Payments are essential to the UK’s economy. Most payments are made through payment systems. We have been acting as a settlement agent for payment systems since the nineteenth century.
Find out more about what payment systems are and how they work:
Payment systems are a set of common rules and procedures that support the transfer of funds between people, businesses and financial institutions. Most payment systems are managed by operators, and supported by one or more infrastructure providers of hardware, software, and communication networks. Some financial institutions have direct access to each payment system and provide payment services to their customers.
Not all accounts are held at the same payment service provider, so when a customer makes a payment to a business that has an account with a different provider, the customer’s provider owes the business’s provider the value of the payment. This creates a level of risk, so a payment system needs to use an intermediary, known as a settlement agent, for the final settlement of funds between providers.
Banks and other institutions can hold accounts with us, which are used to settle money moved between them. We provide these accounts to support our mission of maintaining monetary and financial stability. There is a financial stability advantage for a settlement agent being a central bank like the Bank of England. As we are financially supported by the Government, this removes the risk of account holders losing money held in, or moved between, accounts held with us.
We operate the real-time gross settlement (RTGS) service, infrastructure that holds accounts for banks, building societies and other institutions. The balances in these accounts can be used to move money in real time between these account holders. This delivers final and risk-free settlement.
We also operate CHAPS, the UK’s high-value payment system which provides efficient, settlement risk-free and irrevocable payments. There are over 30 direct participants and several thousand indirect participants that make CHAPS payments through one of the direct participants.
In September 2024, we published our Annual Report for RTGS and CHAPS as an important part of our commitment to transparency and accountability. The Annual Report focuses on our strategy for RTGS and CHAPS, how we delivered our strategy, and the main strategic focus for the year ahead including to renew the RTGS system.
Our strategy for RTGS and CHAPS, which is set by the RTGS/CHAPS Board, is to provide services that, in addition to providing value for money, are:
We have dedicated governance arrangements for the RTGS infrastructure and CHAPS payment system.
The RTGS/CHAPS Board (the Board) provides strategic leadership for the RTGS infrastructure and CHAPS payment system. The Board operates within the Bank’s wider governance structure, reporting to the Governor and Court.
The Board supports the delivery of the Bank’s mission to promote the good of the people of the United Kingdom by maintaining monetary and financial stability. It also seeks to promote efficiency, innovation and competition in sterling payments, wherever that can be safely done without impairing stability.
As operator of a systemically important payment system, the Bank is accountable for the end-to-end risk management of the CHAPS payment system. The Board supports this through the oversight of all risks that could affect the payment system's resilience.
For both RTGS and CHAPS, the Board is responsible for:
The Board is chaired by the Bank’s Deputy Governor for Markets and Banking, Dave Ramsden. Its membership includes a number of independent, external appointees, to provide additional challenge, broader experience and insight into the Board’s decision-making. The Board takes appropriate input from RTGS and CHAPS users, including through the Strategic Advisory Forum.
The RTGS/CHAPS Board works closely with the Renewal Executive Board (REB) – a committee of the Bank responsible for overseeing the RTGS Renewal Programme (the Programme). The REB is responsible for decisions on the overall scope of the Programme, financial management of the Programme and provision of appropriate resources to the Programme.
The REB will inform and, where appropriate, consult the RTGS/CHAPS Board on all relevant matters as these pertain to the live service, industry and scope change. This will include sight of the “go/no-go” decision-making process (including any material risks to the live service identified in any recommendation to go live) for the different Transition States. Information flows are in place between the REB and the RTGS/CHAPS Board on matters that would affect each other’s responsibilities.
The Board has delegated the monitoring of the CHAPS and RTGS risk management framework, risk tolerance and risk profiles to the RTGS/CHAPS Board Risk Committee. This committee comprises four board members: Steve Bell, Michael D'Souza Jackie Keogh and Laura Wallis.
In September 2024, we published an updated self-assessment of the RTGS and CHAPS services against the CPMI-IOSCO Principles for Financial Market Infrastructures Opens in a new window, with point of assessment 31 October 2023.
The principles are internationally agreed standards considered essential to strengthening and preserving financial stability. In carrying out the self-assessment, we considered the CPMI-IOSCO guidance on how the principles apply to financial market infrastructures operated by central banks. As a payment system, CHAPS has been self-assessed as standard against the CPMI-IOSCO principles. While the RTGS service is not a payment system or a financial market infrastructure, we have undertaken the self-assessment for RTGS aspects against the principles that apply to payment systems.
This year we judged that of the 17 principles that apply to RTGS and CHAPS, we ‘observe’ 16 and ‘broadly observe’ one – operational risk. A number of the principles only apply to RTGS or CHAPS, not both.
Our self-assessment of ‘broadly observed’ for operational risk, reflects our conservative view that further time is required to demonstrate the effectiveness of strategic enhancements once embedded although we have made significant progress since 2022.
We complete the self-assessment as operator of the RTGS and CHAPS services and not in the Bank's as supervisor of financial market infrastructures or banks.
The RTGS service needs to be very operationally reliable to support final settlement between accounts that providers hold with us. The service is managed within a clear governance framework. This covers strategy, delivery and risk management.
We carefully consider and test all changes to the RTGS service because they could affect our mission of maintaining monetary and financial stability. We discuss potential changes with account holders and the operators of the payment systems that settle in RTGS.
The RTGS service operates on fault-tolerant computer hardware that is replicated on a second site. The business operation is conducted on a split-site basis. We have the option of using a third site and alternative technology in the form of SWIFT’s ‘Market Infrastructure Resiliency Service’ Opens in a new window (MIRS). Further information on MIRS is below, including background information for invoking MIRS for RTGS and CHAPS settlement.
We currently support four settlement models: real-time gross settlement, delivery versus payment (DvP), and prefunded and unfunded models for deferred net settlement.
We provide settlement services for the CHAPS payment system, the payment system embedded within the CREST securities settlement system and a number of retail payment systems that settle on a net basis. Each system determines its own access criteria as well as the number and duration of any settlement cycles.
Final sterling settlement for CLS Opens in a new window, a foreign exchange settlement system that eliminates settlement risk in participating currencies, is carried out through CLS’s direct participation in CHAPS.
Payments under our Note Circulation Scheme (NCS) are also settled in our RTGS service. NCS allows its members – wholesale cash operators – to hold notes in custody for us within their network of cash centres.
This model is currently only used by CHAPS.
CHAPS is a sterling same-day system that is used to settle high-value wholesale payments as well as time-critical, lower-value payments like buying or paying a deposit on a property. Responsibility for the CHAPS system transferred to the Bank of England in November 2017. Read more about this in our CHAPS section and in the blueprint for a new RTGS service.
Direct participants in CHAPS include the traditional high-street banks and a number of international and custody banks. Many more financial institutions access the system indirectly and make their payments via direct participants. This is known as agency or correspondent banking.
Payment obligations between settlement participants are settled individually on a gross basis in RTGS throughout the business day.
Settlement risk is eliminated, at the cost of an increased need for liquidity, making this model best suited to a high-value payment system with the largest potential systemic risk. We support settlement of CHAPS payments by providing secured intraday liquidity to the direct participants. We also make a liquidity saving tool available to help reduce intraday liquidity needs for CHAPS settlement and provide a user guide alongside other information to help DPs understand how to use the liquidity saving features.
This model is currently only used to support final settlement in CREST. CREST is used to settle transactions for UK securities (gilts, equities and money market instruments). It is operated by EUI Opens in a new window.
Sterling settlement in CREST takes place in a series of very high-frequency cycles throughout the day. After each cycle, we are advised of the debits and credits to be made to the CREST settlement banks’ accounts in our RTGS service. We support settlement in CREST by providing intraday liquidity to the CREST settlement banks (a process known as auto-collateralisation). Settlement risk is eliminated as transactions are settled with finality in real time against segregated liquidity.
Accounts in RTGS are used to settle the net obligations arising from customer transactions for the main sterling retail payment systems: Bacs, Faster Payments, Image Clearing System, LINK, Mastercard Europe, PEXA Payment scheme, and Visa Europe.
Banks and other financial institutions can hold accounts in our real-time gross settlement system (RTGS) for holding reserves or settling net obligations from payment systems. Non-bank payment service providers can hold settlement accounts in the RTGS system. Further information is available on direct access to CHAPS system.
Banks and other financial institutions can experience periods of financial distress. The UK, like many other countries, has a resolution regime for banks and certain other types of financial institution. Resolution is a way to manage the failure of an institution in an orderly way to maintain critical functions – like the provision of payment, clearing and settlement services, protect public money and protect financial stability.
As the operator of RTGS and CHAPS we play a key supporting role in the continuity of access to Financial Market Infrastructures (FMI) by firms in resolution. As well as CHAPS, this applies to other FMI that undertake their final settlement in our RTGS system. To aid resolution planning, we have published our response to the Financial Stability Board’s questionnaire Opens in a new window on Continuity of Access to FMIs for Firms in Resolution.
Holders of RTGS accounts must enter into Terms and Conditions. Annexes cover particular purposes for which the account is used.
Agreements are also in place with the operators of payment systems that settle in RTGS.
Account holders can use an online system to manage accounts in RTGS and their CHAPS payment queues. A detailed RTGS reference manual is available for RTGS account holders.
In March 2025, we published our new RTGS rules. These set out in plain language our expectations of RTGS participants and actions we make take if we have concerns. A further version will be published when TS3 goes live in Spring 2025.
We charge fees to organisations that hold an account in RTGS used for settlement. These fees are reviewed annually and set in advance for the coming year. We operate on a full cost recovery basis over a defined time frame.
The retail payment system operators and the operator of CREST set their own, separate, tariffs and fees.
