Recommendation 1

HM Government Rejected

The Government agrees that strong oversight of BII is essential. This is achieved through both: i) ensuring BII’s Board has the correct mix of skills and experience to exercise effective oversight of BII’s activities; and ii) direct reporting by BII to ministers and senior officials representing the shareholder. BII’s Board is responsible for overseeing BII’s activities and is fully accountable to the FCDO. The FCDO appoints 3 representatives to the Board with full voting rights - the Chair and two Non-Executive Directors – and is consulted on all other appointments. These Board members are appointed by Ministers for their specific skills and experience in overseeing the performance of a regulated financial institution, ensuring it delivers the strategy set by the FCDO. Ministers and officials hold the Board to account through regular formal reporting and engagement at senior levels as articulated in BII’s reporting framework. In addition to holding the Board to account for its oversight of BII, the FCDO’s formal reporting framework with BII provides comprehensive access to information and assurances on BII’s performance across a range of areas, including development impact, Session 2023–24 financial performance, portfolio composition, operational performance, and risks and incidents. This direct reporting to FCDO senior officials and ministers is delivered through regular engagement with the Chair and senior management of BII, principally through regular meetings – normally quarterly – with the Minister for Development, Quarterly Shareholder Meetings which are chaired by the FCDO Director-General, and an Annual Shareholder Meeting with the FCDO’s Second Permanent Secretary. Alongside this there is an established process for escalating any significant risk events that occur within the portfolio or BII. Other bilateral DFIs may have differing governance arrangements where this suits their specific circumstances, for example, because the DFI is a government agency and does not have clear reporting lines to one Secretary of State (e.g. US DFC) or where the DFI has other shareholders who influence the direction of the institution (e.g. FMO). In contrast, UK Public Corporations such as BII are the responsibility of the relevant shareholding department, with the Minister as sole shareholder accounting for all matters concerning the public corporation in Parliament. The Government is committed to maintaining best practice governance arrangements and will continue to periodically review procedures. However, the Government does not agree that the specific proposal of appointing a government official to take a non- voting seat on BII’s Board would enhance BII’s governance arrangements. A non-voting board representative would bring additional risks, including potentially disrupting Board dynamics and blurring lines of responsibility between the Board and FCDO, with the representative duplicating existing oversight and current lines of accountability. The Government does not consider the benefits of FCDO holding a non-voting position to be clear or to outweigh the potential risks. The BII Board has already been assessed as effective in the latest external Board evaluation conducted by Chris Saul Associates in 2022, finding that the Board was positive, disciplined, collegiate and well managed with high standards and professionalism.