RTGS - CHAPS Tariff Consultation

Introduction

Why are we consulting?

The Bank’s Real-Time Gross Settlement (RTGS) infrastructure is critical for the UK economy. The Bank is in the process of renewing this service, with a move to enhanced ISO 20022 for CHAPS payments in Spring 2023 and then implementation of a new core settlement engine in Spring 2024. Given the renewal of RTGS and the changes to the payments industry, the Bank has decided to review the RTGS and CHAPS tariff framework to ensure it remains appropriate going forward.

The cost of running RTGS and CHAPS is recovered by the Bank from industry, via the RTGS and CHAPS Tariffs. This consultation proposes a new framework for the RTGS and CHAPS Tariffs, including recovering the costs of building the renewed RTGS service as well as running RTGS and CHAPS. We are committed to communicating changes to the RTGS and CHAPS tariff framework openly and transparently. We are seeking feedback now to help ensure that the new tariff framework is fit for purpose.

Which organisations would we like to hear from?

We would like to hear from a wide range of current and potential participants in RTGS and CHAPS, as well as other key stakeholders. This includes banks and building societies, other payment service providers, financial market infrastructures, end-users of payment services and trade associations.

Who in your organisation should respond to this consultation?

Responses should ideally include collated views from colleagues across a responding organisation, including those responsible for organisation budgets and setting customer tariffs.

When do we need responses by and how can you respond?

We would be grateful for responses to this consultation by 30 June 2022.

Please respond to this consultation via this survey Opens in a new window.

As well as a small number of general background questions, there are 22 tariff related questions within the survey. Not all questions will be relevant to your organisation, but please do answer as many as appropriate. We want to gather as much relevant feedback as possible to form a view of industry opinions. Please indicate in your response if you believe any of the proposals in this consultation paper are likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

During the consultation period, we will also conduct outreach via events and bilateral meetings.

Annex 4 explains how the Bank will use respondents’ information.

Who to contact if you have questions?

If you have any questions about this consultation, please email RTGSTariffConsultation@BankofEngland.co.uk

Next steps

We plan to hold two Q&A sessions for respondents on 6 June and 7 June. Further details along with registration for these events can be accessed on the RTGS tariff consultation Q&A events page Opens in a new window. We are also happy to meet bilaterally with key stakeholders to discuss how our proposals could specifically impact them. Please contact RTGSTariffConsultation@BankofEngland.co.uk to request a meeting.

We will analyse the responses and publish a summary. We will revisit our proposals based on the feedback received and plan to publish a final tariff approach around the end of 2022. The new tariff framework will not be implemented before the delivery of the new RTGS core settlement engine, expected in Spring 2024.

Exclusions

This consultation relates solely to how the Bank of England recovers the costs it incurs in building and running the RTGS and CHAPS services. It does not cover:

• Fees that users of RTGS and CHAPS pay to third parties such as SWIFT;
• Internal costs that users of RTGS and CHAPS may incur as a result of access to RTGS or participation in a payment system;
• Costs associated with interest paid on positive or negative account balances; and
• Costs associated with functionality considered in the consultation on the roadmap for RTGS beyond 2024.

We are not seeking comments through this consultation on the cost estimates for building and running the RTGS and CHAPS services, but rather, on the proposals for how they are recovered.

Foreword

Payments are at the heart of financial systems and the functioning of economies. They ensure businesses can pay their suppliers and staff, that the wholesale and money markets can settle and they enable government to channel spending and revenue. They are also essential to individuals, allowing us all to buy goods and services. The Bank, as the operator of the Real-Time Gross Settlement (‘RTGS’) service and the provider of the ultimate sterling settlement asset - central bank money - is at the heart of UK payments. RTGS settles over £720bn on average every working day, turning over the equivalent of UK GDP every three days. RTGS settles payments for CHAPS, one of the largest high-value payment systems in the world, supporting wholesale payments and significant retail payments such as house purchases. It also settles for CREST, which is used to settle transactions for UK securities, and a number of retail payment systems including BACS, FPS and some credit card schemes.

In 2017, the Bank announced an ambitious vision to renew the RTGS service to respond to the changing payments landscape, including new ways to pay, new technology and new risks. At the heart of this vision is a renewed RTGS service that will deliver significant improvements, enabling higher resilience, broader access, wider inter-operability, improved user functionality and strengthened end to end risk management. We are on track to implement ISO 20022 messaging standards in CHAPS in April 2023, moving to a common global language for payments that is, or will be, used by many other operators internationally, including SWIFT (for correspondent payments), ECB TARGET2, Fedwire, CHIPS and BOJ-NET, enabling greater harmonisation. We will then introduce a new modern, flexible and efficient RTGS core settlement platform in Spring 2024. The new platform will offer enhanced resilience, improved access to data and liquidity management. These changes will offer major opportunities for the industry to cut costs and offer improved services to customers. The renewed system has also been designed to make it easier for new types of participants to join, helping to promote innovation and competition: since a policy change in 2017, half a dozen or so Non-Bank Payment Service Providers have already joined.

In the light of the changing payments landscape and new types of institutions joining the industry, we have reviewed the tariff framework through which we recover the costs of running, and renewing, RTGS and CHAPS services. The new tariff will not take effect until after the core settlement engine is delivered, planned for Spring 2024, and the costs of delivering the new systems are not yet final, but we wanted to provide industry with an indication of future costs now to support their own planning.

This consultation seeks views on our proposals, in particular:

• How we plan to allocate costs between the various payment systems that settle in RTGS; and
• How we plan to allocate costs for CHAPS between the CHAPS Direct Participants in our capacity as the payment system operator for CHAPS.

We look forward to receiving your feedback and will ensure that all views are considered when forming the final tariff framework. We are keen to hear from not only current users of RTGS and CHAPS, but potential future users too. This will help to ensure that we design a tariff framework that is fit for purpose for all users of the next generation of RTGS.

We plan to publish our final tariff framework around the end of 2022, to provide those paying tariffs with time to prepare.

Victoria Cleland, Executive Director for Banking, Payments and Innovation

Executive summary

The Bank recovers the costs of providing RTGS settlement and acting as the payment system operator for CHAPS through direct charges to the payments industry, by means of the RTGS and CHAPS Tariffs. The current RTGS infrastructure is now over 25 years old and as the investment costs have been fully depreciated for around a decade, the tariffs charged to users since then have focused only on recovering the costs of running the service. The renewed RTGS service will deliver significant improvements, enabling higher resilience, broader access, wider inter-operability, improved user functionality and strengthened end to end risk management. Given the cost-recovery basis, there is no accumulated surplus available to fund the current major investment. We will need to recover the costs of building, as well as running, the renewed service through the income collected via our future tariffs.

The Bank is developing a renewed RTGS service that is fit for the future, will deliver a wide range of benefits and value for money. The programme to renew the RTGS service is still underway and, with two years to run, it is not possible now to provide the precise costs of developing, building and implementing the new service. We do, however, want to provide an indication of the likely costs so that industry can start to plan. Our current high level estimate is that for the annual Tariff charges to cover the build and running of the renewed RTGS and running CHAPS, together with an allowance to keep the underlying hardware current during the period, charges will be in the region of £59m–£74m per annum, dependent on the period over which the build costs are to be recovered. To help smooth the impact of the increases in cost, we have looked at an initial range of recovery periods and are seeking views on this (Section 1), as part of this consultation. We will keep industry updated if there are any material changes to our expectations, and the final tariff, when implemented in 2024, will be based on actual costs.

Given the changes in the payments industry and the introduction of a service with new functionality, we will launch a new tariff framework after the delivery of the new core settlement engine in Spring 2024. The significant enhancements in the RTGS service make this an appropriate time to review our tariff framework, and to ensure it remains fit for purpose in a changing payments landscape.

This consultation invites views on the proposed changes to the tariff framework. We have designed the proposed framework in line with a set of high-level principles, ensuring that it supports the vision for the renewed RTGS and CHAPS services. Our proposed tariff framework aims to build clear links between the costs of providing the RTGS and CHAPS services and the range of benefits which will be received by industry. We are keen to hear a diverse range of views to understand if the proposals are likely to meet this aim, and whether any of our proposals may create incentives to change behaviours in ways which would run counter to our objectives.

A summary of the key changes we are proposing can be found in the Table A below.

Table A: Summary of the key proposed changes

This consultation contains a number of proposals – some more developed than others.

• Proposals which are marked [Detailed proposal] are those which are more developed and where we would particularly welcome comments on the impact and potential implementation challenges.
• Proposals marked [Developing proposal] are those where we aim to make changes in the area described and are seeking input on outstanding choices from industry before setting out the detail of the changes.

Section 1: Background and costs

What are RTGS and CHAPS?

Our provision of RTGS (Real-Time Gross Settlement) and CHAPS supports the Bank’s mission to promote the good of the people of the United Kingdom by maintaining monetary and financial stability. RTGS is critical for the UK economy. It makes payments work by enabling banks, or other types of payment providers, to move money around the financial system seamlessly. It underpins the financial system: every card payment, bill payment or online purchase ultimately depends on RTGS running smoothly.

You can read more about our RTGS and CHAPS services on our website Opens in a new window, but in summary:

• Our RTGS infrastructure is integral to the financial system, representing the core infrastructure for making sterling payments. It settles over £720bn on an average day - taking just three days to settle the UK’s annual Gross Domestic Product. Over 200 organisations hold accounts in RTGS, the majority of these being ‘reserves accounts’ which are sterling deposit facilities provided under the Bank’s Sterling Monetary Framework. Interest is paid at Bank Rate, implemented in line with monetary policy decisions. Over 70 organisations hold accounts that support settlement in one or more of the payment systems that settle in RTGS; and we provide a prefunding service to certain retail payment systems that eliminates credit risk between their settlement participants.
• CHAPS is the UK’s high-value payment system. It provides liquidity efficient immediate settlement of payments of any size and processes over 190,000 payments worth £340bn on an average day. As the payment system operator for CHAPS, we are responsible for the rulebook and acting as the end-to-end risk manager, as well as providing the CHAPS settlement service through RTGS.

In addition to reducing, or eliminating, certain financial risks, our RTGS service is operationally resilient. As well as a focus on our main RTGS infrastructure, we also have a tertiary solution – MIRS, provided by SWIFT – that provides an additional layer of resilience against disruption to availability and data integrity.

RTGS renewal

In 2017, the Bank announced an ambitious vision Opens in a new window to renew the RTGS service to respond to the changing payments landscape. The vision was developed in close collaboration with the payments industry and focused on resilience, competition and innovation. Key to this vision was to make sure that it remains fit for purpose and is able to keep pace with change, while continuing to operate safely and securely. This Renewal Programme is essential to keeping payments flowing freely around the system. RTGS is subject to rigorous governance, which includes a value for money assessment. A renewed RTGS service that is fit for the future will deliver a wide range of benefits while ensuring value for money.

Since the publication of the Blueprint the Bank has continued to engage with industry to refine the more detailed design and respond to industry needs. The Bank continues to benefit from external input, such as the Standards Advisory Panel and Senior Sponsors Body. We have also sought feedback on the detail of our proposals via surveys, workshops, proofs of concept and bilateral meetings with our users. The Bank has also co-ordinated with international and UK authorities.

The renewed RTGS service will support the payments industry as it evolves, meeting demand for cheaper, faster and safer payments for the UK economy. We expect the renewed RTGS service to create major opportunities for the industry to cut costs and offer improved services to customers. Our long-term vision is for it to continue to support safe and efficient settlement in central bank money, while also acting as an open platform for the UK finance industry to facilitate innovation.

We expect the renewed service to have major benefits for our participants and for the Bank’s objectives of maintaining monetary and financial stability:

• Enhanced resilience. Our new ledger will ensure that RTGS can continue to support the stability of the UK financial system in the face of evolving threats. It will also reduce the cost and risk of further upgrades.
• Broader access. New types of payment system providers have already joined RTGS following our policy changes. The renewed RTGS will lower the cost of connecting and make it economical for a broader range of participants to join.
• Wider interoperability. The implementation of a common global messaging standard for payments, ISO 20022, which is, or will soon be, used by other key global infrastructures including SWIFT (for correspondent payments), ECB TARGET2, Fedwire, CHIPS and BOJ-NET, will enable greater interoperability with other payment systems. This will aid increased processing efficiency for cross-border payments (including for AML/sanctions checks) and fraud detection. The UK’s ISO 20022 Common Credit Message (CCM) will deliver wider interoperability between payment types and make it easier for participants to switch between payment systems should the need arise.
• Improved user functionality. The new service will offer new functionality that will save costs and offer improved integration with participant systems such as enhanced liquidity management, the introduction of APIs and greater data availability.
• Strengthened end-to-end risk management. The Bank of England began to deliver the CHAPS service directly in November 2017, which ensured greater oversight and governance.

We are progressing at pace with the delivery of the renewed RTGS service. In Spring 2023, CHAPS will move to international ISO 20022 message standards. In Spring 2024, we will launch the new core settlement platform, which will be modular, flexible and based on open standards.

The scale and ambition of these changes requires significant development work, the costs of which will need to be recovered from users.

One of the major benefits of renewing the RTGS service is the improved capacity for continuous evolution and introduction of new features. Alongside this consultation, the Bank is consulting on the roadmap for the renewed RTGS beyond 2024.

Current tariff approach

We charge fees to settlement participants to fully recover the costs of providing RTGS and acting as the payment system operator for CHAPS. We set our fees for different services to avoid users of one service cross-subsidising users of other services.

We currently set fees for three main service areas:

• The CHAPS tariff consists of a fixed annual participation fee (£30,000) and a per-item fee (31.9p) for CHAPS payments. This recovers the combined cost of CHAPS settlement in RTGS and ‘scheme’ activities we undertake, such as maintaining and assessing compliance with the CHAPS rulebook and supporting risk management and assurance activities.
• The DvP RTGS tariff consists of a fixed annual participation fee (£15,000) and a per-item fee (£1.60) for CREST settlement in RTGS.
• Annual participation charges are levied on settlement participants of the other payment systems that settle in RTGS (currently BACS, FPS, ICS, LINK, Mastercard, PEXA and VISA Europe). The charge varies by system, depending on the number of settlements per day as well as the number of settlement participants. It is typically less than £7,000 a year per participant for each system they settle in.

We do not charge joining costs for systems or participants, but we do pass on the costs of any external legal opinions sought at the point of joining.

We aim for full cost-recovery for the RTGS and CHAPS services, without generating any long-term profit or loss.

• In practice, we smooth cost recovery over a small number of years to reduce tariff volatility.
• Changes to the CHAPS and DvP fixed fees have been rare. Instead, if we have needed to increase (or reduce) income in light of actual or forecasted costs and/or usage volumes, we have done so through changes to the per-item fees for CHAPS and/or DvP as required.

Why are we reviewing the tariff framework?

The broad approach to the RTGS tariff has not changed since 1996 although it was updated for: the introduction of CREST DvP in 2001; when retail systems started settling in RTGS; and when the Bank took on full responsibility for the CHAPS system in 2017.

Since the original RTGS build costs were fully recovered, approximately 10 years ago, the RTGS tariff has sought only to recover running costs and the costs of small incremental changes to hardware and software. Given the cost-recovery basis, there is no significant accumulated surplus that can be used to fund the current major investment in the renewed RTGS service.

Going forward, fees will need to cover the cost of building the renewed RTGS service. The Bank will only start to recover these costs through the new tariff structure after the delivery of the new core settlement engine in Spring 2024. Fees will also need to cover the future costs of running RTGS (and the CHAPS payment system) together with an allowance to keep the underlying hardware current.

The scale of change in the renewed RTGS service makes it appropriate to now also review the overall tariff framework, to ensure a fair approach to distributing these costs in line with the benefits received and to reflect changes in the payments landscape.

Tariff principles

Before designing our future tariff framework, we developed a set of high level principles that were discussed with our external Strategic Advisory Forum and Executive Advisory Board. A high level summary is shown below and more detail is provided in Annex 1. We have since assessed each of our potential tariff models against these principles. While each of these principles is important, we note that there are trade-offs to be made: for example fully proportionate tariffs are rarely simple. We think our proposed tariff approaches make a reasonable trade-off between the principles, but we are keen to get feedback on whether we are striking an appropriate balance.

Given the continuing evolution of the payment landscape we will continue to undertake regular reviews to understand any anticipated changes which could require a change to the tariff framework. Any new proposed settlement structures, or material changes to the way in which RTGS is used, would need to be assessed and the impact on the tariff considered against the principles. Any material proposed changes to the tariff framework would be subject to consultation and an appropriate period of notice.

RTGS renewal costs

The Blueprint explained that we would recover costs of the renewed RTGS from industry in full through the Tariff. It also set out that the Bank will start to recover the costs of building the renewed RTGS only after delivery of the core settlement engine (planned for Spring 2024). In line with our tariff principles we will spread the costs to the industry over a number of years, to provide greater stability and predictability in the Tariffs.

With two years until go-live, there is still uncertainty in the costs, but we want to provide an early indication so that industry can plan. Our current high level estimate over the next few years is that the annual costs to be recovered from industry, for the build of the renewed RTGS and the running of RTGS and of CHAPS, together with an allowance to keep the underlying hardware current during the period, will be in the region of £59m–£74m, subject to the agreed recovery period. In line with the Tariff principles and as noted above, we are consulting on the range of recovery periods (see Table B below). For illustrative purposes only, subsequent sections of this consultation base the impact calculations on the middle option of the build costs being spread over 20 years, resulting in an estimated annual charge of c£64m. The total build costs, and the anticipated annual run costs and allowance to keep the underlying hardware current, recovered under each option remains the same. The choice of recovery periods provides optionality around how quickly industry repays the build costs. After the completion of the build recovery period, annual recovery will be of RTGS and CHAPS running costs, plus any future investment costs subsequently agreed with users of the service.

Table B: Annual cost recovery current high level estimate

This consultation focuses on our approach to recovery of costs for the introduction of ISO 20022 for CHAPS payments and the core settlement engine, plus ongoing run costs. We launched on 29 April 2022 a consultation on the roadmap for RTGS beyond 2024, seeking views on features the Bank is considering introducing after the new core settlement engine is live, as that lays the foundation for continued evolution of the RTGS service. The proposals included in that consultation are not included in the tariff framework proposed here; the Bank will consider how to recover the costs for those proposals following our conclusion on the scope and priorities of the roadmap for RTGS beyond 2024. The Bank will take forward the proposals in that consultation taking into account costs and benefits for the industry and the Bank’s public policy objectives.

Consultation question on build cost recovery period:

1. What are your views on the relative merits of the proposed cost recovery periods (14 / 20 / 25 years)? What are the key factors driving your response?

Section 2: RTGS cost allocation

This section of the consultation sets out our proposals for changes to the way the costs of RTGS are shared between the payment systems that settle in RTGS.

RTGS cost recovery

Most of our costs for RTGS are, and will continue to be, recovered from direct users of RTGS – the settlement participants in the payment systems that settle in RTGS. A small proportion – for example, covering the costs of administering reserves accounts – is, and will continue to be, covered through other Bank income sources, such as the current Cash Ratio Deposit scheme or any future alternative.

As part of the current and future tariff framework, we determine the costs allocated to each of the payment systems that settle in RTGS, including CHAPS, and we set fees to recover these. The fees are collected directly from settlement participants.

At present, for schemes other than CHAPS, the Bank advises the Payment System Operators (PSOs) and their settlement participants how the costs allocated to each payment system are shared between the relevant settlement participants, including whether this is through usage fees, a fixed annual participation charge or a combination of both.

[Detailed proposal] Under the proposed new tariff approach, we would ask each PSO to determine how to split their portion of the total costs across their settlement participants and we would collect amounts from settlement participants as instructed by the PSOs. This is because we consider that the PSOs are in a better position than the Bank to determine an appropriate fee structure based on the service that they offer, having a view of the overall cost base to settlement participants, of which the RTGS settlement costs will form only a small part.

Cost allocation

The majority of costs incurred in providing the RTGS service are not affected by the number of participants or the volumes and values settled. Rather, our cost base is driven by the requirement for a safe, secure and resilient service. Where usage patterns have some impact on costs, such as the number of daily settlements per payment system, we will, in line with our proportionality principle, reflect this in our proposed tariff structures.

Some RTGS costs are specific to a certain service or payment system (eg specific costs for gross settlement or for DvP) and these are allocated directly for recovery through that service. But many costs are incurred in providing basic account management and the core settlement engine. These costs are shared and must be allocated to the different services and payment systems. This is also true for the costs of the renewal of RTGS, where costs of delivery of the renewed service as a whole will be recovered collectively from all users.

The current method of shared cost allocation is based on each payment system’s share of total settlement hours.

• Historically, this approach was seen as a measure of the amount of ‘use’ of RTGS, however, as processes have become increasingly automated, this has become less relevant and no longer reflective of the non-operational effort involved in providing a service to each payment system. Examples of costs incurred in activities not related directly to settlement include the costs associated with development, testing, contingency arrangements and engagement with the payment system’s participants.
• The current approach does not allocate enough shared cost to the retail systems which have very short settlement windows in contrast to CHAPS and CREST, so this non-settlement effort is not fairly reflected.
• Further, under the current approach, allocated costs do not accurately reflect benefits associated with other services provided, such as prefunding.
• In future, we envisage increased variation in settlement models reflecting increased diversity and innovation in the payment landscape: the time based approach is likely to become even less representative.

Table C: High level proposals

Value tranche cost allocation method

[Detailed proposal] Under the new tariff structure, the allocation approach for RTGS shared costs will be based on values: payment systems will be grouped into tranches according to the gross value of payments processed by that system.

Tranche sizes and allocation

[Detailed proposal] We propose to introduce five ‘tranches’ of gross value: very small, small, medium, large and very large. The costs allocated will increase with each tranche, reflecting the increasing benefit of financial risk reduction from settlement in central bank money.

• Payment systems will be measured according to their annual gross value processed, and placed into the tranches set out in Table D.
• All payment systems in a tranche will have the same allocation of costs, with this increasing for the higher value tranches. The base allocation for each tranche is a multiple of 3.5 of the tranche below.
• Exact cost allocation to each system will depend on the total number of payment systems settling in RTGS. This is as a result of the cost-recovery approach – costs per payment system will reduce if the largely fixed costs can be spread across more payment systems.

We plan to review the tranche boundaries every three years.

Table D: Tranche boundaries and allocation

Table E sets out the cost allocation for payment systems in each tranche based on the gross value processed by the payment systems that currently settle in RTGS. It is worth noting that the payment systems currently settling in RTGS are very disparate in terms of values processed, with the values of CHAPS and CREST many multiples of the other payment systems. The allocation below, based on current values, reflects this. The proposed approach would, however, ensure that the allocations would be responsive to changes in these relative values, ensuring an improvement over the current approach.

Table E: Base allocation share given current payment systems and values processed

Transitioning between tranches

We expect movement between tranches to be infrequent and largely foreseeable to the Bank. Payment systems might move between tranches for a range of reasons:

• A change to tranche boundaries as a result of our three-year review.
• Significant migration of payments between payment systems.
• Consolidation or splitting of existing payment systems, eg similar to the recent consolidation of Cheque and Credit, and the Northern Irish Cheque Clearing system into the Image Clearing System.

We will engage with the payment system operators each year to consider the likelihood and impact of any cost allocation changes as a result of moving between tranches, or the number of payment systems using RTGS. Our approach is designed to be responsive, so that:

• If a payment system moves to a higher value tranche it will be allocated more costs; the costs allocated to all other payment systems in all tranches will go down.
• If a payment system moves to a lower value tranche, the costs it is allocated will reduce; the costs allocated to all other payment systems in all tranches will increase. The materiality of this increase will depend on which tranche is left – higher value tranches will have a larger impact.

[Developing proposal] In the case of a very significant increase in the allocation of costs to one or more payment systems, we propose to consider whether there is a case for staggering the move between tranches and/or starting to allocate costs at the new level. While this could reduce the impact of an increase in costs for some payment systems, it could delay cost reductions for others.

Table F: How does this approach meet our principles?

Additional settlement services

Our settlement service to net settlement payment schemes includes optional risk reduction services: prefunding and multiple settlements per day. We currently charge for these by doubling the allocation for pre-funded settlement time used in the allocation approach and counting the time for each individual settlement per day.

[Detailed proposal] The Bank proposes to change the way that we increase the cost allocation for prefunding and multiple settlements as part of the new tariff approach.

The proposed additional allocation for use of these services would be a percentage increase that is added to the base cost allocation for the tranche applicable to the payment system. This would ensure that the scale of the cost allocation links back to the value processed by that payment system (which drives the scale of benefit received by use of the additional service).

These proposed additional allocations would reflect both additional effort by the Bank and additional benefit received by the payment system, and its settlement participants. This would differentiate the cost allocation between those that do, and those that don’t, use the additional settlement services.

The additional allocations would only apply to payment systems in the three lowest value tranches (Tranches 3, 4 and 5). Payment systems in the highest value tranches (Tranches 1 and 2) are very high value and the settlement arrangements are likely to be bespoke: the cost allocation to these payment systems is sufficiently high, without any additional allocation, to cover the nature of the service provided.

Base tranche allocations would be calculated only once the additional charges for these optional settlement services are factored in, to ensure that total allocation across all payment systems equates to 100% of the costs. This means that any changes in usage of these additional settlement services would result in an overall redistribution of allocations across all payment systems.

Prefunding

The standard RTGS settlement service does not include prefunding, but this is designed for use by payment systems that settle on a multilateral net basis to eliminate credit risk in combination with settlement limits set in that system. If a settlement participant cannot settle, the cash held, and protected, through pre-funding can be used to complete settlement.

We propose to increase the cost allocation for those using prefunding to reflect the financial risk reduction benefits gained and operational costs of running the prefunding process. In setting the additional allocation, we have considered the costs associated with alternative default arrangements (such as use of a payment system operator’s own funds) and the efficiency of this approach (avoiding the need to sell securities or raise funds elsewhere; prefunding balances are remunerated at Base Rate; and most prefunding balances are considered liquid in terms of prudential treatment).

[Developing proposal] As a starting point, we anticipate proposing a 20% increase to the allocation for prefunding – ie a payment system using prefunding would be allocated 120% of the basic allocation rate for its tranche.

Multiple settlement cycles

The Bank’s basic settlement service for net settlement payment systems includes one settlement cycle per day for each payment system that settles on a net basis. Some payment systems have multiple net settlements per day.

We propose to increase the basic cost allocation for those using multiple settlement cycles to reflect the additional benefits and our associated costs. For example, we monitor that settlements complete successfully, increasing our costs. And some settlement participants – especially those that typically receive funds – may benefit from the frequent release of funds.

Under our current time-based cost allocation model, each settlement cycle costs the same to the payment system. For example, five settlements a day would be allocated five times the cost relative to a single settlement. This overstates both our additional costs and the additional benefits.

[Developing proposal] We propose to offer one settlement cycle as standard. For multiple settlements, we propose to apply an increase to the basic cost allocation. As for prefunding, this would be added to the base tranche allocation. As a starting point, we anticipate a table of additional allocations, as follows:

• 2–5 settlements: 10%.
• 6–10: 20%.
• 11–20: 30%.
• 21+: Negotiated.

For example, a payment system with prefunding and seven settlements per day would be allocated 140% of the base allocation for the relevant tranche - 100% for basic settlement plus 20% for prefunding plus 20% for seven settlements.

Indicative fees based on current estimated costs

Impact of change in costs if we did not change the cost allocation approach

Based on our estimate of future annual cost recovery requirements being £60m–£75m, depending on the recovery period for the build costs associated with the renewal of the RTGS service, the shared RTGS costs might be in the region of £40m–60m each year. This reflects the fact that the recovery of the costs of renewing RTGS will all be shared RTGS costs, with only some of the RTGS running costs being specific to different payment systems. Using the current allocation approach, and assuming a 20 year recovery period, the estimated £47m shared RTGS costs would be allocated to the model PSs as follows:

Table I: Illustrative allocation of costs to Model PSs using current allocation approach

Impact of the proposed new cost allocation approach

Table J demonstrates the impact of our proposed changes to the allocation approach on the model PSs. Assuming the same shared RTGS cost recovery requirement (£47m each year), and taking into account the current number of payment systems in each tranche and current patterns of usage of additional settlement services, the new cost allocation approach would see model PSs have the following allocation of the shared costs:

Table J: Illustrative allocation of costs to Model PSs using new allocation approach

Consultation questions on RTGS cost allocation

2. How well do you think the proposals for RTGS cost allocation meet the tariff principles?

3. Are there any elements of the approach that incentivise behaviours that conflict with the tariff principles?

4. Do you agree that Payment System Operators (PSOs) should determine their own fee structures for allocating their share of RTGS costs to settlement participants? What are the key factors driving your response?

5. Do you see any areas are of concern with PSOs determining their own fee structures?

6. Do you agree with the proposed approach of allocating costs to payment systems in line with gross value processed? What are the key factors driving your response?

7. Do you agree with the proposal to apply an increase to the basic cost allocation for those payment systems in tranches 3–5 which opt to use additional settlement services? What are the key factors driving your response?

8. Are the proposed levels of charges for additional settlement services likely to affect decisions on whether or not to use the services?

Section 3: CHAPS fee structure

This section of the consultation sets out our proposals for changes to the CHAPS fee structure. This covers recovery of those RTGS costs specific to CHAPS, and an allocation of RTGS-shared costs, as well as costs incurred in our role as the payment system operator for CHAPS such as our rulebook and assurance functions.

Table K: High level proposals

CHAPS costs are recovered through fees, collected from CHAPS Direct Participants (DPs). There is currently a fixed annual fee of £30,000 and a per debit fee of 31.9p.

CHAPS fees will change for two reasons:

• An increase in costs due to CHAPS’ share of the costs of building and running a renewed RTGS service.
• Proposed changes to the CHAPS fee structure, which will result in a redistribution of the costs between different DP types to better reflect the benefit that each type of DP receives.

Change in CHAPS costs

The Bank’s costs of running CHAPS include:

• the cost of acting as payment system operator for CHAPS, which is not materially affected by the renewal of the RTGS service;
• those RTGS running costs which are specific to CHAPS, which we expect to be roughly the same proportion of the total RTGS running costs as now, so will most likely increase in line with the increased costs of running the renewed RTGS service; and
• the CHAPS allocation of the shared RTGS costs, which will increase significantly as they will include recovery of the costs of renewing the RTGS service.

Based on our assumptions on CHAPS’s own costs and the share of RTGS costs allocated to CHAPS through the cost allocation method above, we estimate that annual cost recovery requirement for CHAPS will account for roughly 60% of the total annual cost recovery figure ie in the range of £35-41m, depending on the cost recovery period for the build costs of the renewed RTGS service. For the purposes of illustrating our proposals, we have modelled the impact on DPs of an annual cost recovery target of £37m for CHAPS.

Proposals for change to fee structure

[Detailed proposal] We propose to maintain the current approach of a fixed annual fee to be a Direct Participant in CHAPS, plus usage charges reflecting level of use of CHAPS. Within this structure, however, we propose a number of changes.

Proposal one: Increase share of cost recovery from fixed fees

We currently recover around 6% of CHAPS costs through fixed fees, the remaining 94% comes through the volume-based per-item fees. However, many of the costs of providing the CHAPS service (scheme and settlement) are associated with providing a highly resilient service – including in terms of availability, data integrity and security – given the very high values processed. The majority of our costs are therefore not sensitive to volumes of payments processed.

[Detailed proposal] Our core tariff proposal is for a higher proportion of CHAPS cost recovery to come from fixed fees than today, better reflecting where costs arise.

In terms of mapping fees to the types of costs, we propose to target recovery as follows:

Table L: Proposed coverage of costs by fixed / usage fees

We therefore propose to recover 20% to 40% of CHAPS costs through fixed fees. This depends on whether CHAPS-specific settlement costs are recovered though fixed or usage fees. This increase in CHAPS cost recovery through fixed fees would:

• Provide more stability and predictability in costs for participants when managing their budgets, and for the Bank in income flows. But, it could be more difficult for DPs to translate into what they charge customers if they solely use per-item fees in their customer tariffs.
• Make the total fee for DPs less sensitive to usage levels, potentially presenting a barrier to entry for firms with only low values/volumes in CHAPS. But it would mean lower additional costs associated with each use of CHAPS, possibly attracting more payments.

A factor in our determination will be the risk of behavioural impacts as a consequence of the split between fixed and usage fees. For example, if we target 80% of cost recovery from usage fees, the fees for each payment will be higher than if we were closer to 60% and this could potentially drive DPs (or indirect participants or end users) to put fewer payments through CHAPS.

We would welcome respondents’ views on the merits of different points along that range.

Tiered versus standard fixed fees

We currently charge the same fixed annual fee (£30,000 a year) to all DPs. Our proposal would significantly increase the fixed fee. A much larger flat fixed fee could disproportionately affect smaller firms and potentially act as a barrier to entry, conflicting with our objectives to promote competition and innovation. But the alternative of setting different fixed annual fees for different types of DPs could become complex, less transparent and less predictable. Deciding between the two approaches therefore requires a trade-off between different principles.

Tiered approach

[Detailed proposal] Our preferred option is to tier the fixed fees based on CHAPS DP Categories (see Sections 1.25 to 1.29 of the CHAPS Reference Manual Opens in a new window for an explanation of CHAPS categories) – this would be proportionate.

• Categories drive which rules in the CHAPS Reference Manual Opens in a new window (CRM) apply to each DP, and reflect how systemic the potential risks are. A DP’s category therefore has a strong impact on the Bank’s costs (eg assurance activity, frequency of bilateral engagement, incident management and contingency testing) and on the benefits of settlement in central bank money.
• Fixed fees would be set roughly in proportion to the usage of CHAPS by DPs in each category, with slightly higher threshold applied for the smallest category (Category 3) to ensure that their contribution still covers costs associated with their participation.

While most CHAPS DPs are assigned to categories based largely on their volume / value of CHAPS usage, Financial Market Infrastrutures (FMIs) and the Bank of England, as CHAPS DPs, are, given their criticality, automatically assigned to CHAPS Category 1 and Category 0 respectively.

• As their rationale for direct CHAPS participation is different, as well as the way they use CHAPS, we do not consider it appropriate to charge these at the same tiered fixed fee level as those DPs who are Category 1 due to their usage levels. Many FMIs and the Bank of England, as CHAPS DPs, have more in common, in terms of the work involved for the Bank as CHAPS payment system operator, with DPs in lower CHAPS Categories: volumes are very low; tiering and throughput rules do not apply; and assurance activities are typically simpler given the narrow business models.
• We therefore propose that fixed fees for FMIs would be set according to the CHAPS category each would be in, based solely on volume and value measures as for other DPs. Given the unique status of the Bank of England, as a CHAPS DP, we are considering the appropriate fee structure and will share our proposals on this in our consultation response around the end of 2022.
• Going forward, should additional services be needed for FMIs or the Bank of England, as a CHAPS DP, these would be priced and charged accordingly.

Standard approach

An alternative approach would be to charge CHAPS DPs a standard fixed fee. Although this is less proportionate, it is a simpler approach. To mitigate the impact on smaller firms, and to reduce the barrier to entry that this would create, we would want to apply this approach only with the lower end of the range for fixed fee cost recovery - ie, this would be used to generate a maximum of 20% of total cost recovery.

We would welcome respondents’ views on the merits of a tiered or standard approach.

Proposal two: Introduce a value-based usage fee

[Detailed proposal] Currently the CHAPS usage fee is incurred solely on volume (a per-item fee). Going forward, there would be one usage fee determined by two factors:

• Volume: Per item charge per CHAPS debit initiated by the DP
• Value: Value based charge of a small percentage of the total value of debits initiated by the DP

Although this adds some additional complexity to the fee structure, we consider that the introduction of a value charge would better reflect the benefits that DPs gain from CHAPS and settlement in central bank money. We consider that this approach would also better reflect the way we propose to allocate shared RTGS costs in future, which would mean that CHAPS costs would be linked to the total value of payments processed.

[Developing proposal] With fees reflecting both volume and value of usage, the specific charges would depend on the ratio applied. We would like to understand what respondents think is the most appropriate ratio for volume to value. The current ratio is 100:0. Our proposed options for the new tariff are:

• 75:25 volume: value
• 50:50 volume: value – our preferred option
• 25:75 volume: value

The impacts of each option on different groups of DPs are covered in the ‘Impact on DPs’ section.

We are particularly interested in views as to whether the weighting between volume and value would have any impact on DP behaviours, eg merging or splitting payments, migrating payments to other payment systems, etc. In addition we are interested to know whether the value charge or the weighting placed on it will have any impact on end users, eg would a value based charge in CHAPS impact activity in money market lending?

Proposal three: Frequency of change and reduced initial fees

Under the proposals the CHAPS fees would be more complex and it would potentially be harder for Direct Participants to determine how to recover these through their own charges.

[Developing proposal] We propose to continue to review the CHAPS fee levels annually. However, to ensure stability and predictability, we are considering a commitment to give the industry more notice of any changes. We would be interested in feedback on how far in advance of changes such notifications would be useful to DPs.

[Developing proposal] Given the risk that the increase in fixed fees represents a barrier to entry to the CHAPS payment system, we are considering reduced initial fees for small firms joining CHAPS. This reduced initial fixed fee would apply only to Category 3 DPs for their first year of direct participation. We expect that in comparison to other associated costs with joining CHAPS (eg internal system development etc.) our fees may be quite low. We are interested in views as to whether we should offer an introductory discount.

Table M: How does this approach meet our principles?

Modelling the Impact of proposed changes on DPs

To illustrate the impact of the proposed changes on different types of CHAPS DPs, we have modelled the indicative fees under each of the proposals, and have calculated the total annual CHAPS fees incurred by each type of DP. Given the unusual patterns of CHAPS usage in 2020 and 2021 due to the Covid-19 pandemic, we have based our modelling on 2019 CHAPS usage data.

Impact of change in costs if we did not change the fee structure

To recover the illustrative level of £37m annual CHAPS costs using the current tariff structure, we would charge £30,000 fixed annual fee and £0.738 per CHAPS debit. At the ends of the cost estimate range, £35–41m pa, the per item fee would be £0.607-£0.821.

The impact of a £0.738 per item charge on model DPs would be:

Impact of proposed changes to tariff structure

This section demonstrates the impact of our proposed changes on the model DPs. The illustrative cost recovery level of £37m each year is used for the purposes of the modelling, along with usage levels from 2019. Further detail is available in Annex 3.

As the Category 1 Model DP has the same proportion of total volume and total value of use, changing the weighting of fees between volume and value has no impact on this Model DP. There is, however, an impact on the other Model DPs. Weighting fees by 25% volume / 75% value results in the Model DPs for Category 2 having the same total fee: this is because this weighting coincidentally results in the same weighted usage share for both of the Model DPs.

Tiered fixed fees

Assuming the above cost recovery requirement and that 40% of cost recovery comes from fixed fees, we envisage the following fixed fees by Tier:

This would leave 60% of CHAPS costs to be recovered through usage fees, split across volume and value of usage. Depending on the split, fees would be:

Impact on Model DPs would be:

Standard fixed fees

Assuming the above cost recovery requirement and that 20% of cost recovery comes from fixed fees (to reduce the risk of over-burdening smaller players), we envisage the following fees:

Fixed fee (all DPs): £210,000

Impact on Model DPs would be:

Consultation questions on CHAPS fee structure:

9. How well do you think the proposals for the CHAPS fee structure meet the tariff principles?

10. Are there any elements of this approach that incentivises behaviours that conflict with the tariff principles?

11. Do you agree that the Bank should recover a larger share of its CHAPS settlement costs through fixed fees (we currently recover 6% via fixed fees)? What are the key factors driving your response?

12. Would you prefer the proportion of fixed fee to be closer to our lower-end option of 20% or our upper-end option of 40%?

13. Do you agree with the introduction of a tiered fixed fee? What are the key factors driving your response?

14. Do you agree with the introduction of a value based charge? What are the key factors driving your response?

15. With proposed fees now reflecting both volume and value of usage, what are your views on the relative merits of the following volume/value ratios (75:25 volume/value ratio; 50:50 volume/value ratio; 25:75 volume/value ratio; any other)? Please also rank your preferences for the ratios suggested where one is the most preferable and three the least.

16. Do you agree with the proposal to offer reduced initial fees in the first full year of joining to new CHAPS participants joining in Category 3? What are the key factors driving your response?

17. What is the minimum notice that you would need to reflect any new CHAPS fee level within your pricing structure?

Section 4: Other proposals

Additional charges

At present, some RTGS services which are used only occasionally and by a small number of settlement participants or account holders do not attract a specific fee, with the cost of providing these covered through general cost recovery. This has kept tariff and invoicing relatively simple.

[Detailed proposal] We are considering which additional services should attract specific usage fees to better align with our proportionality principle. We propose to additionally charge for: onboarding and other structural changes to accounts; and new types of settlement.

The proposals included in the consultation on the roadmap for RTGS beyond 2024 are not included in the tariff framework proposed here and may have a different charging structure. The Bank will consider how to recover the costs for those proposals following our conclusion on the scope and priorities of the roadmap for RTGS beyond 2024.

On-boarding and other structural changes to accounts (eg mergers, restructuring etc)

[Detailed proposal] We propose to introduce a charge when participants make a material change in how they use their account which involves some change to its set-up in RTGS. This would include becoming a settlement participant in a payment system, or changing ownership, or certain payment related details (eg the BIC), of the account.

• The fee would reflect the time and cost that we spend in managing such changes. As we expect the number of new settlement participants and new schemes on-boarding to continue to increase significantly in future, we consider it to be reasonable to start to charge separately for these activities.
• The level of fees would be set when sufficient cost granularity exists. As with the rest of our fees, it would be set at a level that targets cost recovery. We anticipate that fees would be higher where the account relates to a CHAPS DP, as this will cover the Bank’s costs as both the operator of CHAPS and the provider of the RTGS settlement service.
• The proposed on-boarding fee would be levied in two parts. The first 50% would be charged to new participants/payment systems at the point that an on-boarding slot is allocated to them and the remaining fee would be charged only after successful completion.

Authorised transfers (pull payments) and Party to Party transfers (PTPs)

The renewed RTGS service will provide alternative methods to initiate a real-time fund transfer, outside the CHAPS service. In some cases, this will replace or enhance existing functionality, but additional methods will also be introduced.

While the detail of the functionality, usage etc. is still being developed, at a high level the basic service provided is likely to mimic that of a CHAPS payment (ie funds are transferred from an account in RTGS owned by one participant, to an account owned by a different participant). For this reason, we propose to mimic the full CHAPS charging approach for simplicity and consistency.

[Developing proposal] For authorised transfer functionality (‘pull payments’) we propose to charge the receiver (which has initiated the transfer) at the full prevailing CHAPS per-item and value-based rates. For Party to Party Transfers (PTPs), we propose to charge the payer (initiator) the prevailing CHAPS per-item and value-based rates.

Invoicing processes

[Developing proposal] Annual participation fees are charged in advance from the beginning of the tariff year (currently 1 April to 31 March each year). Per-item fees are currently charged quarterly in arrears. We are considering changing the tariff year to align with the calendar year and would be interested in feedback on this suggestion.

Consultation questions on other aspects:

18. Do you agree with the proposal to introduce an on-boarding fee? What are the key factors driving your response?

19. Do you agree that the proposed charges for alternative forms of real-time transfers appropriately reflect the value received by the user of these services? What are the key factors driving your response?

20. Do you have a preference (eg for budget planning purposes) for the Bank’s tariff year to run on a calendar year basis, ie 1 January to 31 December as opposed to 1 April to 31 March each year currently?

Consultation questions – general aspects:

21. Please specify if any of the proposals have any equality impacts?

22. Is there anything tariff related not covered in the consultation that you wish to provide feedback on?

Annexes

• Annex 1: Principles

  Principle 1: Proportionate

  The allocation and recovery of our costs across schemes and participants needs to be proportional. As most RTGS and CHAPS costs are fixed, there are a number of ways of defining ‘proportionality’ eg volume and value of usage or underlying settled values; economic benefit from participation; scale of participant etc. This principle can be met in many different ways: however, any proposal which does not demonstrably meet this principle should be ruled out.

  Principle 2: Simple and efficient

  The tariff should be transparent, and easy to administer and understand making simplicity important. It is important to ensure that participants/schemes (and their customers, as well potential future participants/schemes) can readily understand the allocation / fee structure and incentives presented. Complexity should only be introduced if it makes a material difference to outcomes.

  Principle 3: Stable and predictable

  The tariff approach should not be subject to frequent changes: it needs to be sustainable and predictable (over the next few years) for participants/schemes so that they can incorporate these into their own business plans or contracts with customers, and predict the impact on costs of any changes to their plans.

  Principle 4: Supports competition and access

  The tariff should support the RTGS vision of broader access / reduced cost of access, in order to encourage greater competition.

  Principle 5: Supports the Bank’s Mission and RTGS/CHAPS policy objectives

  The Bank does not intend to use tariffs as the primary means to incentivise particular behaviours by participants or schemes; we will continue to use policy statements, rules and / or highlighting best practice. But the tariff structure must be supportive of the behaviours that we want to see, and may be used to guide behaviour if we believe that policy/ best practice may not be sufficient to achieve our policy aims and objectives. There should be no perverse incentives (ie tariffs that incentivise behaviours that run counter to best practice or the Bank’s policy objectives).

• Annex 2: Number of scheme participants

  Number of scheme participants (correct as at 1 April 2022)

  Scheme	Number of settlement participants
  FPS	39
  CHAPS	37
  Visa	34
  Bacs	29
  CREST	24
  LINK	23
  ICS	20
  Mastercard	11

• Annex 3: Further detail of CHAPS fee modelling

  To illustrate the impact of the proposed changes on different types of CHAPS DPs, we have modelled what fees would be needed under each of the proposals to generate the required annual cost recovery, and have calculated total annual fees incurred by each type of DP. Given the unusual patterns of CHAPS usage in 2020 and 2021 due to the Covid-19 pandemic, we have based our modelling on 2019 CHAPS usage data.

  Model DPs: we have used a set of model DPs to look at the impact of changes. This table shows how the model DPs are set up.

  Model	% age of total CHAPS volumes sent	% age of total CHAPS values sent	2019 modelled volumes sent (000s)	2019 modelled values sent (£m)
  Category 1 DP	18.0	18.0	8,749	13,921,155
  Category 2 Retail DP	5.0	2.5	2,430	1,933,494
  Category 2 Custody / Wholesale DP	2.0	3.5	972	2,706,891
  Category 3 DP	0.30	0.15	146	116,010
  FMI DP	0.02	0.80	10	618,718

  Footnotes

  • Note: assumption is that the FMI model DP would be treated as Category 3 for tiered fixed fees.

  2019 baseline for total fees paid: £30,000 annual fee plus £0.319 per debit volume fee

  (£000s)	Annual fixed fee	Total per item fees	Total 2019 fees	% of overall 2019 CHAPS cost recovery
  Category 1 DP	30	2,791	2,821	17.1
  Category 2 Retail DP	30	775	805	4.9
  Category 2 Custody / Wholesale DP	30	310	340	2.1
  Category 3 DP	30	47	77	0.5
  FMI DP	30	3	33	0.2

  Fees if we kept the current fee structure but needed to recover costs of £37m pa

  Fees modelled:

  Annual fixed fee	£30,000
  Per debit volume fee	£0.738

  (£000s)	Annual fixed fee	Total per item fees	Total fees	% of overall CHAPS cost recovery
  Category 1 DP	30	6,460	6,490	17.5
  Category 2 Retail DP	30	1,795	1,825	4.9
  Category 2 Custody / Wholesale DP	30	718	748	2.0
  Category 3 DP	30	108	138	0.4
  FMI DP	30	7	37	0.1

  Change compared to 2019:

  	Increase in fees (£000s)	% age increase	Change in % of total (pp)
  Category 1 DP	3,669	130%	0.4
  Category 2 Retail DP	1,019	127%	0.0
  Category 2 Custody / Wholesale DP	408	120%	0.0
  Category 3 DP	61	80%	-0.1
  FMI DP	4	12%	-0.1

  Fees if we adopted the preferred Tiered Fixed Fees proposals and needed to recover costs of £37m pa:

  Fees modelled:

  	Annual fee (£s)
  Tier 1	2,400,000
  Tier 2	400,000
  Tier 3	110,000

  Weighting vol/val		25/75	50/50	75/25
  Volume fee	£ / transaction	0.114	0.228	0.343
  Value fee	£ / £m	0.215	0.144	0.072

  Impact on Model DPs

  Weighting vol / val = 25/75:

  Model DP	In this scenario		Comparison to 2019		Comparison to current model
  (£000s)	Fees for DP	% of total CHAPS cost recovery	Increase in fees	% age increase	Change in fees	% age change	Change in % of total (pp)
  Category 1 DP	6,396	17.3%	3,575	127%	-94	-1%	-0.3
  Category 2 Retail DP	1,094	3.0%	289	36%	-731	-40%	-2.0
  Category 2 Custody / Wholesale DP	1,094	3.0%	754	222%	346	46%	0.9
  Category 3 DP	152	0.4%	75	98%	14	10%	0.0
  FMI DP	244	0.7%	211	638%	207	557%	0.6

  Weighting vol / val = 50/50:

  Model DP	In this scenario		Comparison to 2019		Comparison to current model
  (£000s)	Fees for DP	% of total CHAPS cost recovery	Increase in fees	% age increase	Change in fees	% age change	Change in % of total (pp)
  Category 1 DP	6,396	17.3%	3,575	127%	-94	-1%	-0.3
  Category 2 Retail DP	1,233	3.3%	427	53%	-592	-32%	-1.6
  Category 2 Custody / Wholesale DP	1,011	2.7%	670	197%	263	35%	0.7
  Category 3 DP	160	0.4%	83	109%	22	16%	0.1
  FMI DP	201	0.5%	168	507%	164	441%	0.4%

  Weighting vol / val = 75/25:

  Model DP	In this scenario		Comparison to 2019		Comparison to current model
  (£000s)	Fees for DP	% of total CHAPS cost recovery	Increase in fees	% age increase	Change in fees	% age change	Change in % of total (pp)
  Category 1 DP	6,396	17.3%	3,575	127%	-94	-1%	-0.3
  Category 2 Retail DP	1,371	3.7%	566	70%	-453	-25%	-1.2
  Category 2 Custody / Wholesale DP	927	2.5%	587	173%	179	24%	0.5
  Category 3 DP	168	0.5%	92	120%	31	22%	0.1
  FMI DP	158	0.4%	125	377%	121	324%	0.3

  Fees if we adopted the alternative Flat Fixed Fees proposals and needed to recover costs of £37m pa:

  Fees modelled:Annual fixed fee: £210,000

  Weighting vol/val		25/75	50/50	75/25
  Volume fee	£ / transaction	0.152	0.305	0.457
  Value fee	£ / £m	0.287	0.191	0.096

  Impact on Model DPs

  Weighting vol / val = 25/75

  Model DP	In this scenario		Comparison to 2019		Comparison to current model
  (£000s)	Fees for DP	% of total CHAPS cost recovery	Increase in fees	% age increase	Change in fees	% age change	Change in % of total (pp)
  Category 1 DP	5,538	15.0%	2,717	96%	-952	-15%	-2.6
  Category 2 Retail DP	1,135	3.1%	330	41%	-690	-38%	-1.9
  Category 2 Custody / Wholesale DP	1,135	3.1%	795	234%	387	52%	1.0
  Category 3 DP	266	0.7%	189	247%	128	93%	0.3
  FMI DP	389	1.1%	356	1075%	352	947%	1.0

  Weighting vol / val = 50/50

  Model DP	In this scenario		Comparison to 2019		Comparison to current model
  (£000s)	Fees for DP	% of total CHAPS cost recovery	Increase in fees	% age increase	Change in fees	% age change	Change in % of total (pp)
  Category 1 DP	5,538	15.0%	2,717	96%	-952	-15%	-2.6
  Category 2 Retail DP	1,320	3.6%	515	64%	-505	-28%	-1.4
  Category 2 Custody / Wholesale DP	1,024	2.8%	684	201%	276	37%	0.7
  Category 3 DP	277	0.7%	200	262%	139	101%	0.4
  FMI DP	331	0.9%	298	901%	294	791%	0.8

  Weighting vol / val = 75/25

  Model DP	In this scenario		Comparison to 2019		Comparison to current model
  (£000s)	Fees for DP	% of total CHAPS cost recovery	Increase in fees	% age increase	Change in fees	% age change	Change in % of total (pp)
  Category 1 DP	5,538	15.0%	2,717	96%	-952	-15%	-2.6
  Category 2 Retail DP	1,505	4.1%	700	87%	-320	-18%	-0.9
  Category 2 Custody / Wholesale DP	913	2.5%	573	168%	165	22%	0.4
  Category 3 DP	288	0.8%	211	276%	150	109%	0.4
  FMI DP	274	0.7%	241	727%	236	636%	0.6

• Annex 4: How the Bank will use respondents’ information

  By responding to this survey, the Bank of England (‘we’) collects information about the Respondent (‘you’). This includes your name and professional contact details.

  We may use your personal data to contact you if we need to clarify your responses or to invite you to further discussion and consultation on related topics. Engagement relating to our work is necessary in the public interest and in the exercise of the official authority of the Bank.

  The consultation feedback will be used to inform the next steps and approach to changes to the RTGS and CHAPS tariff structures.

  The responses will not be shared with any other party or published. In its follow up to the consultation, the Bank may choose to anonymously share themes or significant points of view in order to qualify or explain its next steps. If you do not wish any elements of your response to be anonymously shared or referred to, please indicate so in your response.

  We will keep your personal data for as long as we require it to finalise this work on the changes to the RTGS and CHAPS tariff structures.

  You have a number of rights under data protection laws (for example, you have the right to ask us for a copy of the personal data the Bank holds about you. This is known as a ‘Subject Access Request’). You can ask us to change how we process or deal with your personal data, and you may also have the right in some circumstances to have your personal data amended or deleted.

  To find out more about those rights, to make a complaint, or to contact our Data Protection Officer, please see our website at www.bankofengland.co.uk/privacy

  Information provided in response to this consultation, including personal information, may be subject to publication or disclosure to other parties in accordance with access to information regimes including under the Freedom of Information Act 2000 or data protection legislation, or as otherwise required by law or in discharge of the Bank’s functions.

  Please indicate if you regard all, or some of, the information you provide as confidential. If the Bank of England receives a request for disclosure of this information, we will take your indication(s) into account, but cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system on emails will not, of itself, be regarded as binding on the Bank of England.

• Annex 5: Key documents

  Document title	Link
  CHAPS Reference Manual	CHAPS Reference Manual Opens in a new window
  A Brief Introduction to RTGS and CHAPS	A Brief Introduction to RTGS and CHAPS Opens in a new window
  Bank of England Market Operations Guide	Bank of England Market Operations Guide
  A blueprint for a new RTGS service for the United Kingdom	A blueprint for a new RTGS service for the UK
  Roadmap for Real-Time Gross Settlement service beyond 2024	Roadmap for Real-Time Gross Settlement service beyond 2024
  Bank of England Omnibus Accounts – Access Policy	Bank of England Omnibus Accounts – Access Policy Opens in a new window