various other engagement
events; I then report key headlines from these engagement
activities back to the Board.
What makes you suitable for the role?
engagement and ensuring that colleagues’ interests are
reflected at all stages in the Board’s decision making
How does your role add value to the Board and its relations
with colleagues?
I strive to ensure that the colleague voice is heard in the
boardroom and that colleagues’ trust is maintained in the
promotes a culture of openness, inclusivity and transparency;
is pleasing to hear.
What does the Board expect from you and how does
the Board monitor the effectiveness of the role?
The Board relies on me to update them on the activities and
outcomes of colleague engagement, as part of my roles as
colleagues. It is also part of my role to update colleagues on
the latest Board developments and decisions, in so far as they
relate to issues that impact on our colleagues’ interests. This
People Officer and People senior management to coordinate
engagement activities and strive to ensure that I reach a
broad representation of colleagues.
Q&A
with Graham Lindsay, Designated
Non-Executive Colleague Champion
Stakeholders continued
Stakeholder engagement and decision making continued
How do you report colleagues’ interests and feedback
to the Board?
I have a regular agenda item on Board agendas to update
issues that have an impact on colleagues. In addition, the
Survey results as they become available.
What actions has the Board taken this year in response
to colleague feedback?
I invited the Chair of the Remuneration Committee to attend a
colleagues on a desire for increased transparency around pay and
To ensure consistent messaging and discussions across
What have been your highlights this year in your role
as Designated Non-Executive Colleague Champion?
What are your key priorities for next year in your role
as Designated Non-Executive Colleague Champion?
and I plan to continue my regular site visits, encouraging other
concerns and ideas remain a feature of our Board discussions.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
87
engage with shareholders
The Group recognises the vital role of shareholders in ensuring the highest standards of governance
Engagement in action
The Group is committed to facilitating an open dialogue with investors across a wide range of issues and ensuring that
shareholders can raise strategic and governance-related matters with an appropriate member of the Board. During 2022,
the Chairman met with several large shareholders, including Davidson Kempner, Coltrane and Aberforth Partners, to ensure
that feedback from investors is received effectively and discussed at Board level. Management met with shareholders
representing over 75% of the issued share capital during 2022. At the Group Strategy Conference in 2022 (page 74), the Group
Executive and the Board considered investor perceptions of the Group, with consideration given to the Group’s financial position
and capital base.
The Annual Report
The Annual Report provides a comprehensive overview of the
Company’s Purpose, strategy and progress against objectives.
It facilitates an assessment, by investors, of how the Board is
taking action to promote the success of the Company and
aids evaluation of the Company’s governance processes. The
Annual Report is complemented by regular market updates,
including quarterly trading updates. Feedback from our joint
brokers, Barclays and Numis, is distributed to the Board and
senior management after all market updates.
1
Annual General Meeting (AGM)
The AGM provides the opportunity for all investors to directly
question the Board and to cast their votes for proposed
resolutions, including the reappointment of Board members.
2
The Group website
The Group website provides comprehensive information
about the Company, its divisions, management team and
Board members. Our dedicated ‘Shareholder Hub’ provides
up to date information on our strategy, the latest results
presentations, RNS announcements and our investment case.
3
Investor/analyst meetings
The Group takes a proactive approach by inviting investors
and analysts to meet with senior management on a regular
basis. During the course of 2022, management held over
100 meetings with sell-side analysts and shareholders.
4
Overseas roadshow programmes
During 2022, senior management resumed its schedule of
meeting face to face with shareholders, including roadshows
in London, New York and Edinburgh. The Board received
regular updates on investor feedback and the themes
therein from the CEO.
5
Broker conferences
Senior management regularly attends industry conferences.
In 2022, senior management was invited to attend
conferences organised by Shore Capital and Goodbody.
6
The Sustainability Report
The Sustainability Report provides investors with a clear
account of the Group’s responsible business strategy, and how
this aligns with the Group’s Purpose of providing responsible
lending to underserved markets.
7
Shareholder correspondence
Our IR team is committed to engaging and responding
to all investor queries on a timely basis.
8
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
88
Division of responsibilities
Leadership and
oversight structure
Our governance framework facilitates
effective decision making and is
formally documented in the Group’s
Delegated Authorities Manual,
Board Governance Manual, Board
and committee terms of reference,
and matters reserved for the Board.
This framework is reviewed annually
by Company Secretariat and the
respective Board/committees to ensure
it remains effective and fit for purpose.
The governance framework and
structure of the Group’s governance
arrangements have been established
to comply with the spirit and provisions
of the Code.
The operating, planning and reporting
processes for the Board were refreshed
following the substantial alignment
of the memberships of the Vanquis
Bank and Company boards. Combined
meetings, agenda planners and
reporting processes were devised by
the Chairman and Company Secretariat
to ensure that appropriate, timely and
accurate information continued to flow
to the Board.
Governance at
Vanquis Banking
Group
Board
Executive
Committee
Board
committees
Board committees
The Board is supported by its
committees in discharging its duties.
At each Board meeting, the Chairs
of the committees update the Board
on their activities.
Audit Committee
Monitors the integrity of the financial
statements, oversees the internal controls, and
monitors the independence and effectiveness
of internal audit and the external auditor.
Read more on pages 103 to 107
Remuneration Committee
Determines the Remuneration Policy, ensuring
that pay and benefits align with the Group’s
Purpose and strategy.
Read more on pages 119 to 122
Nomination Committee
Determines the Board’s composition/structure,
oversees diversity and ensures that effective
succession plans are in place for the Board
and senior management.
Read more on pages 95 to 99
Customer, Culture
and Ethics Committee
Oversees stakeholder engagement and
embedding of culture, and monitors the Group’s
environmental and corporate responsibility.
Read more on pages 100 to 102
Disclosure Committee
Ensures compliance with the Market Abuse
Regulation and Disclosure Guidance and
Transparency Rules.
Risk Committee
Reviews and monitors the Group’s principal
and emerging risks and the effectiveness
of the Group’s risk management systems.
Read more on pages 108 to 111
Board
Responsible for overseeing the Group’s
strategic direction for sustainable
growth and delivering value to
stakeholders. It is accountable
for the Group’s activities and is
committed to delivering the highest
standard of corporate governance.
The Board discharges some of its
responsibilities directly and others
through delegation to its committees.
The Board and committees’ terms
of reference, and matters reserved
for the Board, are published on
www.vanquisbankinggroup.com.
Execution of the strategy and day-to-day
management of the Group is delegated
to the Executive Committee and various
management committees with the
Board overseeing, guiding and holding
management to account.
Executive Committee
Responsible for executing strategy,
monitoring performance, promoting
the Group’s culture and embedding the
Blueprint to drive the desired behaviours
within the Group (see page 22 for
information on our Blueprint). The CEO
chairs the Committee; other members
include the Group Chief Finance Officer,
Chief People Officer, Chief Operations
Officer, Chief Risk Officer, General
Counsel and Company Secretary,
and the managing directors of each
product line. During 2022 the Committee
streamlined its governance structure
(see the timeline below), reviewed the
talent pipeline, and approved various
change and transformation spend
within its delegated authority.
Revised operating model: establishing a structure designed to deliver our strategy
Following the substantive alignment of the Group and Vanquis Bank Limited boards in January 2022, the Executive Committee created
a unified leadership structure and revised the management governance structure to facilitate the execution of our strategy. The Group
made significant progress during the year to embed its revised operating model as outlined in the below timetable.
February:
Management
governance
structure and
committees
were
streamlined
terms
of reference
April: Proactive
engagement
with the PRA
took place
during the
year to
support the
Group’s waiver
application
May: Intra-
group funding
arrangements
were
approved by
the Board to
support the
Group’s large
exposure
waiver
application
(see page 85)
June:
The corporate
governance
framework
was refreshed
and approved
by the Board
to support
effective
decision
making
(see page 77)
August:
Shared
services
functions
were created
to deliver
services
across all our
product lines
September:
The Executive
Committee
created a
leadership
team and
reviewed the
talent pipeline
to identify
any gaps and
development
opportunities
September:
The
Nomination
Committee
oversaw the
progress
made by
management
in
implementing
the new target
operating
model
November:
The Group’s
application to
the PRA for a
large exposure
waiver was
approved
which was an
important part
of our strategy
(see page 22)
Vanquis Banking Group plc Annual Report and Financial Statements 2022
89
Division of responsibilities
There is clear division between executive and non-executive responsibilities to ensure accountability and oversight.
We define the separate roles and responsibilities of our Chairman, CEO and SID in writing and they are available on our website
www.vanquisbankinggroup.com.
–
and increase shareholder value.
– Promotes effective decision making, critical
discussion and constructive challenge.
– Safeguards corporate governance.
–
– Recommends the Group’s strategy
–
–
– Promotes a healthy culture of accountability
and transparency.
–
are in place.
– Acts as sounding board for the Chairman.
–
–
– Available to shareholders outside the normal
communication channels.
– Leads the Group Finance function.
– Manages capital management and effective
financial reporting, processes and controls.
–
–
the Group’s strategy.
– Provide independent and constructive challenge.
– Scrutinise the performance of management.
–
– Chair the Remuneration, Nomination, Risk,
–
– Attends Colleague Forums and other colleague
engagement events.
–
– Oversees stakeholder engagement as Chairman
– Provides legal and governance support
–
is fit for purpose.
–
management and the Board.
–
on governance matters.
–
and implementing strategy.
–
–
and performance of the Group.
–
a healthy culture.
– Implements policies and procedures set
by the Board.
Chairman, Patrick Snowball
Senior Independent Director,
Andrea Blance
Non-Executive Directors
General Counsel and Company Secretary,
Melanie Barnett
CEO, Malcolm Le May
Chief Finance Officer, Neeraj Kapur
Designated Non-Executive Colleague
Champion, Graham Lindsay
Executive leadership team
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
90
Independence of the non-executive directors (NEDs)
The Board and Nomination Committee review the
independence of NEDs on appointment and thereafter
annually. The NEDs bring value to the Board through their
unique skills, knowledge and experience, which help to
shape the Group’s strategy and the Board’s decision making.
They also serve a vital role in preventing any individual from
dominating decision making and discussions. The Chairman
held a number of meetings privately with the NEDs without
executive management present, to encourage independent
oversight, open dialogue and constructive challenge. The
Board considers, on recommendation from its Nomination
Committee, that all its NEDs are independent (except for the
Chairman who was independent on appointment), taking
into account the factors in the Code and any other relevant
circumstances which may impair independence, and the
independent NEDs provide constructive challenge to executive
management. Please see the Nomination Committee Report
on page 95 for more details.
All directors are required to disclose to the Board any outside
interests which may pose a conflict with their duty to act in
the best interests of the Group. Further details on conflicts
of interest can be found in the Directors’ Report on page 112.
The independent NEDs also meet annually, led by the
Senior Independent Director, to appraise the Chairman’s
performance and effectiveness. The Senior Independent
Director discusses the results and agrees any actions with
the Chairman prior to the results being fed back to the Board.
Neither the Chairman nor any of the independent NEDs have
exceeded the maximum nine-year recommended term
of service set out in the Code. The table below details the
directors’ tenure as at 31 March 2023.
Board changes and composition
The skills and experience of the directors are set out in their
biographies on page 71 and also in our Board Skills Matrix on
page 91. The Board’s composition was independently reviewed
as part of our external Board effectiveness evaluation
(see page 93 for more details). Proactive succession planning
was undertaken during the year in relation to non-executive
director roles in order to stagger non-executive director
succession in the future, thus retaining the balance of skills,
experience and diversity required for an effective Board.
Board tenure as at 31 March 2023
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total tenure
Patrick Snowball
4 years, 6 months
2 months
Malcolm Le May
5 years, 2 months
2 months
3 years, 9 months
Neeraj Kapur 3 years
Andrea Blance 6 years, 1 month
Elizabeth Chambers 4 years, 8 months
Paul Hewitt 4 years, 8 months
Angela Knight 4 years, 8 months
Graham Lindsay 4 years
Margot James 2 years, 8 months
Michele Greene
Less than 1 month
Chief Executive Officer Interim Executive Chairman Non-Executive Director
Chairman Interim Chief Executive Officer
Independence of the Board
(excluding the Chairman)
Independent 7
Executive 2
Division of responsibilities continued
Leadership and oversight structure continued
78%
of our Board (excluding the
Chairman) are independent
non-executive directors
The Nomination Committee and Board considered potential
external candidates with the skills, experience and diversity
that were considered to be key for the Board to deliver their
long-term strategy and vision, such as those with experience
in consumer cards, credit cards and the digital banking sector.
You can read more about the recruitment process and our
succession planning activity on pages 96 and 98.
The Board comprises the Non-Executive Chairman,
Senior Independent Director, six independent NEDs and two
executive directors. The Board appointed Michele Greene
as an additional independent non-executive director on
9 March 2023 as part of the Board’s succession planning.
The Board also welcomed Melanie Barnett as General Counsel
and Company Secretary during 2022. The Board’s individual
biographies are detailed on page 71.
The Nomination Committee oversees the Board’s composition,
succession and diversity. Please see the Nomination
Committee Report on page 95 for more details.
During the year the Board reviewed the external appointments
of each director and confirmed, following recommendation
from its Nomination Committee, that the directors continued
to have sufficient time to undertake their roles. The Board also
approved the external board appointment of Andrea Blance
to Aviva plc, agreeing that there was no conflict of interest and
Andrea would continue to have sufficient time to carry out her
role on the Board.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
91
Member attendance at Board and committee meetings in 2022
The table below sets out the Board and committee attendance during the year. Attendance is shown as the number of meetings
attended out of the total number of meetings possible for each individual director. During 2022, attendance was very strong
both at scheduled and additional meetings. The Board continues to be satisfied that each director is able to allocate sufficient
time to the Company. This is reflected in the very high levels of meeting attendance. The absence shown below was a result of
either an urgent personal matter or a pre-arranged commitment. The Chair of each committee reports regularly to the Board
on how that committee has discharged its responsibilities.
Board
member Board Ad hoc
Audit
Committee Ad hoc
Nomination
Committee
Ad hoc
Remuneration
Committee Ad hoc
Risk
Committee Ad hoc
Customer,
Culture
and Ethics
Committee
Ad hoc
Total
number of
meetings 9 2 6 1 5 1 5 1 5 2 3 —
Patrick
Snowball 9/9 2/2 — — 5/5 1/1 — — — — — —
Malcolm
Le May 9/9 2/2 — — — — — — — — — —
Neeraj
Kapur 9/9 2/2 — — — — — — — — — —
Andrea
Blance 9/9 2/2 6/6 1/1 5/5 1/1 5/5 1/1 — — — —
Graham
Lindsay 9/9 2/2 — — 5/5 1/1 5/5 1/1 — — 3/3 —
Paul Hewitt
9/9 2/2 6/6 1/1 5/5 1/1 — — 5/5 2/2 — —
Elizabeth
Chambers 9/9 1/2 — — 5/5 1/1 — — 5/5 2/2 3/3 —
Angela
Knight 9/9 2/2 6/6 1/1 5/5 1/1 — — 5/5 2/2 — —
Margot
James 9/9 2/2 — — 5/5 1/1 5/5 1/1 — — 3/3 —
Michele
Greene — — — — — — — — — — — —
Composition, succession and evaluation
Board composition
Board gender
diversity
Board ethnic
diversity
Board
tenure
Executive Committee
and direct reports
Male 5
Female 5
Ethnically diverse 1
White 9
0-2 years 2
2-5 years 6
5-9 years 2
Male 68%
Female 32%
Skills matrix
capability in areas that are relevant to the Group’s business model and strategy.
combined strength of our Board in areas central to delivering the Group’s strategy.
Category
2. Strategy
3. Audit and financial reporting
4. Customers
5. Product development
6. Banking
7. UK Banking regulation
8. Shareholder engagement
9. Change management
10. Loans
12. HR, talent and
employee engagement
13. IT and digital initiatives
14. Capital management and treasury
15. Risk management
16. M&A transactions
17. Regulatory landscape
and engagement
18. Cyber crime
Core capability Supplemental capability
91
102
3
94
55
16
87
8
109
10
11
112
13
14
15
16
17
18
19
1
8 2
1
4
8
1
8
5 4
7 2
9
6
6
9
7
10
4
6
3
2
1
3
6
2
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
92
Composition, succession and evaluation continued
Director induction and training
Director induction process
As the composition of the Board remained unchanged in
2022, no director induction training took place during the
year. Ongoing training was, however, delivered to directors,
which included training reflecting the appointment of the
majority of the Board to the Board of Vanquis Bank under
the restructure of the operating model.
In September 2022, Melanie Barnett was appointed as our
new General Counsel and Company Secretary. As part of her
induction, Melanie was provided with an induction schedule,
which included key reading material and a webinar on directors’
duties. Melanie was also appointed as a director of one of the
Group’s operating subsidiaries, regarding which she received
a business-specific induction.
Any incoming director is provided with a comprehensive
and tailored induction plan to suit the requirements of their
role. Our induction programme is designed to give directors
an in-depth understanding of the business, Purpose, culture
and Values. The programme includes meetings with members
of the Group Executive Committee and other key stakeholders,
which may include the Group auditor, external advisors,
our brokers, and representatives from the FCA and PRA.
All new directors are provided with full access to our secure
electronic reading room within our Board meeting software,
‘Diligent’, which provides induction materials such as Group
policies, structure charts, terms of reference, Delegated
Authorities Manual, broker notes, and past Board and
Committee meeting papers and minutes.
Director training schedule 2023
Examples of the training expected to form part of the 2023
training programme include:
– financial and cyber crime;
– consumer duty; and
– the Group’s refresh of its values.
and colleague interactions, and brought
colleagues and management from across
the different teams.
Andrea Blance
Senior Independent Director
Ongoing director training
It is important that our directors are made aware of any
upcoming developments and receive training tailored
to their roles at the Company, given the ever-changing
economic and regulatory environment.
Directors undertake training both as a whole Board and based
on individual requirements to assist them in carrying out their
duties and responsibilities. At least annually, the Chairman
discusses with each director his or her contribution to the work
of the Board and personal development needs.
During 2022, the directors were provided with deep dives,
teach-ins, briefings and presentations on a range of key
subjects, including the following:
– the Takeover Code;
– Vanquis Bank Limited business review;
– SMF duties deep dive and general banking regulation;
– unconscious bias training;
– financial crime/cybercrime; and
– vehicle finance strategy deep dive, including a brief on the
customer experience and asset management. The Board
also listened to examples of customer calls.
Members of the Board also visited our Chatham, Petersfield
and Bradford offices.
The arrangements for director training are overseen by
the Company Secretary and can be internally or externally
facilitated, with sessions typically originating from technical
Board discussions or an identified training opportunity.
Directors are also given access to an external online academy
tool which provides a wide array of briefings, education and
bespoke training.
In September, the directors had the opportunity to visit the
Moneybarn office in Petersfield and received a deep dive
into the vehicle finance business. The directors received
an in-depth insight in to Moneybarn’s operations, customer
journeys, areas of strategic opportunity and business
priorities. The Board also met management and colleagues
face to face, who took the opportunity to update the Board
on key priorities as well as providing an insight into the specific
challenges faced within the business.
Vanquis Banking Group plc Annual Report and Financial Statements 2022
93
A number of different external providers were considered,
with input received from the Chairman, Senior
Independent Director and other Board members.
The Chairman and General Counsel and Company
Secretary met with the preferred external provider to
discuss their proposed approach to the evaluation.
A decision was made to proceed with Independent
Audit based on its experience and expertise, including
in relation to the financial services sector.
Scoping meeting was held between the Chairman
and General Counsel and Company Secretary with
Independent Audit to provide insights and agree the
approach required to ensure the evaluation was effective
and tailored to the Group.
Independent Audit conducted interviews with the Board
members and key members of the management team.
Board and committee observations took place.
The draft report on Board and committee effectiveness
was reviewed by the Chairman and then the final
report shared with the wider Board, including the
Committee Chairs.
The Board discussed the evaluation results and approved
focus areas to enhance the effectiveness of the Board
and its committees. Feedback on the Chairman’s
performance was discussed without the Chairman
present and the outcome of the discussion relayed to the
Chairman by the Senior Independent Director. Individual
performance discussions for directors were held with
the Chairman.
and Independent Audit or the individual directors and Independent Audit. The contents of this section have
Three-yearly evaluation cycle
2022
facilitated by
Independent Audit
2020
Internal evaluation
facilitated by
Chairman and
General Counsel and
Company Secretary
2021
Internal evaluation
facilitated by Chairman
and General Counsel and
Company Secretary
2022 evaluation process
Approach to and methodology of 2022 external evaluation
In undertaking the evaluation, Independent Audit carried out:
– a review of Board and Board committee papers;
– interviews with all Board members, the General Counsel and Company Secretary and key members of the senior
leadership team;
– observations of Board and committee meetings; and
– the preparation of a report which was shared with the Chairman before being presented to the Board at its December 2022
meeting. The report was quality assured by an independent individual from Independent Audit.
To provide a comprehensive assessment, Independent Audit undertook its review against all aspects of their own board
effectiveness model. This model covers both ‘what’ a board does and ‘how’ it does it, to give a full assessment of performance.
This included: the value and role of the Board; Board composition and dynamics; Purpose and strategy; the management team;
information and Board support; Board committees; risk management and internal controls; people and culture; and stakeholders.
Assessing Board performance – annual Board evaluation
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
94
Update on focus areas identified from the 2021 evaluation
Focus area Progress update
Continue to focus on how to enhance the Board’s
oversight of risk.
The Group CRO has worked with the Risk Committee Chair to ensure the Risk Committee continues to be
effective, ensuring the appropriate number of meetings, that the right amount of time is spent on the
items and the Committee receives the right data. A review of risk appetite metrics was undertaken, with
enhancements made. Reflecting the volatility in the macroeconomic environment the Risk Committee
has received more frequent and detailed credit risk reports. Dedicated Risk Committee meetings were
held to consider the ICAAP and Core UK Group waiver. The Board receives a risk report from the Group CRO
at each meeting and the Group CRO has attended a number of Board meetings to support discussions
on risk matters. A verbal report from the Risk Committee Chair regarding the Risk Committee’s key discussions
and decisions. Risk Committee meetings papers and minutes are made available to all Board members.
Increase the level of engagement between
the Board and senior management and between
the Board and the wider workforce.
The Board has held a number of colleague engagement sessions across the Group’s different sites.
The non-executive directors have also engaged with the wider workforce in the Vehicle Finance division
and Cards division through attending Colleague Forum events. Executive Committee members attended
Board and Committee meetings to present on items as appropriate in the year and attended Board
dinners to enable further opportunity for engagement. You can read about our workforce engagement
mechanism and the Board engagement with colleagues during the year on pages 82 and 86.
Continue to focus on how the Board oversees and
engages with the Group’s customers.
The Group’s customer service model and strategy, including customer segmentation, market
opportunities, product use and customer proposition, were reviewed by the Board. The Board and
its committees also oversaw a number of other customer matters during the year, including our
preparations for the FCA’s Consumer Duty regulation and VBL’s customer retention, acquisition and
engagement strategy. To read about the activities of our CCE Committee, please see pages 100 to 102.
Drive continued focus on the Group’s digital and
data strategy and the enhancement of the Board’s
understanding and discussion of digital market
trends and opportunities.
The Board reviewed our technology strategy and how our customer strategy was, and would be, supported
by a digital customer experience. The Board oversaw our IT transformation; see pages 77 and 109.
Implement a robust Board training plan for 2022. A 2022 training plan was agreed and delivered, including areas that supported them in discharging
their responsibilities and duties as directors of Vanquis Bank Limited, where relevant. Please see page 92
for details on Board training during the year.
Outcome of the 2022 evaluation process: Board and committee effectiveness
The findings from this year’s independent Board performance review were positive, with the Board recognised as highly
engaged, experienced and technically proficient. The evaluation noted that together the directors make up a capable and
cohesive team which has brought a high degree of competence and calm professionalism to the job of tackling the complex
issues the Group has faced in recent years. The review also recognised that good, open and inclusive debate takes place
in meetings, with the non-executive directors being supportive, but providing firm challenge. Whilst noting the good gender
balance on the Board, the evaluation also acknowledged that focus should be maintained in future recruitment processes on
strengthening ethnic diversity on the Board. As with all fair and balanced review processes, the external evaluation identified
opportunities to improve the performance of the Board. The agreed focus areas for 2023 are set out below. The Chairman and
Board will monitor progress against the agreed focus areas, including a formal interim review during 2023 at a Board meeting.
Some of the Board strengths identified Agreed areas of focus to enhance performance
– Effective relationship between Chairman and CEO.
– A healthy dynamic in meetings and positive
relationships on the Board, reflected in lively
discussions and good levels of engagement.
– High-quality Board and committee papers, providing
the right amount of information.
– A Secretariat and admin team which provides good
support to the Board.
– Committees which are well chaired and fulfil
their responsibilities.
– Review the Board’s approach to monitoring strategy delivery, including strategic
milestones and KPIs.
– Review the Board’s approach of overseeing the Group’s technology strategy and its
implementation.
– Keep under review the key priorities for the skills required in new non-executive directors
as part of succession planning and Board appointment processes.
– Review the regularity of Board updates from Product Managing Directors and wider Executive
Committee team.
– Review Board committee meeting attendees to ensure the Board committees continue to
have access to the information and expertise needed to undertake their responsibilities.
Outcome of the Chairman effectiveness review
The review carried out by Independent Audit included consideration of the Chairman’s effectiveness. The assessment identified
that the Chairman was performing well and that he was considered as supportive, hard working and fair and balanced.
Following discussion by Board members (excluding the Chairman), it was concluded that the Chairman was performing his
role of leading the Board effectively. Andrea Blance, as Senior Independent Director, discussed the feedback and areas for
development with the Chairman.
Outcome of the individual director effectiveness review and reappointment
Individual director performance and contribution was assessed with individual performance and development discussions
held with the Chairman. The Nomination Committee conducted its annual review of Board and Committee composition.
Having considered the skills, experience, knowledge and tenure of the Board, and the independence and time commitment
of the directors and Chairman, together with the Chairman and individual director performance evaluation, the Nomination
Committee and Board considered that each director in role at the time of its review continued to be committed to their roles,
have sufficient time available to perform their duties and to contribute effectively. Accordingly, it was agreed that all directors
should stand for election or re-election at the 2023 AGM. As announced on 26 January 2023, Malcolm Le May has decided to step
down as CEO, which you can read more about on page 6. It is expected that Malcolm will step down upon Ian McLaughlin joining
the Group as CEO in the Summer. In accordance with the Code and our Articles of Association, Malcolm will stand for re-election
at the AGM, but will be stepping down as planned upon Ian joining the Group. The independence of the non-executive directors
is also considered at least annually and you can read about this in our Nomination Committee Report on page 96.
Composition, succession and evaluation continued
Assessing Board performance – annual Board evaluation continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
95
Nomination Committee Report
Overseeing the Group’s
leadership needs
Allocation of time
Diversity 14%
Succession and talent 50%
Board composition and appointments 26%
Governance 10%
Patrick Snowball
Nomination Committee Chairman
The Committee’s terms of reference are available at:
www.vanquisbankinggroup.com
The Committee has continued to
play a key role in supporting the
Group’s long-term sustainable success
through its oversight of succession,
talent and diversity.
Patrick Snowball
Nomination Committee Chairman
The Nomination Committee plays a key part in the Group’s
long-term sustainable success through its oversight of
succession, talent and diversity. I reported to you in last
year’s Annual Report on the Board and governance changes
we announced in January 2022 to substantially align the
Board membership of Vanquis Bank Limited with that of the
Company’s, which formed an important step in the execution
of our specialist bank strategy. I am pleased to say that
following these governance changes, this year’s external
Board evaluation recognised the overall effectiveness of the
Board, including its skills and experience, which you can read
more about on pages 93 and 94.
As previously reported and as a consequence of these
governance changes, Robert East stepped down from
both the Company and Vanquis Bank Limited Boards in
January 2022. Other than Robert, the Board and Committee
membership remained unchanged during 2022. The biographies
of all members, which contain information on their experience,
are available on pages 71 to 73 and Committee membership
and meeting attendance are set out on page 91.
As announced on 26 January 2023, having led the transformation
of the business into a specialist banking group with a
focus on customers in the mid-cost and near-prime credit
markets, Malcolm Le May decided to step down as CEO. The
Group also announced the appointment of Ian McLaughlin
as CEO, subject to regulatory approval. During 2022 the
Committee led a succession planning process for the CEO
role which you can read more about on page 97. We were
also pleased to announce on 9 March 2023, the appointment
of Michele Greene as non-executive director with effect from
9 March. You can read her biography on page 73 and about
her appointment on page 98.
The Group has continued to implement a suite of initiatives
amongst our colleague population in order to enhance
diversity, and you can read more about these on pages
22, 39 and 98. The implementation of our new Group Job
Levelling Framework to drive consistency and transparency
regarding the seniority level of each role across the Group,
has allowed us to better define who should make up our
senior leadership population. This supports our assessment
of our senior leadership diversity and our progress against
our target to have 40% female representation in the Group’s
senior management population by December 2024 and
also enables us to focus our actions on the right colleague
population to drive greater female representation. Female
representation in this population (Level 14 roles and above)
as at 31 December 2022 was 33%. This is a new measure for
us and therefore provides a baseline for future reporting and
assessment of our progress on gender diversity as we seek
to achieve our 40% female representation target. We still have
much to do to meet our 2024 target and in ensuring the Group
continues to have a diverse senior leadership team to lead
the delivery of our strategy and create long-term sustainable
success for the Group. A diverse and inclusive Group remains
a priority for us as a Committee and underpins our oversight
of our talent and succession plans.
I am also delighted that Fiona Anderson has joined the Group
as Managing Director of Cards in April 2022, bringing with her
a wealth of experience across credit cards and retail banking.
Role of the Committee
The Nomination Committee is responsible for overseeing:
– the Board’s composition and structure, including the Board
committees, so that it remains appropriate and effective in order
to deliver the Company’s strategy. To do this, the Committee
oversees Board appointments and succession planning;
– the Group’s talent management framework to ensure the Group’s
leadership needs are met now, and in the future. The Committee
monitors the senior management succession planning and the
Group’s talent pipeline, including areas of retention risk; and
– the diversity of the Board and that of the Group’s talent
pipeline. The Committee monitors the activities across the
Group undertaken to meet the Group’s diversity objective and
to increase the percentage of roles held by women and other
underrepresented groups across the Group.
Governance
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96
Board composition and succession
A key element of the Committee’s remit is to lead the
oversight of Board composition and succession plans. The
Committee’s annual assessment of the Board and committee
composition confirmed its view that the Board and committee
composition was appropriate, taking into account: diversity;
balance of skills, experience and knowledge; tenure and
time commitment; the size and structure of the Board; and
independence. Accordingly, following the Committee’s
recommendation to the Board, the Board is recommending
to shareholders that all directors be elected or re-elected at
the 2023 AGM. You can read about each director’s contribution
to the Board in their biographies on pages 71 to 73.
We also consider the tenure of directors to ensure Board
membership is appropriately refreshed. When considering
our succession planning for non-executive directors, we
consider the skills, experience and diversity required on the
Board to ensure it is appropriately composed to continue to
effectively lead the Group and deliver for our stakeholders.
Whilst the Committee and Board recognised that whilst
there are no immediate concerns regarding the tenures of
the non-executive directors, as a number of the directors
joined the Board at similar times, it is key to take a proactive
approach in order to stagger succession in the future, thus
retaining the balance of skills, experience and diversity the
Board needs.
During the year, the Committee considered how to
appropriately fill the non-executive director vacancy following
the departure of Robert East, whilst also identifying candidates
who, through their skills, experience and diversity, could also
address the requirements identified by our non-executive
succession planning activity. The Board and Committee
members reviewed the external on-executive talent pool,
considering the experience, skills and diversity of potential
non-executive director candidates and how this aligned
with the future composition needs of the Board. Through this
process Michele Greene was identified as a strong candidate
for appointment. You can read about Michele’s appointment
process on page 98.
The Committee also continued to oversee succession
planning to our two executive director roles, which forms part
of our talent management and succession process, described
further on page 97.
To support the Committee’s ongoing assessment and
understanding of the Board’s collective skills, experience
and diversity, Board members are required to complete
a self-assessment of the skills and experience which they
believe they bring to the Board in areas which support our
strategy and business model. To reflect the implementation of
combined Company and Vanquis Bank Limited Board roles, the
Committee reviewed an assessment of the directors against
an updated skills matrix which had been developed to reflect
the skills and experience needed for those dual Board roles.
The Committee noted that the Board remained well balanced
across all skill sets. The Board Skills Matrix review informed
the design of the Board’s 2022 training programme. You can
see more about our Board Skills Matrix and our Board training
programme on pages 91 and 92 respectively.
Whilst there were no appointments made to the Board
during the year, the Committee did review whether the
terms of myself as Chairman and of Graham Lindsay,
Non-Executive Director, should be renewed. Following review
by the Committee (excluding the impacted directors), it
recommended to the Board that, subject to re-election at the
2022 AGM, those terms should be renewed for a further three
years and the Board confirmed its approval of the same.
Independence
The Committee and Board have undertaken their annual
assessment of the independence of the non-executive
directors, along with their character, judgement, commitment
and performance. At the year end, all of the non-executive
directors, with the exception of the Chairman, were
determined by the Board to be independent. In determining
the independence, the Nomination Committee and Board
took into account the 2018 Code, circumstances which would
likely, or could appear to, impair, a non-executive director’s
independence, including their length of service as well as those
directors who were also directors of Vanquis Bank Limited.
Time commitment
The expected time commitment of the Chair and non-executive
directors is set out in writing. Prior to appointment, and prior to
taking on additional external appointments, an assessment of
demands on a director’s time are assessed to ensure they have
sufficient time available to carry out their role effectively. During
the year the Committee also undertook its annual assessment
of the time commitment of directors prior to recommending
they be submitted to shareholders for election or re-election.
With the majority of the Company’s Board also members of the
Board of Vanquis Bank Limited, our largest subsidiary, the impact
of this on the directors’ time commitment was considered as
part of the annual assessment. The Committee and Board
continue to consider that the Board members have sufficient
time to undertake their roles effectively.
Board evaluation
During the year, the Committee considered the outcome
of the 2021 Board evaluation as it related to areas within
the Committee’s remit. The 2022 Board evaluation was
undertaken externally, with a detailed report on the process
and outcome set out on pages 93 and 94. As regards to Board
composition, the external evaluation recognised the experience,
engagement and technical skills of the non-executive directors
and acknowledged the good gender diversity of the Board. The
need to continue to improve the ethnic diversity of the Board was
also noted. The Committee’s effectiveness was also assessed
in the 2022 evaluation. The evaluation noted that the Committee
was considered to be well chaired and efficient, with all members
able to contribute to its discussions and good debate taking place.
Composition, succession and evaluation continued
Nomination Committee Report continued
Key Committee activities in 2022 Committee priorities in 2023
– CEO and non-executive succession planning processes.
– Oversight of the implementation of the new operating model.
– Review of the Board’s skills and experience against Board Skills Matrix.
– Review of the Board’s succession plan and activities.
– Oversight of the Group’s talent and succession framework
and plans and diversity of the talent pipeline.
– Further progress its proactive planning for Board succession to ensure
the Board’s membership is appropriately refreshed.
– Oversee progress in relation to diversity amongst the Group’s senior
leaders and how the Group will meet its targets.
– Ensure arrangements are in place to report against the new
diversity requirements set out in the Listing Rules and Disclosure
and Transparency Rules in our 2023 Annual Report.
Senior management succession planning in action
During the year Melanie Barnett was appointed as General Counsel and Company Secretary and Nicola Lipson as Chief
People Officer (CPO), with both now key members of the Executive Committee. Following appointment processes taking
place, both Melanie and Nicola were promoted to their roles from existing roles with the Group, with Melanie joining the
Group in 2020 as Deputy General Counsel and Nicola holding previous roles in the Group as Vanquis Bank HR Director
and as HR Business Partnering, Culture and Engagement Director. Both were identified through our ongoing talent and
succession process, which is overseen by the Committee (and which you can read more above) and were identified as
a key members of our talent pipeline and as having the potential to succeed to more senior roles. Their appointments
support the diverse range of views around the Board, Board committee and Group Executive Committee tables.
CEO succession planning and selection of new Chief Executive Officer
The Group announced on 26 January 2023 that, having led the transformation of the business into a specialist banking
group with a focus on customers in the mid-cost and near-prime credit markets, Malcolm Le May had decided to step
down as CEO. The Group also announced the appointment of Ian McLaughlin as CEO and Executive Director, subject to
regulatory approval. Ian is a highly experienced banking CEO with a strong track record of delivering growth through
improving customer service and enhancing distribution throughout his extensive financial services career in consumer
finance, motor finance, savings, SME finance and mortgages.
The Board, with the support of the Nomination Committee, keeps executive succession plans under regular review whilst
taking into account the strategic priorities of the Group. In line with our succession processes, we undertake a formal,
rigorous and transparent search process for each appointment, using objective criteria covering experience and personal
qualities and taking into account the benefits of diversity.
As part of its executive director succession planning process, during 2022 the Nomination Committee completed a review
of the internal succession plan for the CEO role alongside an extensive externally facilitated market mapping process of
external talent. To support this succession planning process, a job specification was developed with the assistance of
Russell Reynolds Associates and reviewed by the Nomination Committee.
Our succession planning process identified a longlist and subsequently a shortlist of internal and external candidates.
Each candidate went through a formal, robust and detailed assessment led by Russell Reynolds Associates against the
key evaluation criteria identified for the role of CEO. Following this assessment, a series of interviews were conducted by
the Chairman and non-executive directors of those candidates identified for interview. Reflecting that the Group CEO
is also CEO of Vanquis Bank, candidates were also assessed as to whether they were fit and proper to undertake the
role. The Nomination Committee considered the outcomes of the external assessment and of the interview processes.
As part of the process the Nomination Committee and Board considered the skills and development areas of the
preferred candidates.
On Malcolm Le May confirming his decision to step down, the Nomination Committee reviewed the proposal regarding
the appointment of his successor and, following consideration of the robust, diligent and externally facilitated process,
the Nomination Committee recommended to the Board the appointment of Ian McLaughlin as CEO, subject to regulatory
approvals. Malcolm will continue as CEO until Ian joins, and then will remain with the Group to support an orderly transition.
Ian is expected to join the Group in the summer, following his notice period.
Ian’s appointment, when effective, would not change the current diversity of the Board. On appointment, Ian will undertake
a tailored induction plan and we will report on this in next year’s report.
Other than for recruitment and related talent advisory services, Russell Reynolds Associates has no other connection to the
Company or individual directors. Russell Reynolds Associates is a signatory of the Enhanced Voluntary Code of Conduct for
Executive Search Firms, which specifically acknowledges those firms with a strong track record in and promotion of gender
diversity in FTSE 350 companies against the scope of the Davies Review.
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97
Talent management and succession
The Committee undertook its annual talent review, which
includes talent identification, succession planning, retention
risk assessment and inclusion and diversity. The progress
made during the year to embed the Group-wide talent
and succession approach has increased the visibility of
the Group’s talent pool and enabled more robust calibration
of talent, helped to identify gaps and support development
conversations to drive more robust succession planning.
Whilst the Committee noted the good progress made in talent
management and succession planning and the general strength
of the internal talent pipeline, in assessing the Group’s short,
medium and longer-term succession plans, it also noted that
continued focus was required to further strengthen
the Group’s short-term succession plans for Executive
Committee roles following the recent target operating model
changes. This will remain an area of focus for our talent
management and succession programme for 2023.
The Committee members were able to engage with our
key talent during the year, such as through site visits and
product-focused sessions. You can read more about the
Board’s colleague engagement activity on pages 82 and 86.
As part of its role in ensuring the Group has the leadership
capabilities to deliver its strategy, the Committee continued to
oversee progress of the implementation of the Group’s new target
operating model, considering the impact of the changes on
colleagues one and two levels below the Executive Committee
as well as the wider colleague population.
Governance
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98
Composition, succession and evaluation continued
Nomination Committee Report continued
Non-executive director appointment: Michele Greene
Candidate requirements
A role specification was agreed which sought to identify candidates with skill and experience
areas which would enhance the Board’s effectiveness as it sought to deliver its banking strategy,
including experience in retail banking, cards and digital wallets. Candidates were sought with
experience which reflected requirements of the Group’s proactive non-executive succession
planning, including those who could succeed to chairing Board committees in the future. A key
aspect of our candidate requirements was cultural fit and a natural affinity and empathy with
the Group’s Purpose and our customers. The candidate specification was prepared to clearly
recognise the value of diversity and inclusion and to reflect that diversity in its broadest sense
was a key priority for our search.
Search process
The candidate search and identification process was led by the Chairman and supported
by Korn Ferry, which produced a longlist of candidates to support the Committee’s succession
planning process. From an initial potential candidate list of 29 candidates (with 66% female
representation), the Committee reviewed a refined list of 17 potential candidates, with a
shortlist of preferred candidates chosen for further discussion and engagement. We worked
with Korn Ferry to ensure that the appointment search was alert to all aspects of diversity
and inclusion throughout the process. Female representation in the shortlist of candidates for
future non-executive director roles was 41%. In considering the pool of potential candidates, the
Committee considered and discussed the ethnic diversity of the non-executive director talent
pool, challenging what further action could be taken to drive greater ethnic diversity in the
pool of potential candidates in order to support the Company’s desire to continue to improve
the ethnic diversity of the Board. The Chairman engaged with our external recruitment advisor
on this matter.
Interviews and
assessment of suitability
Following review of the potential candidates, Michele was interviewed by Patrick Snowball
and other Board members and assessed against the role requirements.
Appointment
Following interviews, the Nomination Committee recommended the appointment of Michele’s to
the Board. Michele’s appointment brings a range of skills and experience to the Board, including
in areas identified in our Board Skills Matrix. She has deep knowledge within the consumer credit,
card payments and digital banking sector. Michele is a chartered accountant by background and
combines finance leadership, with a strong strategic and digital capability and entrepreneurial
experience. She also brings experience needed to support our Board succession plans, with skills
and experience to chair Board committees in the future. Michele joined the Board on 9 March 2023.
We will report on the induction programme in next year’s report.
We were supported in the search by Korn Ferry. Other than for recruitment and related talent
advisory services, Korn Ferry has no other connection to the Company or individual directors.
Korn Ferry has been accredited by the FTSE Women Leaders Review (and its predecessor the
Hampton-Alexander Review) under the Enhanced Voluntary Code of Conduct for Executive
Search Firms, for its work in actively moving the dial on gender diversity across the FTSE 350
and beyond.
Inclusion and diversity
Our approach across the Group to inclusion and diversity,
including our initiatives to support diversity, is set out
on page 39.
Our Inclusion and Diversity Policy, which includes Board
diversity, is designed to promote equality, diversity and
inclusion across all parts of the Group and to ensure that we
have a working environment where everyone feels included
and valued. You can read about the aims of our Inclusion and
Diversity Policy and how it supports the delivery of our strategy
in the table on page 99.
The Committee has overseen progress against the Group’s
inclusion and diversity strategy and the actions being
implemented to meet its diversity targets. It received an
update on the Group’s inclusion community and the work
of our different Affinity Groups, including efforts to raise
colleague awareness of inclusion initiatives and to support
an inclusive culture.
The Committee reviewed the progress being made in relation
to enhance the Group’s diversity data, which is critical to the
senior leadership team and Committee’s roles in ensuring
targeted diversity planning and initiatives.
The Committee also undertook a review of our diversity
targets, and our progress against those targets, and agreed
that the existing current Group diversity target remained
fit for purpose. The Committee noted that good progress
had been made and, it was also acknowledged that there
was more that could be done to further build the Group’s
inclusion and diversity agenda in 2023, such as a continued
focus on inclusion and diversity data collection, building
talent pipelines and supporting our inclusion community.
The Committee also requested management ensure focus
was given to specific functions and teams where greater
female representation was required. During the year, the
Committee also reviewed the outcome of the FCA final
policy decision for proposals set out in CP 21/24 ‘Diversity and
inclusion on company boards and executive committees’
and the resulting changes to the Listing Rules and Disclosure
and Transparency Rules. Whilst the Company is not required
to comply with the requirements until it publishes its Annual
Report for the financial year ending 31 December 2023, as
highlighted elsewhere in this report: following the appointment
of Michele Greene, the Group has increased female
representation on the Board to 50%; the membership of each
of our standing Board committees is majority female, with
two of the Committee chaired by female directors and our
Senior Independent Director is also female; and we also have
one director of an ethnically diverse background. This year
we updated our Inclusion and Diversity Policy to reflect the
changes to the Listing Rules and Disclosure and Transparency
Rules and the Committee will formally report against these
requirements in our next report.
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99
Aims/objectives of our Inclusion
and Diversity Policy
Our Board Diversity Policy How our Diversity and Inclusion Policy
supports delivery of our Purpose and strategy
– Creating and promoting an
inclusive and positive culture
and working environment that
is free from discrimination.
– Ensuring that all colleagues are
treated with dignity and respect,
regardless of any personal
characteristics, and in accordance
with the law.
– Creating a culture where all our
colleagues feel able to speak up
about any concerns.
– Addressing any instances of
inappropriate or unacceptable
behaviour such as harassment,
bullying, discrimination
and victimisation.
– Providing guidance, training and
support to help our colleagues
deliver our inclusion and
diversity commitments.
– Ensuring our managers
lead by example and set
appropriate standards.
– Enabling all colleagues to reach
their full potential and contribute
fully to the success of the business.
– Ensuring policies, procedures and
practices comply with relevant
legislation and are inclusive of all.
– Actively engaging in days and
events which support equality,
inclusion and diversity.
– Promoting our inclusion community
and Affinity Groups to increase
awareness of inclusion and diversity.
– Sets out our commitment to achieving
a diverse and inclusive Board and senior
management team.
– Recognises that having a wider range of
perspectives represented at senior level
contributes towards a high-performing,
effective leadership team that brings greater
diversity of thought to better respond to
our diverse customer base and stakeholder
views, in order to achieve the Group’s overall
strategic aims.
– Ensures that the selection process for Board
appointments is based on merit, whilst also
ensuring diverse shortlists for Board roles.
– Requires the Board’s standing sub-committees
to be appropriately composed in order to
undertake their duties effectively, including
appropriate balance of diversity.
– Confirms our commitment to measurable
objectives regarding Board and senior
management diversity, including those
set out in the Women in Finance Charter,
Hampton-Alexander Review and Parker Review.
– Reiterates the Board and Nomination
Committee’s roles in supporting and
monitoring activities to increase diversity in
senior management roles and talent pipeline.
– Supports the engagement of executive search
firms which have signed up to the Voluntary
Code of Conduct for Executive Search Firms
on gender diversity and best practice.
– Embeds diversity targets set out in the Listing
Rules and our commitment to meeting
diversity requirements set out in the Listing
Rules and Disclosure and Transparency Rules.
By delivering our policy’s key aims, it is the
Board’s view that the Group will benefit from
a wider range of perspectives and ideas
represented at each level of management
and at Board level, contributing to a
high-performing and effective leadership
team which brings greater diversity of thought
to better respond to our diverse customer
base and stakeholder views in order to
achieve the Group’s overall strategic aims.
An effective and diverse Board (and Board
committees), with the appropriate collective
balance of diversity, skills and experience,
has the foundations to be able to support
stakeholders’ views, challenge management
and achieve the Group’s overall strategic
aims by having a wider range of perspectives
represented at Board level.
Objective Progress and implementation
To ensure a rounded and diverse Board and Group
Executive Committee; appointments will be made
on merit, taking into account different backgrounds,
diverse experience, perspectives, personalities,
skills and knowledge, as well as alignment with
the Group’s culture.
Our Inclusion and Diversity Policy, including the Board Diversity Policy, and our formal
documented Board appointment require that appointments are to be made on merit,
taking into account diversity and alignment with the Group’s culture. Diversity forms a key
consideration of Board appointment and succession planning processes. You can read
more about our most recent Board appointment processes on pages 97 and 98.
To ensure Board appointment ‘long lists’ reflect
the Board’s diversity commitments.
Our Board Diversity Policy confirms our commitment that all shortlists for our Board and
senior management positions are balanced from a gender perspective. Our Chairman
and Nomination Committee also ensure that we work with external search firms to drive
diverse candidate ‘longlists’ for consideration for roles as they arise.
To maintain a balance of one-third of the directors
being women as a minimum.
We have continued to exceed this objective and female representation on the Board
as at the date of this report is 50%.
To maintain a minimum of one director from an
ethnically diverse background in support of the
Parker Review target.
We have continued to meet this objective.
The Board will support and monitor Group activities
undertaken to meet its diversity objectives and to
increase the percentage of senior management
roles held by women and other underrepresented
groups across the Group.
The Committee has continued to review the Group’s inclusion and diversity strategy and
initiatives, which have a key role in ensuring we have a diverse senior management and
colleague population and an inclusive culture. When reviewing talent management and
succession, the Committee has reviewed the diversity of our talent pipeline and discussed
barriers to greater diversity.
Additional management diversity objective
As a signatory to the HM Treasury’s Women in
Finance Charter, we have a target to have 40%
female representation in the Group’s senior
management population by December 2024.
You can read on page 39 about the progress made towards this target during the year.
For the purposes of this target we have identified Level 14 and above roles as the relevant
population and female representation in this population was 33% as at 31 December 2022.
We also remain committed to delivering this objective by the December 2024 deadline.
We remain focused on meeting the Hampton-Alexander target of 33% at the Executive
Committee level and its direct reports. Female representation in the Executive Committee
and direct reports population was 32% as at 30 March 2023. This represents positive
progress in relation to this population over the last year; however, we remain focused
on continuing our progress.
Patrick Snowball
Nomination Committee Chairman
30 March 2023
Governance
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100
Customer, Culture and Ethics Committee Report
Overseeing our
people and culture
Allocation of time
KPI tracking 20%
Reviewing policies against Group’s culture 18%
Monitoring governance, ESG
commitments and CR reporting 32%
Monitoring stakeholder expectations 30%
Graham Lindsay
Customer, Culture and Ethics Committee Chairman
and Designated Non-Executive Colleague Champion
The Committee’s terms of reference are available at:
www.vanquisbankinggroup.com
I am pleased to present an overview of the Committee’s work
during 2022. It has been a busy year for the Committee which
included the oversight of providing redress to customers
through the CCD Scheme of Arrangement, following our
campaign to contact 4.2 million customers via letter, email
and media, and the Group’s refresh of the Strategic Blueprint
following the significant change to the business model,
which you can read more about on page 22. The Committee
is encouraged by the continuing development, of the
Group’s Mission, vision and strategic drivers which will further
embed the Group’s Purpose and ensure we are focused on
doing the right thing for our customers, colleagues, and all
other stakeholders.
The membership of the Committee remains unchanged,
comprising three independent non-executive directors and,
where appropriate, the executive directors and members of
the senior management team are invited to attend meetings.
Biographies of the members, Elizabeth Chambers, Margot James
and me are available on pages 71 to 73.
During the year, the Committee’s core duties remained
unchanged as we continue to be focused on our
responsibilities to our customers and overseeing the Group’s
culture. At each meeting the Committee reviewed and
discussed the key performance measures within the Group’s
Blueprint and Customer Dashboards.
The Committee reviews the outcome of the annual Colleague
Survey each year. The survey for 2022 confirmed that we
maintained good levels of colleague engagement throughout
what has been a difficult and challenging year due to the
change across the Group, including the wind-down of the CCD
business, the Scheme of Arrangement, and the restructure of
the Group’s operating model. You can read more about the
employee survey results on page 39.
Feedback from the action planning sessions on the 2022
Colleague Survey is currently underway across the Group
and will be used to further inform and develop collective
action plans.
Corporate culture is everything; it
impacts on everything we do. Getting
the culture right will ensure our business
is sustainable, and delivers the right
outcomes for our customers, colleagues
and shareholders.
Graham Lindsay
Customer, Culture and Ethics Committee Chairman
and Designated Non-Executive Colleague Champion
Role of the Committee
The Committee is responsible for:
– overseeing the embedding and monitoring of the Group’s
culture, ensuring that any material issues in regard to the culture
and ethics applied across the Group are addressed;
– overseeing the development, embedding, and monitoring of
the KPIs by management of the Group’s customer objectives,
Purpose, culture and ethics within its operations, consistent with
the Group’s Strategic Blueprint;
– overseeing the Group’s efforts to ensure that its policies, business
processes, procedures, systems and behaviours are consistent
with improving the customer experience and delivering fair
customer outcomes;
– reviewing and providing guidance for external communications
on key reputational issues within its remit, such as customers,
diversity, and sustainability (ESG agenda: environment,
social, governance);
– ensuring that appropriate arrangements are in place to support
compliance with the 2018 UK Corporate Governance Code and
the accountabilities under section 172 of the Companies Act 2006
as appropriate; and
– ensuring that appropriate employee engagement mechanisms
are in place for the Board to understand the views of colleagues
so these can be factored into decision making.
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101
Monitoring Dashboards
The Committee adopts a KPI and evidence-based approach
to its work.
The Blueprint Dashboard consists of four Blueprint outcomes,
each measured by a variety of metrics, with targets set where
appropriate, to ensure that the Group is able to demonstrate
that it is delivering business activities in accordance with
its Purpose and Strategic Priorities. The Group’s Head of
Sustainability is a standing attendee at the Committee
meetings and has responsibility for monitoring and reporting
metrics within the Blueprint Dashboard.
This Blueprint Dashboard is updated and submitted for review
by the Committee at each meeting so that it can monitor and
challenge the embedding of the Group’s culture and delivery
of positive customer outcomes.
Providing ongoing support to our communities, particularly
to children and young people, is an important aspect of
delivering our Purpose. The Dashboard confirmed that
good progress had been made on the number of colleague
volunteering hours being undertaken during 2022, with
colleagues using their skills in support of a large number of
charities. There were also many team challenges including
at Thornton Community Centre and Café West Community
Centre in Bradford.
Thornton Community Centre offers a wide range of activities
that support the local community, such as stay and play
sessions in the morning and youth groups in the evening. The
team was tasked with turning a currently unused grass area
into a safe outdoor space by building a fence around it. Café
West is a community centre in the Allerton area of Bradford
which serves a diverse community and provides a range
of services, including more than 30 different activities each
week. The team transformed an overgrown area into a new
community growing space by clearing out weeds, replacing
topsoil, levelling the ground, dismantling old raised beds
and making this outdoor space available to use.
Our colleague volunteering opportunities included the
provision of mentoring support to students at New College
Bradford, through a collaboration with our charity partner, the
Ahead Partnership. Through the programme three colleagues
mentored a group of 11 young people, aged 16-18, from New
College Bradford, who are all taking IT and business focused
courses, in order to raise awareness of the opportunities
available in our business. The Committee tracks the
volunteering hours via the Blueprint Dashboard because it is
an important aspect of the Group’s Social Impact Programme
and shows how colleagues can use their own career journeys,
backgrounds and experiences to inspire children and young
people and help them to develop the core skills they need
to live their lives and achieve their full potential.
The Blueprint Dashboard enables the Committee to monitor
customer experiences through use of metrics such as Net
Promoter Score (NPS). During 2022, the Committee noted
that the NPS score in the Group’s vehicle finance business
had declined which enabled the members to explore root
cause issues and corrective actions with management. The
Committee was able to propose how the NPS survey could
be better used to improve customer experience and provide
useful feedback to customer-facing colleagues.
During the year, the Committee received an update on the
progress of the newly developed Conduct Risk Dashboard,
which was created to enable monitoring of the high-level
customer journey and customer outcomes. The first line
customer outcome testing approach has been evolved
to provide outputs that are aligned to the conduct risk
framework. The framework was enhanced to include a
‘three-lens’ approach (Customer Outcomes, Business Outcomes
and Customer Experience) within the scorecard. During the
work to enhance the framework, a sliding scale was designed
to draw out the materiality of the outcome from both a
conduct and business process perspective. Metrics have been
placed against each stage of the customer journey and these
are tracked in the Risk Committee. For more information on the
metrics please see the Risk Report on page 108.
In 2022, the Committee regularly listened to customer calls.
At its November meeting the Committee listened to calls and
considered how these calls had been assessed against the
newly developed My Customer and Me (MCAM) framework.
The MCAM framework provides the business with a level of
assurance around customer testing that is able to clearly
demonstrate when outcomes are or are not meeting the
expected Group standards. This confirmed that when applied
practically, the framework will highlight where customer
interactions contain risks to the customer outcome, regulatory
compliance or to the operations of the Group. Where a poor
outcome is identified, the framework ensures corrective action
is undertaken and managed in line with agreed controls. The
Committee discussed the calls and agreed that, generally, the
quality of service provided by the customer-facing colleagues
was of a high standard and any areas of improvement that
had been identified would be taken forward by management.
Blueprint and culture refresh
During 2018, the Group developed a Blueprint which comprised
our Purpose, four strategic drivers and three behaviours,
and was designed to underpin the culture we needed to
be successful. A great deal has happened in the four years
since the Blueprint was developed and launched including
an unsuccessful hostile takeover bid, a global pandemic, and
the wind-down of the CCD business. Looking to the future, the
UK now faces a cost of living crisis and increased economic
uncertainty and we believe there is significant opportunity
for the Group to be best placed to serve the needs of more
people as the first-choice bank for those who are excluded
from accessing financial services from traditional lenders.
The Blueprint has been refreshed during the year to ensure it is
still relevant today and remains fit for the future of the Group.
Good progress has been made on evolving the Blueprint and
our core messaging regarding our Purpose, Vision, Mission,
Strategic Drivers and Behaviours. The Committee discussed
in detail how the Group would deliver on the Purpose through
a clear vision and Mission and how this will be achieved
through the three strategic drivers. Our Mission is to be the
‘first-choice bank for the UK population who are excluded
from accessing financial services by the traditional lenders’.
To achieve that mission, the focus remained on people and
culture, growing our business in a sustainable and responsible
way and customers and community. The Committee
reviewed the Blueprint Dashboard to ensure that the metrics
currently tracked remained appropriate and aligned with the
refresh work.
Corporate Responsibility Community Programme
The Purpose of our business is to help put people on a path
to a better everyday life. One of the ways we do that is by
partnering with organisations through the Group’s community
investment programme to support the delivery of activities
and initiatives which seek to address some of the key
factors which, on their own or acting together, can reduce
social and/or financial inclusion. In 2023 we will build on this
award winning programme and launch a Foundation. The
Foundation will focus on helping to put children and young
people on a path to a better everyday life by providing them
with access to education, social and financial inclusion, and
economic development opportunities.
Governance
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Committee activities in 2022 Committee priorities in 2023
– Important progress has been made on the 2022 leadership development strategy which
comprised building the outline to an Inclusive leadership programme for senior leaders
across the business.
– In order to contribute to the Board’s overall accountability for the delivery of the Group’s
sustainability performance, the Committee ensured that embedding sustainability
throughout the business, strengthening our governance to manage climate-related risks
and opportunities, and monitoring progress of our net-zero target were priorities.
– In order to support the Board’s oversight of the key stakeholder relationships the
Committee received an update on the Group’s relationship with key suppliers; the
feedback from the suppliers was overall very positive, with some helpful comments
on potential improvements which could be made in both ‘collaboration potential’ and
communication of the ‘Group Strategy’.
– The Committee listened to a wide range of randomly selected customer calls from
across the different product lines to monitor customer outcomes and identify any
opportunities for improvement, which had been fed back to product MDs.
– The Committee received an update on the progress of the implementation of the
Consumer Duty requirements across the Group.
– Reviewed and approved the Group’s Modern Slavery Act Statement.
– The Committee received an update on the progress made on the recommendations
of the Task Force on Climate-related Financial Disclosures (TCFD).
– The Committee received an update on the progress of the newly developed Conduct Risk
Framework including the high-level customer journey which had been produced, and the
expected customer outcome that been defined alongside each journey stage.
– Received an update on the progress made in delivering the 2022 stakeholder
engagement strategy objectives and noted Group’s stakeholder engagement
objectives for 2023.
– The Committee received comfort that the Group was fully compliant with the 2018 UK
Corporate Governance Code for 2022.
– The Committee reviewed the proposed governance and management controls which
had been implemented to ensure that sufficient level of oversight is provided, of the
approach that Group takes to comply with the TCFD recommendations.
– The Committee received an update on the cost of living crisis which included the FCA’s
guidance on tailored support and what’s required of firms.
– Continue to discuss and review workplace
related matters including the results of the
Group’s Colleague Surveys, feedback from
Colleague Forums, the diversity and inclusion
agenda and leadership and development
provision, monitoring progress with the
Future of Work programme.
– Continue to focus on the customer
agenda by monitoring progress on
customer metrics relating to the embedding
of a customer-focused culture across
Vanquis Banking Group and ensuring
that customer outcomes and interests
are considered throughout every stage
of the customer lifecycle.
– Review the previous year’s s.172 Statement
against the market, consider external advice
and identify areas for enhanced reporting
in this area.
– Oversee the Group’s approach to minimising
its contribution to climate change by reviewing
the delivery of the Group’s net-zero strategy
and by managing climate-related risks
through its Task Force on Climate-related
Financial Disclosures (TCFD) work.
– Review the Group’s compliance with relevant
regulatory and voluntary requirements,
including the Company’s Modern Slavery
Statement, Gender Pay Gap Reports
and Prompt Payment Code.
– Review and approve the Group’s community
investment strategy for 2022-23.
– Oversee the embedding of the stakeholder
engagement strategy and monitor progress
against the same.
– Review whistleblowing data and consider
any cultural root causes and issues.
Corporate Responsibility Community
Programme continued
The Foundation will seek to improve the lives of children
and young people by providing educational and social
development opportunities which support financial and
social inclusion. In 2022, the Committee reviewed the launch
by the Group of a £100,000 scheme working in partnership
with School-Home Support and the Dixons Academies Trust
to supply essential items of school uniform for students who
need support across Bradford, Liverpool, Manchester and
Blackpool. School uniforms, in some cases, can cost as much
as £300, and as families struggle with the cost of living crisis
and rising energy bills, providing school uniforms for their
children can become a challenge, so we were pleased that
the Group was able to lend its support.
ESG and stakeholder considerations
Following the operating model changes and the creation
of the new shared services division, including procurement
services, the Committee supported improvements to the
Group’s supplier relationship management with a new
supplier relationship management (SRM) framework launched
in 2022, under which all colleagues will be held accountable
for the management of key suppliers within our supply base.
The Committee considered the relationships the Group
has with its suppliers, the impact of the closure of CCD on
suppliers and how we continue to ensure and evidence that
our supply chain adheres to and complies with the Modern
Slavery Act.
In the last 12 months, the Group has been heavily focused
on maintaining suppliers’ service levels across its divisions
following the closure of the CCD business. A supplier survey
was sent to a representative sample of our supplier base.
The questionnaire was designed to try and extract an
accurate perception of the Group as a customer, from
suppliers from different divisions and varying criticalities.
The overall responses evidenced that the Group is regarded
as a good customer, though areas for enhancement both in
collaboration potential and communication of Group Strategy
were also identified and the Committee will continue to
monitor these.
The Committee supports the Board in providing oversight of
the Group’s approach in managing and reporting ESG-related
matters. During the year, the Committee received two updates
on how the climate risk agenda was being governed and
managed across the Group. This included an update on
the strategy in place to enable the Group to determine the
actual and potential impacts of climate-related risks and
opportunities on the business and its key stakeholders, and
one on the progress being made by management in setting
carbon reduction targets which align with current climate
science, details of the Group’s TCFD report are set on pages
40 to 49. Throughout 2022, we have engaged with colleagues
via the ‘Greenprint’ section of the Stay Connected intranet site
on a range of issues such as why we measure and report our
carbon footprint. Please see our ESG Report on pages 45 to 49.
Graham Lindsay
Customer, Culture and Ethics Committee Chairman
30 March 2023
Customer, Culture and Ethics Committee Report continued
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Ensuring a robust
control framework
Allocation of time
Governance 15%
Financial reporting 35%
External audit 16%
Internal audit 22%
Management reporting 12%
Paul Hewitt
Audit Committee Chairman
The Committee’s terms of reference are available at:
https://www.vanquisbankinggroup.com
Audit, risk and internal control
Audit Committee Report
Throughout 2022, the Committee
the embedding of an enhanced
control regime. This, combined with
close monitoring of the uncertain
macroeconomic landscape, will
continue to be the focus for 2023.
Paul Hewitt
Audit Committee Chairman
I am pleased to present the Audit Committee Report for
the year ended 31 December 2022, which summarises the
key activities of the Committee during 2022 and confirms
compliance with the Competition and Markets Authority
Statutory Audit Services Order.
The Committee membership has remained consistent for
the last three years, with me as Chair alongside two other
non-executive directors, Andrea Blance and Angela Knight.
Angela Knight continues to chair the Risk Committee and works
to ensure that the work of both Committees is coordinated.
The biographies of all members, which contain information on
their qualifications, are available on page 71 and Committee
attendance is detailed on page 91. The Board remains satisfied
that the Committee as a whole has sector competence and
an appropriate level of relevant financial experience.
I am pleased to report that the recent Board effectiveness
review (page 93) confirmed that the Audit Committee was
‘well managed’, had a ‘good level of oversight’ and provided a
forum for ‘vigorous challenge’ when necessary. The alignment
of the Boards of Vanquis Bank Limited and the Company
also continued to embed successfully throughout the
year, reducing the administrative burden and streamlining
governance arrangements.
The transformation of the Group Finance function to
ensure sufficient maturity for an enhanced control regime,
as recommended in the BEIS White Paper, ‘Restoring trust
in audit and corporate governance’, progressed well
throughout the year. In parallel, the implementation of our
Integrated Assurance Framework also remained on track. The
Committee was satisfied with the Group’s progress against
the recommendations made in the White Paper and remains
committed to the further embedding of enhanced controls
throughout 2023.
I look forward to our 2023 AGM, where I would be pleased to
answer any further questions on the work of the Committee.
Role of the Committee
The Committee is responsible for overseeing the following:
Financial reporting
– monitoring the integrity of the financial statements, and any other
published financial information, and reviewing the significant
financial reporting judgements therein;
– advising the Board on the Annual Report and Accounts, including
whether it is fair, balanced and understandable;
– assisting the Board in assessing the Company’s
going concern
status and ongoing viability;
External audit
– conducting the tender process and recommending to the Board
the appointment, remuneration and terms of engagement of the
external auditor;
– reviewing and monitoring the independence and objectivity
of the external auditor;
– assessing the effectiveness of the external auditor;
– implementing and monitoring the Group’s policy on
non-audit services;
Internal audit
– assessing and monitoring the effectiveness of the Group’s
Internal Audit function, including approving the annual Internal
Audit Plan; and
Internal controls and processes
– reviewing and monitoring the effectiveness of the Group’s system
of internal financial and operational controls.
Governance
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Committee activities in 2022
Committee priorities
for 2023
– Reviewed and approved the 2021 financial statements and areas of significant judgement, including the
going concern basis and viability statement. Confirmed that the 2021 financial statements were fair, balanced,
and understandable.
– Reviewed and approved the Preliminary Results Announcement.
– Reviewed and approved the Non-Audit Fees Policy and non-audit fees for 2021.
– Reviewed and approved the External Audit fees.
– Confirmed Internal Audit’s Charter, statement of independence and objectivity and effectiveness.
– Reviewed the 2021 external auditor’s full-year report and management letter and recommended approval
of the same by Board.
– Reviewed and confirmed the result of the Internal Audit Self-Assessment.
– Reviewed and approved the annual internal statement of governance, risk management and internal control.
– Confirmed that there were sufficient distributable reserves to recommend the payment of the 2021 interim
dividend (paid May 2022) and the 2022 interim dividend (paid September 2022) to the Board.
– Received the external auditor’s interim review.
– Received and approved the external auditor’s proposed 2023 audit plan.
– Reviewed the accounting judgements proposed by management including those set out on page 107.
– Received regular updates from management on the continued embedding of the transformation
of the Group Finance function.
– Received regular reports on the implementation of the Integrated Assurance Framework.
– Reviewed and approved the Interim Management Statement.
– Confirmed the coordination of activities between internal and external audit.
– Reviewed and approved the 2023 Internal Audit Plan.
– Received an update on the progress made against the TCFD recommendations.
– Received an update on the Group’s risk assessment processes and preventative measures to prevent
the Corporate Criminal Offence of failure to prevent tax evasion.
– Received an update on the outcome of the Board committee effectiveness evaluation.
– Reviewed and approved the Committee’s terms of reference, 2023 forward agenda planner and adherence
with its terms of reference during 2022.
– Continued embedding
of the Integrated
Assurance Framework
across the three lines
of defence.
– Continued oversight
of the transformation
of the Group
Finance Team to
ensure the correct
level of maturity
for an enhanced
control regime.
– Continued monitoring
of the legislative and
regulatory landscape
in relation to audit
reform and controls
enhancements.
– The further
development of data
analytics in the Internal
Audit function.
Fair, balanced and understandable
Having regard to its duty under Code Provision 25, the Committee
considered whether the 2022 Annual Report and Financial
Statements, when taken as a whole, was fair, balanced,
and understandable.
The Committee adopted the same robust process as in prior years
to justify the statement. This included:
– Committee reviews to provide input at early stages of
drafting. Committee feedback was then incorporated into
subsequent drafts;
– oversight of the process, which included input, evaluation,
and verification by Group senior management;
– external evaluations of the Remuneration and Governance
Reports respectively; and
– private sessions with the external auditor.
The Committee considered management’s areas of significant
judgements, estimation, and uncertainty and emerging issues as
set out in the financial statements on page 163 to 164. These areas,
alongside the going concern assumption, were scrutinised and
challenged by the Committee and the external auditor as part
of the year-end processes.
In assessing compliance with the Code, the Committee considered
the following criteria:
Is the Report fair?
– Is it a full reflection of events throughout the year and consistent
with messages communicated throughout the year?
Is the Report balanced?
– Is the narrative reporting consistent with the financial reporting?
– Are the statutory and adjusted measures are
appropriately balanced?
Is the Report understandable?
– Is it presented in a logical order and using clear language?
– Are important messages clearly highlighted as such?
– Is information shown in tabular or graphic form where this would
assist the reader?
Conclusion
The Committee concluded that, in its opinion, the 2022 Annual
Report and Financial Statements, when taken as a whole, are
fair, balanced, and understandable and recommended this
assessment to the Board.
Audit, risk and internal control continued
Audit Committee Report continued
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105
Financial reporting process internal control and risk management systems
The Committee receives regular reports from the Internal Audit and Group Risk functions in relation to the effectiveness of internal
controls and risk management systems. Where recommendations for improvement are made, these are agreed with management
and progress is monitored by the Committee at each meeting. In 2021, the Committee commissioned an external review of the
Group’s internal financial controls environment, which identified three areas where continued improvement was required.
Area for improvement identified in 2021 Progress to date
Implementation of a Group-wide integrated
risk system
Significant progress was made during the year on the implementation
of the Integrated Assurance Framework. The framework, facilitated by
the Riskonnect software, will facilitate a single view of all risks across
the Group. You can read more about our risk harmonisation activity on
pages 54-58.
The embedding of our specialist banking
group strategy
The common Board structure and integrated operating model
embedded successfully during 2022, reducing the administrative
burden and enhancing strategic oversight. The transformation of the
Finance Function has also progressed well during the year, with key
improvements to internal controls notably in relation to the general
ledger, management reporting, financial planning, treasury and the
finance operating model.
The IT platform modernisation
A transformation programme is being executed which, over the
next few years, will see all products on a unified modern technology
platform, providing a single view of our customer, and enable our
strategy and aspirations to be achieved. The transformation activity
has commenced, with personal loans being serviced through the new
platform in 2023, followed by credit cards and vehicle finance.
Internal Audit submits to the Committee an annual assessment of the overall effectiveness of the governance, risk, and internal
control environment of the Group. The assessment is a holistic view, considering the aggregate outcomes of audits conducted over
the year, and assesses a range of factors including first line controls, risk appetite metrics, risk and controls awareness, governance
structures and people risk. In February 2023, Internal Audit confirmed that the Company’s control environment had improved
significantly during 2022 and that the Risk, Compliance and Finance Functions were adequate and effective.
Deloitte LLP provides an annual management letter which identifies significant internal controls matters and the management
response. The Committee also holds private sessions with the external auditor, in the absence of executive directors or management,
to ensure that any issues of concern are escalated to the Committee as necessary.
Internal Audit
The Group continues to operate an in-house Group Internal Audit function, managed by the Group Chief Internal Auditor who
reports to the Committee at each meeting. Specialist services are provided by third-party consultants where necessary and
are subject to the Group policy on non-audit work. During the year, the Group Internal Audit function executed the approved
annual audit plan. The Plan is developed through a risk assessment against each of the Group’s principal risks (page 59) and
the methodology for its development continues to be refined to ensure optimal risk coverage. The audit conclusions for 2022
demonstrate a significant improvement in the control environment since the prior year. The Committee is satisfied that the
Group Internal Audit function is both independent and effective, as detailed below.
Independence
The Group Chief Internal Auditor reports directly to the Chair of the Committee, with an administrative reporting line
to the Group Chief Executive, and has no responsibilities outside of oversight of the Internal Audit function, as required
under the Institute of Internal Auditors Code of Practice.
The Committee holds regular private sessions with the Group Chief Internal Auditor, in the absence of any executive
director or member of management. The Chair of the Committee also meets with the Group Chief Internal Auditor
at least quarterly.
The Group Chief Internal Auditor confirms to the Committee that the Internal Audit function is organisationally
independent through an annual attestation.
Effectiveness
The Committee annually approves the Internal Audit Charter and regularly monitors progress against the Internal
Audit Plan. The Committee scrutinises an Internal Audit self-assessment and effectiveness review annually, and requests
regular updates on any remediation requirements. The Committee receives regular confirmation that the Internal Audit
function is appropriately resourced and has sufficient expertise to fulfil its role. A 2021 External Quality Assessment of
internal audit, conducted by Ernst & Young, concluded that the function benchmarked well against industry peers.
Governance
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106
External Audit
Appointment
and tenure
Deloitte LLP has been the Group’s external auditor for 10 years. The Group’s policy is to undertake a formal tender
process for the position of external auditor at least every 10 years; this was conducted in 2020 and Deloitte LLP was
selected by the selection panel. The Committee has the authority to commission a formal tender process at any time
it decides this may be in the Group’s best interest.
At the Committee meeting in March 2023, the Committee concluded that Deloitte LLP continued to perform in line with
expectations and remained independent of the Group. Deloitte LLP’s reappointment will be proposed to shareholders
at the 2023 AGM.
Effectiveness
The Committee held private sessions with the external auditor three times during the year. The Committee schedules
the private sessions on an alternating basis to ensure the Committee meets with both the internal and external auditor
in the absence of executive directors or senior management. This facilitates the ability of the external auditor to raise
any issues of concern. In addition to this, the Chair of the Committee meets with the external audit partner quarterly
and additional meetings or private sessions are available upon request.
The annual assessment of the external auditor requires the feedback of the Committee and Group and Divisional
Heads of Finance. The scores and feedback are shared with the external auditor and an action plan to address
remediation needs is developed. The main remediation need identified in relation to the 2021 audit was the need to
allow sufficient time for testing and management response ahead of deadlines, though the overall conclusion was
that Deloitte LLP remained effective.
The FRC conducted an inspection of the 2021 financial statements for Vanquis Bank Limited, the results of which were
published in December 2022. The report concluded that ‘limited improvements’ were required and all findings were
addressed by Deloitte during their 2022 audit.
Throughout the year, the external auditor challenged management and demonstrated professional scepticism.
One notable example related to the IT controls in the vehicle finance business during the interim period before the
systems upgrade; Deloitte debated with management regarding the appropriateness of interim risk acceptances.
Independence
and objectivity
The Committee ensures adequate safeguards are in place to ensure the independence of the external auditor.
These include:
– a policy on the appointment of staff from the external auditor: engagement partners, quality review partners, other
key audit partners, and senior members of the audit engagement team may not be employed as Group Finance
Officer, Director, Finance Shared Services or any Divisional Finance Director;
– non-audit work is subject to the policy detailed below and the non-audit team does not prepare anything which
would be relied upon in the Group audit;
– work performed is subject to an independent professional standards review and Engagement Quality Control
Review process;
– the Committee considers the reappointment of the external auditor, including the rotation of the audit partner,
annually. The review considers both independence and effectiveness, primarily using a scorecard system.
A new, lead Audit Partner has been in place since May 2022 and the transition period ran smoothly; and
– the external auditor attests its independence and objectivity to the Committee on an annual basis.
Non-audit work
The Company has a formal policy on the use of the external auditor for non-audit work, which is reviewed annually and
adheres to the EU Audit Directive and Regulations. The policy stipulates that non-audit work should only be awarded to
the external auditor when there is clear reason to prefer it over alternative suppliers, following a rigorous procurement
process. All awards of non-audit work to the external auditor are monitored to ensure that their independence, and
perceived independence, are not compromised.
The Committee must approve in advance any award of non-audit work with an aggregate value in excess of £250,000.
The Chair of the Committee must approve any non-audit work with an aggregate value of £50,000-£250,000.
Deloitte LLP’s fees for non-audit work during the year were £0.7m (2021: £1.2m) The ratio of audit to non-audit fees
was 2.4:1.
Audit, risk and internal control continued
Audit Committee Report continued
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107
Significant issues and areas of judgement
The critical accounting assumptions and key sources of estimation uncertainty considered by the Committee in relation to
the Annual Report and Financial Statements 2022 are outlined on pages 163-164. In addition to the matters set out on the next
page, the Committee also considered the going concern statement set out on page 158. The Committee discussed these with
the external auditor during the year and, where appropriate, these have been addressed as areas of audit focus as outlined
in the Independent Auditor’s Report on pages 220 to 228.
Issue Judgement Actions
Impairment of amounts
receivable from customers
Receivables are impaired on
recognition in accordance with
IFRS 9. The impairment allowance
is initially dependent on the
probability of default (PD), the
loss given default (LGD) and the
exposure at default (EAD) within
12 months, discounted at the
original effective interest rate (EIR).
Lifetime losses are recognised
following a significant increase
in credit risk.
The assessment of credit risk and
therefore impairment allowance
should be probability weighted,
and should utilise all information
available, including past events,
current conditions and supportable
forecasts of economic conditions
at the reporting date.
An assessment of macroeconomic
factors, including the latest
economic forecasts, is also required
to estimate expected losses.
Judgement is applied to
the impairment allowance
required. This includes whether
past performance provides a
reasonable estimate of future
losses implicit within the PD,
LGD and EAD.
In 2022, adjustments made in
relation to the Covid-19 period
have been fully unwound as the
Group considers these impairment
provisions to be no longer
required. In addition, the Group
has refreshed SICR threshold
parameters in the credit cards
provisioning model to better
reflect the evolving receivables mix
following a refocus onto lower risk
market segments.
In light of the higher inflationary
economic environment and
rising living costs, a cost of
living post-model adjustment
remains in place.
The Audit Committee reviews and challenges
the key judgements applied throughout
the year. This includes adjustments to
determining significant increases in credit
risk and default. Post-model adjustments are
reviewed and challenged when impacting
PD, LGD or EAD.
The process of creating future estimates is
considered with peer analysis performed.
The design, implementation, and testing
of new models and any associated
model enhancements are reviewed and
challenged. The embedding of the new IFRS
9 model monitoring control framework will be
overseen by the Committee, and the required
ongoing monitoring of these models together
with associated controls will be reviewed and
challenged. Evidence following the period
end is assessed to determine if the evidence
would have been available at the period end
and included within the assessments.
The work performed by Deloitte LLP on
validating the management assumptions
is considered. Findings are presented in
Deloitte LLP’s report to the Audit Committee
which is challenged with knowledge of the
latest circumstances.
The work performed by Group Internal Audit
is considered, in particular, on technology
and operational controls.
Retirement benefit asset
The valuation of the retirement
benefit asset is dependent upon
a series of actuarial assumptions.
The key assumptions are in respect
of the discount rate, inflation
rates and mortality rates used
to calculate the present value
of future liabilities.
Judgement is applied in
formulating each of the
assumptions used in calculating
the retirement benefit asset.
This considers any adjustments
made to the key judgements to
ensure they remain appropriate
for the Group’s defined benefit
pension scheme.
The Company’s external actuary, Willis
Towers Watson, proposes the appropriate
assumptions and calculates the value
of the retirement benefit asset.
The Committee considers the adjustments
made by management to the core
assumptions proposed by the actuary.
The Committee also considers the audit work
performed by Deloitte LLP on the assumptions
and to what extent the assumptions are
within the suitable ranges of assumptions
based on audit experience.
Compliance statement
The Group has fully complied with the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 throughout the 2022 financial year.
Paul Hewitt
Audit Committee Chairman
30 March 2023
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
108
Sustainable growth through
effective risk
management
Allocation of time
Top of mind, principal and emerging risks 8%
Credit risk focus 15%
Risk appetite, framework, policy and harmonisation 11%
Regulatory and prudential risk reporting 29%
Risk management effectiveness 9%
Compliance and conduct 17%
Governance and remuneration 11%
Angela Knight
Risk Committee Chair
The Committee’s terms of reference are available at:
www.vanquisbankinggroup.com
The Committee has been focused on
overall, with particular attention given
to the principal risks. The embedding
of expertise in our Risk function
has bolstered our frameworks and
enabled the Committee to continue
its work overseeing the delivery of the
well-controlled manner.
Angela Knight
Risk Committee Chair
I am pleased to report that the Group’s overall risk profile
has improved throughout the year with several activities
contributing to this aggregate position.
As part of the strategic transformation from a legacy divisional
structure to a Group structured around product lines and
shared services, the Group and Vanquis Bank Risk Committees
were combined. The Committee membership has remained
consistent with me as Chair and two other non-executive
director members, Elizabeth Chambers and Paul Hewitt, who is
Chair of the Audit Committee. The biographies of all members,
which contain information on their qualifications, are available
on pages 71 to 73 and committee attendance is on page 91.
I am also a member of the Audit Committee and work with
Paul Hewitt to coordinate the work of both Committees. The
Committee has increased both the frequency and duration
of its meetings during the year and expanded its schedule
to accommodate an increased focus on current and
emerging risks.
The Committee reviews the Chief Risk Officer’s (CRO’s) Report at
each meeting to facilitate discussion of the top of mind risks
(top down strategic and emerging risks), the principal risks
(bottom up all encompassing risks), and the Group’s position
against its risk appetite and compliance and regulatory matters.
The CRO Report also informs the Committee of the second
line’s oversight and challenge of first line operations and the
CRO provides an annual assessment of the effectiveness of
risk management. This year the Committee has received an
additional interim assessment of risk management effectiveness
which provided us with a helpful mid-year check point.
Role of the Committee
The Committee has two primary roles: firstly, to ensure that
there is an appropriate Enterprise Risk Management Framework
in operation across the Group, enabling effective oversight of
the Group’s principal risks and its aggregated risk position; and
secondly, to provide advice to the Board in relation to the Group’s
current and potential future risk strategies and exposures. The
Committee’s principal areas of responsibility are as follows:
– understanding the Board’s strategy, desired culture and direction
and identifying the key strategic and emerging risks which might
prevent delivery;
– endorsing an overall risk appetite and recommending it to the
Board for approval at least annually;
– carrying out an assessment of the principal risks facing the Group;
– monitoring the overall effectiveness of risk management across
the Group and product lines as overseen by the Group CRO;
– in conjunction with the Audit Committee, reviewing the Group’s
capability to identify and manage new risk types, and keeping
under review the effectiveness of the Group’s internal control
and risk management systems;
– reviewing the Group’s management of current and
forward-looking risk exposures;
– notifying the Board of any changes in the status and control
of material risks;
– reviewing the Group’s management of operational resilience;
– reviewing and approving the Group’s ICAAP, ILAAP and Group
liquidity assessment, including the stress testing and capital
allocation approach; and
– continuous improvement of risk outcomes for the Group through
effective risk management planning.
Audit, risk and internal control continued
Risk Committee Report
Vanquis Banking Group plc Annual Report and Financial Statements 2022
109
At each meeting the Committee has:
– reviewed and assessed the overall risk management
status of the Group;
– reviewed and assessed the Group’s top of mind risks
and key risk priorities;
– reviewed and assessed the Group’s principal risks;
– reviewed and confirmed the risk appetite status across
the Group; and
– reviewed the minutes and actions from previous meetings.
Key areas of focus
Credit risk
Responding to the volatile macroeconomic environment
during the year, the Committee has requested and received
more frequent and detailed credit risk reports. The Committee
requested the inclusion of concentration risk dashboards
and oversaw the broadened monitoring of potential areas
of financial stress for customers. The Chief Credit Officer
attends the Committee and provides updates on the portfolio
performance, stability and customer behaviours. Uncertainty
in the macroeconomic environment dictates that we will
continue to monitor very closely the impact of rising interest
rates and other financial pressures on our customers.
IT change transformation
The Board has committed to transform the Group’s IT
infrastructure to deliver the future strategy and desired
operating model. The Committee has played a key role
in challenging management to ensure it has identified,
considered and addressed the risks presented by the IT
change programme. The Committee has invited the Chief
Information Officer to be a standing attendee and has
received a report regarding the IT strategy, transformation,
and associated risk management activity at each meeting.
The Committee has provided guidance and approval to
management in support of its proposals to balance risk
management on legacy systems in order to optimise
investment of resources, both time and money, into the new
infrastructure, Gateway. You can read more about the Group’s
investment in its technological capabilities for sustainable
growth on page 9.
The Committee has overseen the continued progress of the
first line control programme initiated in Vanquis Bank and
now extended to all of the Group. To date the programme has
defined 300+ controls, 93% of which have been designed and
73% of which have been implemented. All have contributed
to strengthening our control environment.
Prudential risk
I am pleased to recognise the considerable efforts that have
gone into enhancing our prudential regulatory documents.
The ICAAP received significant focus in 2021 and 2022 which
delivered improvements to methodology and addressed
the simplification and improved risk profile of the Group. The
Committee reconsidered the ICAAP in May 2022 to approve
the summary narrative and reaffirm the calculations and
assumptions ahead of recommending it to the Board for
approval and its submission to the FCA and PRA.
On 8 March 2023 the Group announced an update about
our capital requirements from the PRA, following conclusion
of its Capital Supervisory Review and Evaluation Process.
The outcome was a reduction in the Group’s Total Capital
Requirement by more than a third, from 18.3% to 11.9%. I
am delighted that our efforts to reposition the Group and
strengthen the Group-wide risk management framework have
strongly contributed to this outcome. I would like to thank the
Treasury and Risk teams for their hard work and dedication
in helping us achieve this positive result.
Following on from the enhanced ICAAP, the ILAAP has been
subjected to a detailed root and branch review during
2022 and was approved by the Committee, for onward
recommendation to the Board, in December 2022. The
Committee commissioned expert independent advice to
provide further assurance over the methodological changes.
In November 2022 the PRA approved the Group’s application
for a Core UK Group waiver. The Committee dedicated
significant time to carefully consider the liquidity risks that
might arise from the arrangement and to ensure each entity
was appropriately resourced and well run to honour the
arrangements. The Committee also approved the associated
intra-group funding and lending framework.
Consumer Duty
The Committee has overseen the submission of the Group’s
implementation plan to the FCA for the Consumer Duty
Regulation. Sponsored by the CRO, a Consumer Duty
programme has been established to support the Group’s
work to analyse, plan and implement the requirements of
the Consumer Duty Regulation. The Committee completed
a deep dive review of the regulation and its consequences
for the Group, and has been consulted on the programme’s
governance arrangements and establishing the accountable
SMF. The Committee has received regular updates from the
programme, which has so far completed an in-depth gap
analysis of the Group’s current position against the regulation
in order to develop the implementation plan, and established
a Steering Committee and a number of workstreams: Product
and Service, Price and Value, Consumer Understanding, and
Consumer Support. The Consumer Duty programme will now
move to implement the activities that were committed to in
our implementation plan, in order to embed the Consumer
Duty principles throughout 2023. The Committee will continue
to closely monitor its progress.
Risk harmonisation
The Committee has overseen significant progress on the Risk
Harmonisation Programme. All legacy frameworks have been
consolidated into one single Enterprise Risk Management
Framework to ensure a consistent application of best practice,
and enabled by a centralised Risk function.
An automated Risk Management System was implemented
with modules for Risk Appetite, Risk Events, Risk and Control
Self-Assessment (RCSA) and Internal Audit activated during
the year. Additional modules for Compliance and Regulatory,
Model Risk and Third-Party Supplier management are planned
for 2023. This technology ensures a secure and single central
repository of risk information and will provide improved
reporting and insight capability.
The Committee has overseen the continued development
of the Group’s Risk Appetite Framework to reflect the
changes to organisational structure driven by the strategic
transformation. The Committee receives comprehensive
risk appetite data with detailed plans regarding any
route-to-green activity for metrics that are not within appetite.
Looking forward, uncertainty in the macroeconomic
environment dictates that we will continue to monitor very
closely the impact of rising interest rates and other financial
pressures on our customers throughout 2023. The continuation
of our IT transformation means that execution risk and IT
and information security risk will be a central focus of the
Committee, alongside the associated risk acceptances
which we will address as the new infrastructure is introduced
and there is decreased reliance on legacy systems.
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
110
IT Platform
& Controls
Credit risk
Emerging risks
Principal risks
Opportunities
Our Risk Management Framework and Risk Appetite
Framework (RAF) establishes our appetite for risk and provides
direction on the appropriate risk taking across the Group.
We have processes and procedures to ensure that any risk
taking activity beyond our appetite is recognised, escalated
and addressed appropriately. The Committee assessed the
Risk Appetite Framework in December 2022 ensuring that
it remained appropriate to the risk strategy and profile of
the Group. The Committee approved recommendations by
management to refine some of the RAF metrics to reflect the
evolution of the Group across the year and the increased
sophistication of our ability to assess risk. In addition to
reporting on execution risk and strategic risk, the second
line monitors in-flight strategic programmes. This allows
the Committee to constructively challenge management’s
implementation and helps identify execution risks at an early
stage. For further details regarding the principal and emerging
risk assessment, full details of the Risk Appetite Framework
and those principal and emerging risks the Board is willing
to take in order to achieve its long-term strategic objectives,
please see pages 54 to 66.
Principal and emerging risks
The Committee is responsible for assessing the principal and emerging risks to the Group. The CRO reports at each meeting on
principal and emerging risks and the Committee considers these and any other risks that may impact on the Group’s strategy
and operations and assesses its aggregated risk profile. You can read more about how we identify and manage risks in the risk
management and principal risk section of our Strategic Report on pages 54 to 66.
The Committee
has commissioned
enhanced credit
risk reports from the
Chief Credit Officer.
The Committee considered
the way in which the
Group manages and
executes change.
The Committee
has overseen the
implementation
and efficacy of
operational controls.
The Committee
has invited the
Chief Information
Officer to be a
standing attendee.
Climate
Financial
Crime
Capital
Funding
and
Liquidity
Market
Credit
Strategic
Execution
Legal
and
Governance
Conduct
and
Regulatory
People
Technology
and
Info-
Security
Operational
Model
People risk
Execution risk
Audit, risk and internal control continued
Risk Committee Report continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
111
Committee review of internal risk management
and controls
In accordance with the 2018 UK Corporate Governance
Code Principle O, the Board has a responsibility to establish
procedures to manage risk, oversee the internal control
framework, and determine the nature and extent of the
principal risks the Company is willing to take in order
to achieve its long-term strategic objectives. Provision
29 requires the Board to monitor the Company’s risk
management and internal control systems.
Following a detailed review by the Committee, the directors
can confirm that the Group’s key risks have been robustly
assessed and are effectively controlled. 2022 was a year
of continued improvement in terms of the Group’s overall
risk profile. In reaching this conclusion, the Risk Committee
assessed the following criteria:
– a comparison between the Group’s net risk profile and
positioning on both 1 January 2022 and 2023, indicating
an improvement year-on-year;
– management of ‘top of mind’ risks including credit risk
related to the cost of living crisis, strategic execution risk,
technology and change, and our preparedness to meet
new conduct regulation (Consumer Duty);
– performance of the Risk function against its objectives as
agreed and assessed by the Remuneration Committee;
– an assessment of the implementation and embedding
of the Risk Harmonisation Programme to ensure consistent
application of best practices;
– key strategic decisions taken and executed in 2022
which alter the risk profile of the Group, including the
change in structure and centralisation of shared services,
the wind-down of CCD and the introduction of open
market loans;
– an assessment of our relationships with our regulators,
which demonstrates a multi-year improvement; and
– other key indicators such as the reduction in open and
overdue audit actions, engagement with risk awareness
activities and enhanced risk awareness within first
line management.
The Committee appreciates that the embedding of a risk-aware
culture is a continual and iterative process. With this in mind
the Committee priorities to further enhance the Group’s control
environment during 2023 are set out in the table below.
Angela Knight
Risk Committee Chair
30 March 2023
Committee activities in 2022 Committee priorities in 2023
– Oversaw the Risk Harmonisation Programme, including the implementation
of the Group-wide Riskonnect risk system.
– Monitored the Group’s strategic and emerging risks.
– Approved the ICAAP, ILAAP and Pillar 3 Disclosures, for onward recommendation
to the Board.
– Provided an attestation in support of Core UK Group waiver application.
– Performed enhanced monitoring of credit risk change in light of changes
to the macroeconomic environment.
– Reviewed the principal risks, internal control and committee reports within the 2021
Annual Report and Financial Statements.
– Reviewed and approved the Group Lending Framework, including the stress testing
and capital allocation approach.
– Recommended to the Board the Consumer Duty of Care implementation plan.
– Received the CRO’s assessment of the executive directors’ non-financial scorecard
for 2021.
– Confirmed the effectiveness of the annual Group Risk Management Framework following
an internal review by management.
– Reviewed the Group MLRO Report.
– Monitored in detail complaints performance across the Group and oversaw resulting
operational and process changes.
– Monitored IT resilience across the Group and the progress of the IT transformation plan
via regular reporting from the Group Chief Information Officer (CIO).
– Oversaw model governance and model validation results.
– Received regular data protection performance reports and action plan updates.
– Approved the Compliance Monitoring Plan.
– Approved the Committee’s revised terms of reference (ToR) and forward agenda planner.
– Oversee the embedding of the Risk
Harmonisation Programme supporting
the transfer of accountability for risk
management into the first line.
– Closely monitor the Group’s ‘top
of mind’ risks.
– Oversee execution of the Group’s Consumer
Duty of Care implementation plan.
– Oversee IT strategic transformation
execution and the delivery of controls
in the new IT infrastructure.
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
112
Directors’ Report
Our responsibilities
as a listed business
Melanie Barnett
In accordance with section 414C(11) of the Companies Act 2006,
the directors present their report for the year ended
31 December 2022. Information relevant to the Directors’ Report
that has been covered in the Strategic Report has been listed
below alongside its location. Both the Strategic Report and
the Directors’ Report have been prepared and presented in
accordance with, and in reliance upon, applicable company
law. The liabilities of the directors in connection with both the
Directors’ Report and the Strategic Report shall be subject to
the limitations and restrictions provided by company law.
Other statutory information
(including that required by Listing Rule 9.8.4R)
Agreements with controlling shareholders Not applicable
Contracts of significance 215
Details of long-term incentive schemes 131 to 132
Directors indemnities 113
Dividends 114
Engagement with employees 82 and 83
How we had regard to suppliers, customers
and others in a business relationship with
the Group 82 to 85
Events post balance sheet date 2022: throughout
and 167
Risk management including principal risks 54 to 66
Future business developments 18-25
Going concern and viability statement 67
Greenhouse gas emissions, energy
consumption and efficiency 48
Interest capitalised Not applicable
Item (7) in relation to major subsidiary
undertakings Not applicable
Non-pre-emptive issues of equity for cash Not applicable
No political donations 116
Parent participation in a placing by a listed
subsidiary Not applicable
Provision of services by a controlling
shareholder Not applicable
Publication of unaudited financial
information Not applicable
Purchase of own shares Not applicable
Research and development 116 and 192
Share capital – structure, voting
and other rights 113
Share capital – employee share plan
voting rights 113
Shareholder waivers of dividends 132
Shareholder waivers of future dividends 132
Waiver of emoluments by a director 132
Waiver of future emoluments by a director 132
Articles of association
The directors’ powers are conferred on them by UK legislation
and by the articles of association. Changes to the articles
of association must be approved by shareholders passing
a special resolution and must comply with the provisions of
the Companies Act and the FCA’s Disclosure Guidance and
Transparency Rules.
Corporate governance statement
The Company was fully compliant with all the provisions
of the 2018 UK Corporate Governance Code (the Code)
throughout 2022.
The Group’s Corporate Governance Report is set out
on pages 68 to 118.
Directors
The membership of the Board and biographical details of the
directors at the year end are given on pages 71 to 73 and are
incorporated into this report by reference. Commentary about
the Board’s composition and Board tenure can be found
on page 90 to 91.
All directors were present throughout 2022 and up to the
date of signing the Annual Report and Financial Statements
2022, other than Michele Greene who joined the Board
on 9 March 2023 and Robert East who resigned from
the Company on 13 January 2022.
Appointment and replacement of directors
Rules about the appointment and replacement of directors
are set out in the Company’s articles of association. In
accordance with the recommendations of the Code,
Vanquis Banking Group plc Annual Report and Financial Statements 2022
113
all directors will offer themselves for appointment or
reappointment, as appropriate, at the 2023 AGM. As announced
on 26 January 2023, Malcolm Le May will step down when
Ian McLaughlin joins the Group in the Summer of 2023.
Directors’ indemnities
The articles of association permit the Company to indemnify
directors of the Company (or of any associated company)
in accordance with section 234 of the Companies Act.
The Company may fund expenditure incurred by directors
in defending proceedings against them. If such funding is
by means of a loan, the director must repay the loan to the
Company, if they are convicted in any criminal proceedings
or judgment is given against them in any civil proceedings.
The Company may indemnify any director of the Company
or of any associated company against any liability.
However, the Company may not provide an indemnity against:
1. any liability incurred by the director to the Company
or to any associated company;
2. any liability incurred by the director to pay a criminal
or regulatory penalty;
3. any liability incurred by the director in defending criminal
pro ceedings in which they are convicted;
4. any liability incurred by the director in defending any civil
proceedings brought by the Company (or an associated
company) in which judgment is given against them; or
5. in connection with certain court applications under
the Companies Act, no indemnity was provided and no
payments pursuant to these provisions were made in 2022
or at any time up to the date of this report.
There were no other qualifying indemnities in place during
this period.
The Company maintains both a deed of indemnity in favour
of the directors and directors’ and officers’ liability insurance
which gives appropriate cover for any legal action brought
against its directors.
Directors’ powers
Subject to the articles of association, UK legislation and any
directions given by special resolution, the business of the
Company is managed by the Board. The directors currently
have powers in relation to the issuing and buying back of the
Company’s shares, which were granted by shareholders at
the 2022 AGM. The Board is seeking renewal of these powers
at the 2023 AGM.
Conflicts of interest
The Companies Act and the articles of association require
the Board to consider any potential conflicts of interest of
its members.
The Board has a formal policy and operates formal procedures
regarding conflicts of interest in order to identify and manage
conflicts and to maintain independent judgement. All members
of the Board have completed conflict of interest forms which
are reviewed annually. All directors have an ongoing duty
to notify the Company of any changes and to ensure that
appropriate authorisation is sought where required and are
required to renew and confirm their external interests annually.
The Board (excluding the director concerned) considers and,
if appropriate, authorises each director’s reported actual
and potential conflict of interest, taking into consideration
what is in the best interests of the Company and whether the
director’s ability to act in accordance with his or her duties is
affected. The Board will refer to the Conflict of Interest Policy
for the most appropriate mitigating control.
Records and Board minutes of all authorisations granted
by the Board and the scope of any approvals given are held
and maintained by the Company Secretary.
Share capital
The Company’s issued ordinary share capital comprises a
single class of ordinary shares. The rights attached to the
ordinary shares are set out in the articles of association. Each
share carries the right to one vote at general meetings of
the Company. No new shares were issued to satisfy awards
made under the Long Term Incentive Scheme 2015 (LTIS),
the Restricted Share Plan (RSP) or Deferred Bonus Plan (DBP).
140,448 shares were issued during the year to satisfy exercises
of options under the Provident Financial Savings-Related
Share Option Scheme 2013.
Rights of ordinary shares
All of the Company’s issued ordinary shares are fully paid up
and rank equally in all respects and there are no special rights
with regard to control of the Company. The rights attached
to them, in addition to those conferred on their holders
by law, are set out in the articles of association. There are
no restrictions on the transfer of ordinary shares or on the
exercise of voting rights attached to them, except:
1. where the Company has exercised its right to suspend
its voting rights or to prohibit their transfer following the
omission by their holder or any person interested in them
to provide the Company with information requested by it
in accordance with Part 22 of the Companies Act; or
2. where their holder is precluded from exercising voting
rights by the FCA’s Listing Rules or the City Code on
Takeovers and Mergers.
Directors’ interests in shares
The below interests include those held by connected persons.
Between 31 December 2022 and the 14 March 2023, being the
latest practicable date prior to publication, there have been
the following changes to the directors’ interests:
– on 3 January 2023, Malcolm Le May received 7,559 shares
under the role-based Allowance.
Malcolm Le May’s interest in shares as at 14 March 2023
is 1,138,553.
Number of shares
31 December
2022
31 December
2021
Malcolm Le May 1,137,332 942,231
Neeraj Kapur 689,299 400,838
Patrick Snowball 96,477 96,477
Andrea Blance — —
Elizabeth Chambers 12,000 12,000
Robert East
1
5,000
2
5,000
Paul Hewitt 34,205 34,205
Margot James — —
Angela Knight — —
Graham Lindsay 9,771 9,771
Michele Greene
3
— —
1 Robert East resigned on 13 January 2022.
2 Holdings as at resignation date, 13 January 2022.
3 Michele Greene joined on 9 March 2023.
Dividend waiver
Information on dividend waivers currently in place can be
found on page 132.
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
114
Profit and dividends
The continuing operations profit before taxation, amortisation
of acquisition intangibles and exceptional items amounts to
£126.6m (2021: profit of £167.8m).
As at the date of this report, the directors have declared
dividends as follows:
Ordinary shares (p per share)
Interim dividend
2022 (paid on 22 September 2022) 5p
2021 (paid on 20 May 2022) 12p
Proposed final dividend
2022 (proposed to be paid on 7 June 2023) 10.3p
2021 £nil
Total ordinary dividend
2022 15.3p
2021 12p
All-employee share schemes
The current schemes for employees resident in the UK are the
Provident Financial Savings-Related Share Option Scheme 2022
(SAYE) and the Provident Financial Share Incentive Plan 2022 (SIP).
The plan rules will be updated to reflect the change of Company
name to Vanquis Banking Group plc in due course.
Share schemes are a long-established and successful
part of the total reward package offered by the Company,
encouraging and supporting employee share ownership.
The Company’s schemes aim to encourage employees’
involvement and interest in the financial performance
and success of the Group through share ownership.
The Company’s SIP offers employees the opportunity to further
invest in the Company and to benefit from the Company’s
offer to match that investment on the basis of one matching
share for every four partnership shares purchased.
Scheme title
Total
participants as
at
31 December
2022
Total
participants as
at
31 December
2021
SAYE 528 864
SIP 147 139
Substantial shareholdings
In accordance with the Disclosure Guidance and Transparency Rules (DTR 5) the Company, as at 14 March 2023
(being the latest practicable date prior to publication of this report), had been notified that the following persons hold
directly or indirectly 3% or more of the voting rights of the Company.
All interests disclosed to the Company in accordance with DTR 5 that have occurred since 14 March 2023 can be found
on the Group’s website: www.vanquisbankinggroup.com.
Interests as at 31 December 2022 Holders (descending %)
Schroder
Investment
Management
Redwood Capital
Management
Davidson
Kempner Capital
Management
BlackRock Marathon Asset
Management
Coltrane Asset
Management
CfD
Vanguard
Group
Artemis
Investment
Management
Premier Miton
Investors
Aberforth
Partners
13.43%
12.21%
9.03%
7.42%
4.86%
4.07%
3.93%
3.82%
3.79%
3.20%
Interests as at 14 March 2023 Holders (descending %)
Schroder
Investment
Management
Redwood Capital
Management
Davidson
Kempner Capital
Management
BlackRock Coltrane Asset
Management
CfD
Marathon Asset
Management
Vanguard
Group
Artemis
Investment
Management
Premier Miton
Investors
Janus
Henderson
Investors
15.01%
12.20%
9.03%
7.41%
4.60%
4.60%
4.06%
3.89%
3.80%
3.03%
Directors’ Report continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
115
Executive share incentive schemes
Awards are also outstanding under the RSP and DBP. DBP
awards were granted during the year on 7 April 2022. RSP and
CSOP options were granted under the RSP on 7 and 26 April 2022.
Further information is set out on page 131 and 132.
Shares were awarded to the CEO under the role-based
allowance (RBA). Further information is set out on page 133.
Provident Financial plc 2007 Employee Benefit
Trust (EBT)
The EBT, a discretionary trust for the benefit of executive
directors and employees, was established in 2007. The trustee,
SG Kleinwort Hambros Trust (CI) Limited, is not a subsidiary
of the Company. The EBT operates in conjunction with the
LTIS, RSP, RBA and DBP and either purchases shares in the
market or subscribes for the issue of new shares. The EBT is
funded by loans from the Company which are then used to
acquire, either via market purchase or subscription, ordinary
shares to satisfy awards granted under the LTIS, RSP and DBP.
Funds are used to acquire shares by way of market purchase
for the RBA. For the purpose of the financial statements,
the EBT is consolidated into the Company and Group. As a
consequence, the loans are eliminated and the cost of the
shares acquired is deducted from equity as set out in note 30
on page 211 of the financial statements.
In 2022, the EBT agreed to satisfy awards made under the RSP
and CSOP options under the RSP in relation to 2,376,546 shares
in the Company. In 2022, the EBT also agreed to satisfy buyout
award agreements in relation to 8,880 shares in the Company
and to satisfy an award under the RBA of 28,433 shares in the
Company by way of market purchase.
As at 31 December 2022, the EBT held the non-beneficial
interest in 2,946,015 shares in the Company (2021: 2,864,456).
The EBT may exercise or refrain from exercising any voting
rights in its absolute discretion and is not obliged to exercise
such voting rights in a manner requested by the beneficiaries.
Provident Financial Employee Benefit Trust
(the PF Trust)
The PF Trust, a discretionary trust for the benefit of executive
directors and employees, was established in 2003 and
operated in conjunction with the PSP. The trustee, Provident
Financial Trustees (Performance Share Plan) Limited, is
a subsidiary of the Company. The PF Trust has not been
operated with the Performance Share Plan since 2012, when
the previous PSP expired. As at 31 December 2022, the PF Trust
had no interest in any shares in the Company (2021: nil).
Provident BAYE Trust (the BAYE Trust)
Administration of the Group’s share plans has transitioned
in the year from YBS to Equiniti. The Provident BAYE Trust is a
discretionary trust which was established in 2013 to operate
in conjunction with the SIP. On 30 November 2022 YBS Trustee
was retired and Equiniti Share Plan Trustee was appointed.
Neither are subsidiaries of the Company. The BAYE Trust is
funded by loans from the Company which are then used to
acquire ordinary shares via market purchase to satisfy the
Matching Awards for participants of the SIP.
For the purposes of the financial statements, the BAYE Trust
is consolidated into the Company and Group. Participants
in the SIP can direct the trustee on how to exercise its voting
rights in respect of the shares it holds on behalf of the
participant. As at 31 December 2022, the BAYE Trust held the
non-beneficial interest in 196,535 shares (2021: 211,894 shares).
Colleague engagement and investing
in our workforce
We invest in our colleagues through recognition, reward,
development, wellbeing, the working environment and culture.
Colleagues are recognised through our ‘Better Everyday’
recognition platform and our ‘Perks at Work’ scheme, which
offers colleagues in-store and online rewards and discounts,
online training courses and mental wellbeing courses.
We have a Group Reward Framework that enables clear
career progression and movement around the Group. We have
established mechanisms for colleague engagement including
appointing a Designated Non-Executive Colleague Champion.
Information relevant to how we invest in our colleagues
and where it can be found:
Information
Location
Reward and recognition 137
Learning and development – management
programmes, apprenticeships, mandatory
e-learning and mentoring 39 and 81
Culture – equal opportunities, gender diversity,
other diversity and inclusion and Colleague
Survey results 39 and 81
Health and wellbeing – support and initiatives 81
Engagement – internal communication,
Colleague Survey, Workforce Panels and
Designated Non-Executive Colleague Champion
80 to 82
and 86
Equal opportunities and diversity
The Group is committed to employment policies which follow
best practice, based on equal opportunities for all colleagues
irrespective of gender, pregnancy, race, colour, nationality,
ethnic or national origin, disability, sexual orientation, age,
marital or civil partner status, gender reassignment, religion or
belief. The Group gives full and fair consideration to applications
for employment from disabled persons, having regard to their
aptitudes and abilities. Appropriate arrangements are made for
the continued employment and training, career development
and promotion of disabled persons employed by the Group
including making reasonable adjustments where required. If a
member of staff becomes disabled, every effort is made by the
Group to ensure their continued employment, either in the same
or an alternative position, with appropriate retraining being
given if necessary.
Pensions
The Group operates two pension schemes in the UK.
Employee involvement in the Group defined benefit
pension scheme is achieved by the appointment of
member-nominated trustees and by regular newsletters and
communications from the trustees to members. In addition,
there is a website dedicated to pension matters. The trustees
manage the assets of the defined benefit pension scheme
which are held under trust separately from the assets of the
Group. Each trustee is encouraged to undertake training
and regular training sessions on current issues are carried
out at meetings of the trustees by the trustees’ advisors.
The training schedule is based on The Pensions Regulator’s
Trustee Knowledge and Understanding requirements. The
trustees have a business plan and, at the start of each year,
review performance against the plan and objectives from the
previous year. In addition, they agree objectives and a budget
for the current year.
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
116
Pensions continued
The trustees have a risk register and an associated action
plan and a Conflicts of Interest Policy, both of which are
reviewed at least annually.
As at the year end there were three trustees nominated by
members and four trustees appointed by the Company.
The trustees have implemented a de-risking investment
strategy which has been agreed with the Company. The
objective of the strategy is to reduce the risk that the assets
would be insufficient in the future to meet the liabilities of the
scheme. The de-risking investment strategy is kept under
close review by both the trustees and the Company.
The Company has put Pension Trustee Indemnity Insurance
in place to cover all the Group’s pension schemes where
individuals act as trustees. The trustees are also protected by
an indemnity within each scheme’s rules and this insurance
effectively protects the Group against the cost of potential
claims impacting on the solvency of the pension schemes.
The Group operates a Group Personal Pension Plan for
employees who joined the Group from 1 January 2003 and a
Group Personal Pension Plan for employees of Moneybarn who
joined the Group from 1 January 2003. Employees in both these
plans have access to websites which provide information
about their funds and general information about the plans.
Compliance
The Risk and Audit Committees oversee compliance and
work together to review the systems and controls for the
prevention of bribery. Compliance is also monitored by the
Divisional Boards.
Health and safety
The Group is committed to achieving high standards of health
and safety in relation to all of its colleagues, those affected
by its business activities and those attending its premises.
During 2022, an ambitious health and safety strategy was
implemented to develop new Group-wide H&S policies and
procedures, while building on a strong record of delivery
and performance.
Mandatory H&S training has been refreshed to equip
colleagues with a robust awareness of the H&S risks posed in
an ever-changing workplace, whether office or hybrid working,
along with strategies to mitigate that risk.
Accident and reporting statistics remain a key performance
indicator and area of focus. During the year there were no
RIDDOR reportable events.
Anti-bribery and corruption
The Group has a policy on anti-bribery and corruption which
reflects the requirements of the Bribery Act 2010 (the Policy).
The Policy sets out the Group’s zero-tolerance approach
to bribery and corruption and its commitment to acting
professionally, fairly and with integrity in all its business
dealings and relationships, wherever it operates, and
implementing and enforcing effective systems and controls
to counter bribery, corruption and other financial crimes.
The Policy applies to all employees, contractors and directors
in relation to the business activities undertaken by, or on
behalf of, the Group. It also applies to any third party which
is undertaking business for or on behalf of the Group, which
must comply with the Policy or maintain equivalent standards
and safeguards to prevent bribery and corruption.
Under the Policy, all employees, contractors, directors and
relevant third parties of the Group and its divisions must
comply with the following minimum requirements:
– they must not directly or indirectly engage in bribery
or corruption in any form; and
– they also must not accept, solicit, agree to receive,
promise, offer or give a bribe, or facilitate payment,
kickback or other improper payment.
The Policy also states that if an employee, contractor, director
or relevant third party of the Group or its divisions becomes
aware of a breach of the above minimum requirements they
must immediately comply with applicable protocols and
procedures to inform an appropriate person within the Group
who must as soon as is reasonably practicable report the
incident to the Deputy Company Secretary.
The Group provides anti-bribery and corruption training
to all colleagues.
Related policies
Gifts and Corporate Hospitality Policy
The Group has a Corporate Hospitality Policy which sets
out the Group’s requirements for the review, approval and
documentation of any gifts or corporate hospitality which are
accepted, offered or provided. The Risk Committee oversees
the Gifts and Corporate Hospitality Policy.
Whistleblowing Policy
The Group has a Whistleblowing Policy which is overseen
by the Board. The Group is committed to fostering a culture
of openness, honesty and accountability and requires
the highest possible standards of professional and
ethical conduct.
A Group Whistleblowing Forum is in place which oversees
whistleblowing investigations, reviews management
information and takes the opportunity to consider
any concerns regarding persistent trends and shares
best practice.
Should any Group colleagues have any concerns relating
to anti-bribery and corruption or corporate hospitality then
anonymous concerns can be raised through the Group’s
external third-party helpline facility as detailed in the Group
Whistleblowing Policy. Whistleblowing arrangements are
overseen by the Board.
The Group provides whistleblowing training to all colleagues.
Overseas branches
The Group has no overseas branches.
Political donations
The Group made no political donations nor incurred any
political expenditure during the year.
Research and development
The Group’s research and development activities have
predominantly related to systems and applications for the
credit cards and personal loans businesses as set out in note
19 on page 192 of the financial statements.
Directors’ Report continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
117
Environment and greenhouse gas emissions
The Group’s greenhouse gas (GHG) and energy use
reporting is undertaken in accordance with our obligations
under both The Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013 and the UK Government’s
Streamlined Energy and Carbon Reporting (SECR) policy that
has been implemented through the Companies (Directors’
Report) and Limited Liability Partnership (Energy and Carbon
Report) Regulations 2018. These emissions are reported in
accordance with WRI/WBCSD GHG Protocol. We use a financial
control approach to account for our GHG emissions and
use emission conversion factors from Defra/DECC’s GHG
Conversion Factors for Company Reporting 2020. Our GHG
emissions are calculated using energy use data accessed
via meters and energy suppliers, and from records of fuel use,
business travel bookings and waste management data; see
our Sustainability Report for more information.
The Group’s total GHG emissions, in tonnes of CO
2
equivalent (CO
2
e), along with details of our energy use
and an intensity ratio, are reported in the table on page
48. Corporate Citizenship has provided limited level ISAE
3000 (Revised) assurance in respect of this data. Its full,
independent assurance statement is available online at:
www.vanquisbankinggroup.com/sustainability. Where
challenges have occurred in obtaining data, estimates have
been used and assured by Corporate Citizenship.
The Group’s Climate Risk Committee, which is chaired by
Gareth Cronin, the Group Chief Risk Officer, and includes
senior representatives from functions such as Finance, Risk,
Operations and Sustainability, has been established to
help the business to assess, manage and report material
climate-related risks and opportunities, and ensure that we
continue to meet the recommendations of the Task Force
on Climate-related Financial Disclosures (TCFD). Details on
the progress the Group has made during 2022 in meeting
the TCFD recommendations are set out on pages 40 to 49.
In December 2022, the Group gained a Carbon Disclosure
Project (CDP) rating of B- (2021: B-) for our climate change
risk management efforts throughout the year.
To help us to manage and reduce our wider impacts on
the environment the Group continues to have in place an
environmental management system (EMS). Our EMS helps
us to identify, assess and reduce key environmental risks
and impacts; set and deliver against environmental targets;
and ensure our legal compliance. This EMS is independently
audited each year against the requirements of the
international management standard ISO 14001:2015. Following
the environmental audits carried out in 2022, all the Group’s
business premises in Bradford, London, Chatham in Kent and
Petersfield in Hampshire were re-certified to comply with the
international standard ISO 14001:2015. The ongoing functioning
of the EMS is overseen by the Environmental Working Groups
that are in place across the Group.
Important events since the end of the financial year
(31 December 2022)
On 26 January 2023 the Group announced its decision to
change its name to Vanquis Banking Group plc. On the
same day it also announced that Malcolm Le May had
decided to step down as CEO; that Ian McLaughlin had been
appointed as CEO, subject to regulatory approval; and that
it had launched a pilot phase for a new secured product of
second charge mortgages. On 8 March 2023 the Company
announced an update on its Capital Requirement and on
9 March 2023 the Company appointed Michele Greene as
a Non-Executive Director. You can read more about these
changes in our Chairman’s Statement on page 6 and 7,
and throughout our Strategic Report.
Financial instruments
Details of the financial risk management objectives and
policies of the Group and the exposure of the Group to credit
risk, liquidity risk, and market risk are included on pages 165
to 168 of the financial statements.
Significant agreements
There are no agreements between any Group company and
any of its employees or any director of any Group company
which provide for compensation to be paid to an employee
or a director on termination of employment or for loss of office
as a consequence of a takeover of the Company.
Directors’ responsibilities
The directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
The directors have also chosen to prepare the parent
company financial statements under United Kingdom
adopted international accounting standards. Under
company law the 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 Company and
of the profit or loss of the Company for that period.
In preparing these financial statements, International
Accounting Standard 1 requires that directors:
– properly select and apply accounting policies;
– present information, including accounting policies, in
a manner that provides relevant, reliable, comparable
and understandable information;
– provide additional disclosures when compliance
with the specific requirements of the financial
reporting framework are insufficient to enable
users to understand the impact of particular
transactions, other events and conditions on
the entity’s financial position and financial
performance; and
– make an assessment of the Company’s ability
to continue as a going concern.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Governance
Vanquis Banking Group plc Annual Report and Financial Statements 2022
118
Directors’ responsibility statement
We confirm that to the best of our knowledge:
– the financial statements, prepared in accordance with
the relevant financial reporting framework, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
– the Strategic Report includes a fair review of the
development and performance of the business and
the position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
– the Annual Report and Financial Statements, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the Company’s position, performance, business
model and strategy.
The directors are also required by the FCA’s Disclosure
Guidance and Transparency Rules (DTR) to include a
management report containing a fair review of the
business of the Group and the Company and a description
of the principal risks, emerging risks and uncertainties
facing the Group and Company.
The Directors’ Report and the Strategic Report constitute
the management report for the purposes of DTR 4.1.5R and
DTR 4.1.8R. The directors are responsible for keeping proper
accounting records that are sufficient to:
– show and explain the Company’s transactions;
– disclose with reasonable accuracy at any time the
financial position of the Company and Group; and
– enable them to ensure that the financial statements
and the Directors’ Remuneration Report comply with
the Act and, as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the Company and the
Group and taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Annual Report and Financial Statements 2022 will be
published on the Group’s website in addition to the normal
paper version.
The directors are responsible for the maintenance and integrity
of the Group’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement
Company law requires the directors to prepare financial
statements for each financial year. Under that law the
directors are required to prepare the Group financial
statements in accordance with relevant IFRS, IFRIC
interpretations and the Companies Act 2006.
The directors who held office during the financial year
and to the date of this report were as follows:
Patrick Snowball Chairman
Malcolm Le May Chief Executive Officer
Neeraj Kapur Chief Finance Officer
Andrea Blance Senior Independent Director
Angela Knight Independent Non-Executive Director
Elizabeth Chambers Independent Non-Executive Director
Margot James Independent Non-Executive Director
Paul Hewitt Independent Non-Executive Director
Graham Lindsay Independent Non-Executive Director
Michele Greene
Independent Non-Executive Director
Appointed on 9 March 2023
Robert East
Independent Non-Executive Director
Resigned on 13 January 2022
Disclosure of information to auditor
In accordance with section 418 of the Act, each person
who is a director as at the date of this report confirms that:
– so far as they are aware, there is no relevant audit
information of which the Company’s external auditor
is unaware; and
– they have taken all steps that ought to have been taken
as a director in order to make themselves aware of any
relevant audit information and to establish that the
Company’s external auditor is aware of that information.
Auditor
Deloitte LLP, the external auditor for the Company, was first
appointed in 2012 and, following a tender process in 2020,
a resolution proposing its reappointment was passed at
the 2022 AGM. The reappointment of Deloitte LLP as the
Company’s external auditor is proposed at the 2023 AGM.
2023 AGM
The 2023 AGM will be held at the offices of Clifford Chance,
10 Upper Bank Street, London, E14 5JJ on 25 May 2023 at
11.30am. The Notice of AGM, together with an explanation
of the items of business, will be contained in the circular to
shareholders dated 30 March 2023 and is available on our
website, www.vanquisbankinggroup.com.
Approved by the Board on 30 March 2023 and signed
by order of the Board.
Melanie Barnett
Directors’ Report continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
119
Ensuring remuneration delivers the right reward
outcomes across the Group
Committee members (attendance)
Andrea Blance (Chair) (5/5 plus 1/1 ad hoc)
Margot James (5/5 plus 1/1 ad hoc)
Graham Lindsay (5/5 plus 1/1 ad hoc)
The Chairman, the Group Chief Executive Officer (CEO),
the Chief People Officer (CPO), the Group Reward
Director and the Committee’s independent advisor (PwC)
attend Committee meetings by invitation. No person
is in attendance when their own remuneration is
being discussed.
Andrea Blance
Remuneration Committee Chair
Throughout 2022, the Committee
has focused on ensuring that our
remuneration policies are applied
consistently and fairly to all colleagues.
Andrea Blance
Remuneration Committee Chair
The report complies with the provisions of the Companies
Act, the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 and the Listing
Rules of the FCA. The Company also follows the requirements
of the UK Corporate Governance Code (the Code) updated
in July 2018.
On behalf of the Board, and as the Chair of the Remuneration
Committee, I am pleased to present the Directors’
Remuneration Report (DRR) for the year ended 31 December
2022. The report sets out how the Committee carried out
its responsibilities during the year and our approach to
remuneration in 2022 and explains the rationale for our
decision making.
As part of this report, we are presenting our new Directors’
Remuneration Policy (the Policy) which, if approved, will
apply from the date of the 2023 AGM for up to three years.
No material changes are proposed to the Policy as the
Committee is confident that it remains fit for purpose and
continues to support the delivery of our strategy. A summary
of the proposed changes is included below, and the full Policy
is set out on pages 123 to 124.
This year has been a significant one for the Group, as it has
continued to deliver on its Purpose, ‘to help put people on a
path to a better everyday life’, in what has been a challenging
set of economic circumstances for all. The economic impact
of the Russian invasion of Ukraine, and the continuing fallout
from the Covid-19 pandemic have combined to produce a
very uncertain environment, with high inflation and higher
interest rates combining to create cost of living challenges for
both our colleagues and our customers. By continuing to lend
responsibly to customers who can’t access traditional lenders,
the Group helps to deliver financial inclusion and, through
that, support social mobility.
Directors’ Remuneration Report
Annual Statement by the Chair of the Remuneration Committee
Directors’ Remuneration Report
Vanquis Banking Group plc Annual Report and Financial Statements 2022
120
In 2022 the Group completed its pivot into the mid-cost
credit market, and its repositioning as a banking group,
which culminated with the Group changing its name in
2023 to Vanquis Banking Group (the Group). Going forward,
the combination of the Group’s Social Purpose with the
benefits the banking structure brings, means the Group
is well positioned to deliver its vision of becoming the
leading specialist bank to customers who cannot access
traditional lenders.
Overall, the Group has performed well and successfully
implemented the new operating model despite the
challenging external environment.
The Committee has also been very mindful when making
decisions to ensure fair outcomes for all colleagues taking
account of experience of all stakeholders against a backdrop
of ongoing economic uncertainty, such as the current
inflationary environment and cost of living crisis. The decisions
we have taken were based upon careful consideration
of a broad range of factors and the report explains how
the Committee determined remuneration outcomes in
this context.
2022 Group performance
2022 was a year of significant endeavour and strong
achievement. Highlights include:
– changing to a shared services operating model
supporting credit cards, vehicle finance and
personal loans;
– introducing our Gateway platform which supports the
personal loans business, and which will be rolled out
across other products in 2023;
– delivering against our cost optimisation initiatives;
– largely completed the Scheme of Arrangement (SOA)
as well as being on track to liquidate our home credit
business – thus removing residual risk; and
– maintaining a good working relationship with our
regulators which enabled: (i) a revised cross-Group
funding arrangement to be implemented; (ii) C-SREP
capital adequacy review to progress; and (iii) the ICAAP
process to progress.
Our financial performance remains strong and is in line with
management expectations which is excellent in a year where
there were significant external headwinds which were not
envisaged when the business targets were set, reflected in:
– adjusted profit before tax (continuing operations),
of £126.6m (£167.8m in 2021); and
– adjusted return on required equity (RORE) of 22.2%
(32.3% in 2021).
Wider colleague pay
It has been another tough year for most people in the UK
including our customers and our colleagues.
The economic instability generated even greater uncertainty
for many of our colleagues in a world still gathering itself post
the Covid-19 crisis and, as a result, the Group decided to take
an active approach during 2022, to support our lower levelled
colleagues (who tend to be our lower paid as well), as follows:
– 5% salary increase on 1 January 2022 – to all colleagues;
– mid-year review for approx. 17.6% of our colleagues who
were (i) lower levelled, and (ii) adrift of the market due to
changes throughout the year; and
– £750 winter fuel payment to over 50% of our colleagues –
100% focused on our lower levelled colleagues.
In 2023, we intend to continue our focus on our lower
levelled colleagues. We have introduced a minimum salary
(above the Living Wage for all) by level (and location) and
actively distributed a larger percentage of our salary pool
to those colleagues. The executive directors have forgone their
annual salary increase in 2023 to augment the salary pool for
our lower paid colleagues. The Chairman and non-executive
directors have also forgone an increase in fees with the
monies being redistributed in a similar manner.
In addition to the actions on base salary, our performance
was strong enough to generate a staff bonus pool for 2022
which meant that all performing colleagues will be able to
share in our success.
The Board is committed to ensuring there is an open dialogue
with our colleagues over various decisions. The Chairs of
the Remuneration and CCE Committees have discussed the
Remuneration Policy and practices for executive directors with
the Colleague Forum in 2022. Our long-established Colleague
Forum was created to facilitate effective engagement
between the Board and our wider colleague population,
to encourage discussions on issues of importance and
understand views and concerns of the Group. As a result of
our work on a consistent reward framework (which includes
a standard levelling system), we can now more clearly
demonstrate the linkages (and fairness) in bonus outcomes
at all levels within the Group and the cascade of metrics
between all our colleagues including the executive directors.
I want to take this opportunity to thank our colleagues for their
efforts in 2022 in such trying circumstances.
Directors’ Remuneration Report continued
Annual Statement by the Chair of the Remuneration Committee continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
121
Executive director remuneration in 2022
Annual bonus for executive directors
The annual bonus is determined based on performance
against corporate scorecard targets.
The financial element of the annual bonus reflected the
Group’s strong performance over 2022, with delivery being
marginally above on-target for adjusted profit before tax and
above-target for adjusted RORE. The Committee determined
that the financial element of the annual bonus outcome
should vest at 86.2% for both the CEO and CFO. Regarding
achievement under the Group’s non-financial scorecard,
the Committee determined a vesting outcome of 66% for
the CEO and 80% for the CFO based on performance against
scorecard objectives. This results in overall annual bonus
outcomes of 78.1% of maximum for the CEO and 83.7% for the
CFO (96% for both in 2021). This equates to 117.2% of base salary
for the CEO and 104.6% of base salary for the CFO. We have
set out in more detail the annual bonus results for 2022 on
pages 130 to 131.
The Committee believes that the remuneration outcome
accurately reflects the performance of the Group over the
year and it is justified in the context of the experience across
its various stakeholders.
RSP 2020 vesting
The RSP 2020 awards for the CEO and CFO are due to vest in
November 2023 based on an assessment of the Committee
as to the stewardship of the Group over the three-year
vesting period. Clearly, the final decision will be made in the
final quarter of 2023 but based on the performance to date
(assessed against the underpin) and the overall stewardship
during Covid-19 (and the subsequent period), it is currently
expected to vest in full. More detailed disclosure is set out
on page 132.
It should be noted (and there is a fuller description in the
main body of this report) that the Committee considers the
potential for windfall gains at the point of granting the RSP
and has a formal policy which we follow. In 2020, we reduced
the grant by 15% after having considered the share price
movement prior to the grant date. Given the share price at
grant (£2.41) the Committee believes that there have been no
windfall gains and that no further adjustment is required.
Single total figures of remuneration for 2022
The resulting single total figure of remuneration was £2,396k
for the CEO (or £1,867k excluding the RSP2020 notional amount)
and £1,428k for the CFO (or £1,193k excluding the RSP2020
notional amount). Full details are set out in the Annual Report
on Remuneration on page 129. This represents a year-on-year
increase of 21.5% (or (5.3)% excluding the vesting of the RSP2020
notional amount) for the CEO and 9.8% (or (8.3)% excluding the
vesting of the RSP2020 notional amount) for the CFO – driven
entirely by the notional vesting of the RSP2020.
CEO change
As has been announced, Malcolm Le May has decided to step
down as CEO and retire. He is on a 12-month notice period,
ending on 24 January 2024.
Malcolm will be succeeded by Ian McLaughlin who is expected
to join during the summer of 2023.
Ian’s compensation package, which is in line with our current
Policy, is as follows:
– salary: £725,000;
– role based allowance: none;
– annual bonus: up to 150% of base salary (with 40% deferred);
– restricted stock plan: up to 100% of base salary
(with a post-vesting holding period of two years);
– shareholding requirement: 200% of base salary
(with up to five years to be compliant); and
– transitional travel allowance for 12 months.
There are no buyouts or other joining payments.
Malcolm will remain working within the business until Ian
joins (and a suitable handover has been completed), with
the balance of his 12-month notice period spent on garden
leave. During this period, he will continue to receive his salary,
role-based allowance, pension and other benefits. He will
receive his 2022 bonus and the 2023 restricted stock grant
in the usual way (but as a good leaver this will be pro-rated
to his leaving date – as will his other unvested RSP awards).
He will be eligible for a pro-rata bonus for 2023 based on the
period up to the start of his garden leave.
Directors’ Remuneration Policy
The Committee is seeking shareholder approval for a new
Remuneration Policy for the executive directors, as the term
for the existing Policy comes to an end at the 2023 AGM. As a
reminder, at the GM in 2020 the Directors’ Remuneration Policy
received the support of 97.8% of shareholders and the 2021
Remuneration Report received very strong support at the 2022
AGM, with 98.5% of votes received in favour. During the year we
have maintained ongoing engagement with investors about
remuneration largely via our Chairman and we believe that
shareholders remain satisfied with the Remuneration Policy
and its implementation.
We have undertaken a review of the existing Policy and we
believe it remains appropriate to support the delivery of our
strategy. As such, no significant change to the overall structure
or quantum of the current executive directors’ remuneration is
being proposed in the new Policy. A summary of the changes
proposed are set out on pages 123 to 124 including the annual
bonus deferral policy and Restricted Stock Plan (RSP) underpin
to align with market practice.
Directors’ Remuneration Report
Vanquis Banking Group plc Annual Report and Financial Statements 2022
122
Directors’ Remuneration Policy continued
The Committee has used ESG metrics for the annual bonus
scheme for several years with a strong emphasis on the ‘S’
element as our business purpose is focused on our core
Purpose of helping to put people on a path to a better
everyday life. It is one of the things we reflect on when
considering vesting, but we wish to make this clear and are
proposing to include ESG as an additional consideration in the
RSP underpin assessment for future grants. We are pleased to
note that the Financial Times has named us one of Europe’s
Climate Leaders and in the Top 100 of companies which
have reduced their carbon footprint the fastest. In addition,
Newsweek has named us as one of the World’s Most Socially
Responsible Banks – in the top 20%.
Further detail on the implementation of the full policy is set out
on pages 135 to 136.
Implementation of Remuneration Policy in 2023
The Committee considers that the current Policy, approved at
the November 2020 GM, has operated as intended and does
not require a fundamental change. However, we are proposing
the following changes which the Committee considers to be
appropriate to ensure that the Policy will continue to operate
effectively in line with our strategic priorities and support
attraction and retention of key talent, as follows:
– base salary: no increase to base salary for executive
directors compared with the average increase for the
wider colleague group of 5%; and
– annual bonus and corporate scorecard: retain the overall
weighting of the financial/non-financial metrics as
60%/40% but restructure the weighting of the non-financial
metrics so that they align with our Strategic Priorities.
2023 RSP to be granted in April 2023
After considering 2022 performance, RSP awards of 100% of
base salary will be granted – in line with our Policy. Subject
to underpin criteria, as set out in our Policy, awards will vest
in three years with an additional retention period of two years
after vesting.
Assessment of windfall gains is important in the current
environment, and we have been sensitive to it for several
years. In 2020, we adopted an internal policy which considered
whether there should be an adjustment at the point of grant
to mitigate this possibility. The Policy considers:
– a range of comparison points (including prior year grant
price) to determine appropriateness of current year
grant price;
– a potential reduction in grant if the current grant price is
materially (circa 20%) lower than the comparison points
above; and
– other factors which may support or mitigate
a grant reduction.
The grant to the incoming CEO will be made as soon
as is possible upon his arrival.
Chair and NED fees
There will be no increase to Chairman fees, NED base fees,
committee membership fees and SID fees, which is in line with
the 0% increase for executive directors.
Conclusion
Overall, the Committee is satisfied that the Remuneration Policy
continues to support the Group’s business strategy. We believe
that it has delivered the right behaviours and reward outcomes
across the Group, and competitively positions the Company’s
remuneration against its peers. We believe that several small
changes (which will be submitted to this year’s AGM) will ensure
that it continues to operate effectively for the next three years.
The executive directors, the senior management team and all
our colleagues have made exceptional contributions to the
business over the year, showing great resilience to support the
Group through yet another challenging year. This is reflected in
the outcomes of the bonus pool in 2022 (payable 2023) which,
although smaller than the previous year, reflects the effort and
results achieved.
In the rest of this report, we present the disclosures required
by regulations, as well as additional information to explain
how our executive remuneration aligns with our strategy, with
shareholder interests and with wider workforce pay. I would like
to thank our shareholders for their continued support during the
year. I will be available at the Company’s 2023 AGM to answer
any questions in relation to this Remuneration Report.
Andrea Blance
Remuneration Committee Chair
30 March 2023
Directors’ Remuneration Report continued
Annual Statement by the Chair of the Remuneration Committee continued
Vanquis Banking Group plc Annual Report and Financial Statements 2022
123
Remuneration at a glance
The following section sets out:
– an overview of the proposed changes to the Directors’ Remuneration Policy;
– an illustration of the operation of the Policy for 2023;
– a summary of the executive directors’ single total remuneration figures, and outcomes under the 2022 Annual Bonus Plan
and the RSP 2020; and
– an overview of executive directors’ shareholdings.
Summary of the proposed new Directors’ Remuneration Policy
The table below summarises the key proposed changes to the Directors’ Remuneration Policy, as approved at the 2020 GM,
subject to shareholder approval for the new Policy at the 2023 AGM. Further information on the implementation of the full Policy
can be found on pages 135 to 136.
Element of remuneration Summary of proposed Policy Changes from current Policy
Salary
An executive director’s base salary is set on appointment and reviewed
annually or when there is a change in position or responsibility.
When determining an appropriate level of base salary, the
Committee considers:
– pay increases for other colleagues;
– remuneration practices within the Group;
– any change in scope, role and responsibilities;
– the general performance of the Group and each individual;
– the experience of the relevant director; and
– the anticipated economic environment.
None; Policy will be unchanged
in relation to salary.
Benefits
Benefits include market standard benefits. None; Policy will be unchanged
in relation to benefits.
Role-based
allowance (RBA)
RBA of 15% of base salary.
RBAs are non-pensionable and will be released in equal instalments over
three years in the form of shares.
The maximum annual value of an RBA grant for an individual is 25%
of base salary.
None; the RBA only applies to the
current CEO (Malcolm Le May).
Pension
The Company provides a pension contribution allowance that is fair,
competitive and in line with corporate governance best practice.
None; Policy will be unchanged
in relation to pension.
From 1 January 2023, both the CEO’s
(and CFO’s) pension contribution
will be 10% of salary, in line with the
wider workforce.
Annual bonus
Quantum: The Committee will determine the maximum annual
participation in the Annual Bonus Plan for each year, which will not
exceed 150% of base salary.
Operation: The Annual Bonus Plan is based on a mix of financial and
strategic/operational conditions and is measured over a period of one
financial year. The financial measures will account for no less than 50% of
the bonus opportunity.
Deferral: At least 40% of the bonus is deferred over three years with
pro-rata vesting.
Deferral: Deferred bonus will vest
pro-rata over the three-year
period, aligned to market practice.
The prior approach was a ‘cliff
vest’ at the end of the three-year
deferral period.
Dividend equivalent: The Policy
provides flexibility to adjust the
share price to allow for the lack of
dividends in order to align with the
regulatory guidance.
No other changes.
Restricted Share
Plan (RSP)
Quantum: The maximum value of RSP award will be 100% of base salary
per annum.
Operation: Awards are granted annually to executive directors in the form
of conditional awards or options. Awards vest at the end of a three-year
period subject to:
– the executive director’s continued employment at the date of vesting;
– the executive director is a ‘good leaver’, i.e., retirement (subject to pro-
ration); and
– the satisfaction of an underpin as determined by the Committee
whereby the Committee can adjust vesting for business, individual
and wider Company performance.
A two-year holding period will apply following the three-year vesting
period for all awards granted to the executive directors.
Upon vesting, sufficient shares may be sold to pay tax on the shares.
ESG underpin: Policy will include
an additional criterion relating to
ESG as a part of the RSP underpin
assessment.