Heat a saucepan over medium-low heat, and add the butter.

Gently sauté the shallots for about 1 minute or until aromatic. Add the flour, and continue to cook for 1 to 2 minutes.

Pour in the cold milk while whisking to avoid lumps. Add the bay leaf. Bring to a boil, and then reduce heat to low. Simmer, whisking frequently, for approximately 10 minutes.

Remove from the heat, and whisk in the cheese. Season with salt and pepper to taste.