Real-Time Gross Settlement (RTGS) system and CHAPS Annual Report 2023/24

Foreword

Delivery of the RTGS and CHAPS services supports the Bank’s mission to promote the good of the people of the United Kingdom by maintaining monetary and financial stability. RTGS ultimately lies at the heart of every electronic payment in the UK and settles over £700 billion on an average working day.

The longer-term context for RTGS is a world where payments work faster, are more responsive, resilient and seamless. Under the next phase of the RTGS Renewal Programme, we will move to a new core ledger and settlement engine for RTGS; this will deliver a more resilient, flexible and innovative sterling settlement system to support monetary and financial stability.

We will continue to enhance the service as part of our Future Roadmap for RTGS to make sure it can meet the changing needs of the payments industry. We have made important progress, working closely with users, to further the design of three roadmap priority features: additional channels to connect to RTGS to enhance resilience; extended settlement hours for RTGS/CHAPS; and synchronisation of transfers in RTGS with settlements in other ledgers. Many of these changes are key to facilitate innovation in wholesale payments and support enhanced cross-border payments.

On 30 July, the Bank published a discussion paper on our approach to innovation in money and payments. This set out plans in several areas:

• preserving the role of central bank money as an anchor for confidence in the financial systems;
• exploring technical innovations for the systems we operate – including those part of the future roadmap for RTGS as well as a programme of experiments for wholesale central bank digital currency (CBDC); and
• objectives in retail payments, working closely with other UK financial authorities.

We continue to support the UK economy by operating RTGS and CHAPS services to a high standard providing a resilient platform for further innovation. To the credit of Bank staff, and those in the wider payments industry, these outcomes continue to be achieved in a fast-changing payments context. There have, however, been a number of disruptions. We are disappointed that these disruptions have occurred and apologise to anyone impacted. In each case, we invoked our recovery and response arrangements including consideration of which contingency arrangements would be applicable. Settlement was completed by the end of day in line with our own impact tolerances and that set by the Financial Policy Committee for critical payments.

This Annual Report is an important part of our wider commitment to transparency and accountability spanning our strategic approach; provision of live services; and how we are evolving the services and products that we provide to benefit users. Through this report, we are sharing our strategic themes, and how we work with industry to deliver effective RTGS and CHAPS services while providing value for money.

Dave Ramsden
Deputy Governor for Markets and Banking
Executive Chair of RTGS/CHAPS Board

1: Introduction to the RTGS and CHAPS services

Why are RTGS and CHAPS important?

The Bank of England’s mission is to promote the good of the people of the United Kingdom by maintaining monetary and financial stability. The provision of RTGS and CHAPS services directly supports our mission in three ways:

• By offering settlement accounts to eligible institutions, RTGS plays a vital role in the functioning of the UK economy through supporting safe and efficient settlement of obligations in central bank money across a wide range of payment systems.
• CHAPS provides a safe and efficient system for individual high value, and often time-critical, payments to settle. The Bank also reviews the end-to-end risk management for CHAPS with the objective of reducing risks to financial stability.
• Reserves held in reserves accounts in RTGS – under the Bank’s Sterling Monetary Framework – are remunerated at Bank Rate. RTGS therefore acts as the platform through which monetary policy decisions are implemented.

Further information on RTGS and CHAPS can be found on the Bank’s website, including: A brief introduction to RTGS and CHAPS.

Governance

RTGS/CHAPS Board

The RTGS/CHAPS Board is chaired by the Bank’s Deputy Governor for Markets and Banking and is comprised of Bank executives and four independent members. It is responsible for setting the strategy for our management and operation of the RTGS and CHAPS services, consistent with the Bank's mission. It is also accountable for the end-to-end risk management of the CHAPS system.

To ensure the effective governance of the RTGS and CHAPS services, reviews of the Board’s effectiveness are undertaken and identified improvements are implemented.

The RTGS/CHAPS Board operates within the Bank’s wider governance structure, reporting to the Governor and the Bank’s Court of Directors. The RTGS/CHAPS Board’s full responsibilities, including those of the Board Risk Committee, are published on the Bank’s website.

RTGS Renewal governance

We are approaching the end of the multi-year RTGS Renewal Programme. In June 2023, we completed a major change with the adoption of ISO 20022 for CHAPS payments. The next major change will be the delivery of a new core ledger and settlement engine for RTGS, known as Transition State 3 (TS3). Through the RTGS Renewal Programme, our objectives are to increase resilience, competition and innovation within the payments landscape.

• We are delivering a resilient, flexible and innovative system for the UK to meet the challenges posed by a rapidly changing landscape, including issues flagged in our strategic planning and horizon scanning rounds.
• Our renewed RTGS and CHAPS services will support competition and innovation in the wider banking and payments markets while ensuring and enhancing monetary and financial stability.

The Renewal Executive Board is a committee of the Bank responsible for overseeing the overall scope, delivery and financial management (within an overall budget determined by Court) of the RTGS Renewal Programme. The Renewal Executive Board is responsible for taking the final go-live decisions for the various implementation stages of the renewed RTGS system, including the TS3 go-live decision. The Terms of Reference for the Renewal Executive Board are published on the Bank’s website.

Strategy setting

We currently have four key strategic themes, which together with supporting value for money, guide how we provide our services.

• Safe and resilient, delivering world leading standards in the face of evolving threats through the use of the full set of tools and resources available to the Bank.
• Well run, providing efficient and cost-effective services to users.
• Responsive to user voice and changes in the wider environment.
• Renewed to ensure that safe and resilient settlement in central bank money remains at the core of a rapidly changing payments landscape.

We prioritise safe and resilient and well run as these are preconditions for the remaining themes of responsive and renewed. Our strategy is informed by consideration of relevant external developments through a structured horizon scanning and emerging risk process.

We are reviewing our future strategy and strategic themes in light of the RTGS Renewal Programme coming to a close with the delivery of TS3, our new core ledger and settlement engine.

Transparency

The Bank is committed to providing users and the wider public with an appropriate level of information of how the Bank operates, and develops, the RTGS and CHAPS services. We provide this through several routes including: this Annual Report; publication of our self-assessment of RTGS and CHAPS against the Principles for Financial Market Infrastructures; making our annual ISAE 3402 audit available securely to our users; publication of the tariffs for RTGS/CHAPS as well as the provision of more detailed costing information to fee-payers; and publishing other updates, including following discussion and consultation papers.

We seek input from our users and the wider public through a range of mechanisms such as surveys, working groups and forums, industry discussion and consultation papers.

We also publish data on operational availability and the volumes and values processed through RTGS and CHAPS.

Risk management

A Bank-wide risk management framework is complemented by a local framework specific to RTGS and CHAPS. The RTGS/CHAPS Board Risk Committee, chaired by an independent member, has delegated authority for a range of matters relating to risk management including: the RTGS/CHAPS risk management framework; and RTGS/CHAPS risk tolerances – consistent with the overall Bank risk tolerance.

We have identified three risk domains: internal; third-party service providers; and service users – which together define the scope of risk that we manage for the RTGS and CHAPS services. The Bank seeks to mitigate risks to a low level and maintains a robust control environment and risk culture that supports this. There is a low tolerance for operational risks.

Further information covering our approach for managing risks associated with the RTGS and CHAPS services is set out in our regular self-assessment against the Principles for Financial Market Infrastructures. We provide further details below of our role as the end-to-end risk manager for CHAPS.

End-to-end risk management for the CHAPS payment system

As the end-to-end risk manager for the CHAPS system, we seek to ensure that the end-to-end flow of CHAPS payments is safe, secure and stable.

The Bank does not directly manage all risks across the end-to-end CHAPS system. Our approach is for certain risks to be managed where this can be done most effectively. We therefore co-ordinate with others (including CHAPS Direct Participants and critical service providers such as Swift) to seek assurance that the CHAPS payment system, taken as a whole, is operating within our risk tolerance, as set by the RTGS/CHAPS Board.

The CHAPS Reference Manual sets out the rules that CHAPS Direct Participants must meet. The Bank undertakes assurance of CHAPS Direct Participants against these rules before permitting access to CHAPS and on an ongoing basis.

2: Safe and resilient

Weaknesses in security or operations at any point in the payment chain could threaten stability and trust in the whole system. It is therefore vital to have a holistic view of CHAPS as a network – spanning the Bank’s own RTGS infrastructure in addition to that operated by CHAPS Direct Participants – through which financial or operational risk can be transmitted. We can take this holistic view over the end-to-end risk management of CHAPS, drawing on the tools and resources available to the Bank to assess and manage risks.

Enhancing risk management

Given the criticality of RTGS and CHAPS to financial stability, having an effective approach to risk management is vital. Our approach is set out in the RTGS/CHAPS risk management framework.

We have continued to enhance our approach. Recent activities have included:

• Carrying out an assessment of identified tail risks, which will be repeated annually.
• Considering the risks that the changes resulting from delivery of the RTGS Renewal Programme could pose.
• Designing and delivering risk culture training for business, risk and technology staff.
• Oversight of actions identified as part of post incident reviews.
• Progressing work to rebalance responsibilities across the three lines of defence – particularly transfers from the first to the second line.
• Undertaking a gap analysis against the Bank’s supervisory statement on third party risk management and progressing work to close the gaps identified as well as developing a dedicated third-party risk management framework for RTGS/CHAPS.

Cyber

It is important that the Bank continues to develop the resilience of RTGS and CHAPS to cyber threats. Cyber resilience has been a continual focus in the development, and now live operation, of the renewed RTGS service.

Cyber resilience underpins our cyber security efforts for RTGS and CHAPS, enabling us to anticipate, withstand, recover from, and adapt to cyber attacks, thereby protecting and minimising the impact to our RTGS and CHAPS services.

Layered and overlapping security controls provide multiple safeguards against security vulnerabilities and threats. The Bank promotes and nurtures a strong security culture given the crucial role of the Bank’s staff in protecting the Bank’s assets. The Bank operates three lines of defence including dedicated first, second and third line teams that work together to identify, assess, mitigate, and monitor cyber risks. Cyber incident response, containment, and recovery capabilities are subject to regular testing throughout the year.

We have well-established collaborative engagement with the UK’s National Cyber Security Centre, as well as intelligence gathering and sharing arrangements with other government bodies and the banking and payments industry.

While our foundations are strong, the ever-evolving cyber threat landscape necessitates that we keep pace by continuously assessing and enhancing our defence capabilities. The Bank-wide cyber security strategy outlines how we will deliver a sustainable and resilient capability over the next few years, tackling the dual challenges of an evolving cyber threat and transformations to the technology that we need to protect – including new technology introduced through the RTGS Renewal Programme. The new RTGS infrastructure has uplifted our security capabilities, allowing us to achieve our vision for the RTGS Renewal Programme and position ourselves to deliver the future roadmap for RTGS safely and securely.

Assurance over CHAPS Direct Participants

As the operator of CHAPS, a systemically important payment system, we are responsible for setting rules and standards for CHAPS Direct Participants – as well as seeking assurance over their compliance with those rules and standards. This serves to mitigate against the financial and operational risks that might impact the smooth flow of CHAPS payments.

One of the objectives of the RTGS Renewal Programme is to increase the number of CHAPS Direct Participants in the future. Wider access helps to promote competition and innovation in payment services – see Access under the well run strategic theme. Onboarding will also be technically simpler which will facilitate quicker and more frequent onboarding due to increased automation. Assurance must be proportionate, accommodate a greater diversity of scale and business model, and be responsive to key risks. To support these objectives, we are updating the categorisation model for CHAPS Direct Participants, including revisiting which requirements apply to which category.

3: Well run

We will continue to deliver safe and reliable day-to-day operations and to provide efficient and cost-effective services to users, including considering any changes that are required to support the transition to the renewed RTGS service as well as to safely retire the current RTGS infrastructure.

Access

We continue to refine the contractual, policy, operational and assurance arrangements for RTGS and CHAPS to ensure that they continue to promote efficiency, innovation, and competition in the changing payments landscape where that can be done without impairing monetary and financial stability.

Onboarding

There are now more than 70 organisations using RTGS to settle directly in one or more payment systems. Between March 2023 and February 2024, we onboarded seven new settlement participants across Bacs, Faster Payments, PEXA and Visa.

Each major milestone introduced as part of the RTGS Renewal Programme requires technical preparation, including change freezes to the current RTGS infrastructure to safely deliver the necessary changes. For both CHAPS and the retail payment systems, the next onboarding slots will be available in 2025.

The new RTGS system will be able to accommodate a substantially higher number of account holders and offer streamlined and simplified onboarding. CHAPS Direct Participants can now use a test simulator to support testing; this was delivered as part of TS2.1 of the RTGS Renewal Programme.

Omnibus accounts

In April 2021, we announced a policy to enable a new type of account – an omnibus account – for regulated payment system operators. An omnibus account holds a pool of participant funds that can be used to fund settlement on the payment system operators’ ledger. The funds constitute reserves with the central bank based on defined legal arrangements put in place by the payment system operator to hold the funds in trust on behalf of the participants. Funding movements to and from the omnibus account are via CHAPS. This creates options for reserves-backed arrangements to support new and innovative financial market infrastructures.

The first omnibus account holder, Fnality, is now live as a CHAPS Direct Participant; this supports its £FnPS system – currently in pilot mode involving Banco Santander, Lloyds, and UBS (and live proving within CHAPS) – with the first payments made in December 2023. We have recently received a second omnibus account application.

Further access enhancements

In February 2024, we published a discussion paper on reviewing RTGS access policies. Three factors motivated the review: promoting greater access to central bank money settlement to support monetary and financial stability in a changing payments landscape; using the increased capacity and functionality in the renewed RTGS service; and to fulfil the Bank’s commitment under the G20 roadmap to enhance cross-border payments.

We identified four areas for potential enhancement:

• Strengthening the assessment and ongoing assurance processes for non-bank payment service providers seeking access to RTGS.
• Helping foreign banks to better understand the benefits and costs to direct access to RTGS to encourage greater direct participation and to enhance the settlement of cross-border payments.
• Potentially introducing a new assurance regime for FMIs that settle in RTGS and a discretionary mobilisation phase to make it easier for start-up or less mature FMIs to benefit from the advantages of settlement in central bank money without compromising our risk requirements.
• Reviewing the CHAPS value threshold of 2% and the factors considered for withdrawing consent when an indirect participant exceeds it, as a means to further enhance resilience in CHAPS by reducing risks where a significant proportion of payments are processed by CHAPS sponsor banks.

The Bank’s contractual arrangements are being updated as part of the transition to TS3, the new core ledger and settlement engine for RTGS. This will ensure that our arrangements continue to support our monetary and financial stability objectives as well as supporting innovation in light of future changes to RTGS. Provisions will be included to allow us to be more flexible in adapting RTGS to support a changing payments landscape. Our updates also include strengthening the arrangements for non-bank payment service providers, including with the FCA.

Consistent with the discussion paper on reviewing RTGS access policies, we have been experimenting with the use of live proving and mobilisation stages for organisations seeking RTGS access. We will draw on lessons from this to implement new optional stage gates going forward. Subject to mutual agreement, these gates will allow organisations earlier access to RTGS services than might otherwise be the case. That access would still be subject to proportionate risk mitigation, allowing the organisation to prove their payments model alongside bringing themselves within the Bank’s risk tolerance for the provision of RTGS services.

Organisational structure and business aims

The RTGS Renewal Programme has always been broader than technical change. To better support our vision, we made further changes in February 2024 to how we organise our teams. Our business functions are broadly split into policy and strategy and change and operations. As part of these changes we also created a new team with a dedicated focus on data, we are restructuring how we manage technical change, and several product owners will join to support our product-centric approach. Revisions to how we prioritise and deliver technical change reflects more modular technology and that the frequency of change to RTGS will be higher and delivered on an agile basis.

We also reframed many of our operational and technical roles: the renewed RTGS system will require less manual processing than the current system; and technology build and run staff are embedded alongside operational staff.

RTGS/CHAPS tariff

The cost of running RTGS and CHAPS is recovered by the Bank from industry, via the RTGS and CHAPS tariffs. Given the renewal of RTGS and wider changes to the payments landscape, we have designed a new framework for the RTGS and CHAPS tariffs. This is based on a set of principles (proportionate; simple and efficient; stable and predictable; supportive of competition and access; and supportive of the Bank’s monetary and financial stability mission and RTGS/CHAPS policy objectives) and was informed through external consultation during 2022 and early 2023.

The revised tariff framework aims to introduce better alignment of tariffs with the benefits of settlement in central bank money, using a combination of volume and value-based fees. We expect to implement the new framework once the new core ledger and settlement engine for RTGS is introduced. We have shared further details with payment system operators and RTGS account holders, including CHAPS Direct Participants.

Operational resilience

Strong operational resilience of RTGS and CHAPS is important to help avoid or manage major operational disruption, which could impact financial stability. As such, further enhancing the operational resilience of the RTGS and CHAPS services is one of our key priorities.

MIRS, the Market Infrastructure Resiliency Service provided by SWIFT, is a contingency solution for RTGS (including CHAPS settlement) that is intended to address a range of scenarios including a dual site failure of RTGS. The service is geographically remote from the Bank’s main RTGS infrastructure and is technologically independent.

Enhancing frameworks for operational resilience and exercising

In April 2022, we adopted a new operational resilience framework in line with the regulatory policy on operational resilience from the UK financial authorities – we have reviewed this annually. We are continuing to embed our operational resilience framework, including through maintaining and updating the asset mapping for the RTGS and CHAPS services. This covers:

• Our important business services and associated impact tolerances (see Box B: Important business services including for addition of a new impact tolerance for non-critical CHAPS payments).
• Our approach for asset mapping, where we have explored enhanced tooling and updated the asset mapping as we have moved through successive stages of the RTGS Renewal Programme.
• Our approach for scenario testing for which further information is provided below.

Scenario testing is designed to understand the various extreme but plausible scenarios where our impact tolerances might not be met, and to drive future investment.

• We are continuing to refine our scenario testing programme, integrating it with other testing activity (including the regular scripted testing) as part of the delivery for the RTGS Renewal Programme.
• We regularly test MIRS to ensure we continue to improve familiarity with, and confidence in, MIRS. The most recent MIRS live test was completed in April 2024.
• We are engaged in a wide range of industry activities to exercise resilience – a UK Finance-coordinated event around CREST disruption; Pay.UK’s Payments Industry Resilience Forum, and planning for SIMEX24, a sector wider simulation exercise.

The current MIRS live test takes place on production systems during a CHAPS extension that we call for that purpose ie after 6pm. We are considering how to further evolve our live testing of MIRS and we will aim to undertake testing that covers more of the live operational day.

4: Responsive

We aim to be responsive to RTGS and CHAPS users, and understanding their views of changes in the wider payments environment is crucial in delivering a robust and resilient service. We gather information from a wide range of sources and feed them into our decision-making, including input to Board-level discussion.

Stakeholder engagement

We undertake a broad programme of engagement with external stakeholders. Our two strategic forums are the Strategic Advisory Forum and the Senior Sponsors’ Body. The latter focused on the RTGS Renewal Programme and, given we are approaching the end of the Programme, held its last meeting on 30 May 2024. We also engage bilaterally with senior industry contacts and through trade associations. We will continue to engage domestically and internationally with our counterparts operating other RTGS and high-value payment systems on topics including ISO 20022, retail fraud and cross-border payments.

We have consulted stakeholders on a variety of issues relating to the RTGS and CHAPS live services as well as the RTGS Renewal Programme and beyond. We have also held a series of industry events to support the RTGS Renewal Programme including briefings and seminars.

To support the design and delivery of features under the future roadmap for RTGS, we have worked closely with the industry as part of co-creation. We have held a series of focused thematic engagement groups to gather input into high-level design and business case development of the priority features. We are also drawing on bilateral engagement and surveys and, in due course, consultations.

Horizon scanning

We undertake horizon scanning to identify and assess developments in the payments landscape from the perspective of understanding the opportunities and/or risks that these developments may pose to the RTGS and CHAPS services. Horizon scanning informs our strategy setting and development for the RTGS and CHAPS services.

We gather and analyse information on developments drawing on a network of experts across the Bank, as well external stakeholders including private sector organisations such as Pay.UK and UK Finance as well as the financial authorities including the Payment Systems Regulator, and the Financial Conduct Authority.

In 2023/24, we explored a range of developments including artificial intelligence and large language models; open banking; Digital IDs, the New Payments Architecture (NPA) for retail payments, retail stablecoins and central bank digital currencies (CBDCs).

Retail fraud in CHAPS

The Payment Systems Regulator has required Pay.UK, as the operator of Faster Payments, to implement rules to require participants in Faster Payments to reimburse consumers for losses due to authorised push payment fraud.

The Bank, as the operator of the CHAPS payment system, is committed to achieving comparable outcomes of consumer protection for consumers making retail CHAPS payments relative to if the payment had been made using Faster Payments. The arrangements for CHAPS reflect the unique characteristics of CHAPS as a wholesale payment system. The approach for CHAPS will only cover participants who process CHAPS payments for UK retail use. See Box C: Retail fraud in CHAPS for further information.

We are working with the Payment Systems Regulator and CHAPS Direct Participants, as well as other key stakeholders, to deliver this for 7 October 2024. The approach will be through a combination of directions from the Payment Systems Regulator to CHAPS participants as well as changes to the CHAPS rulebook that set the same upper limit of £85,000 as Faster Payments.

Enhancing cross-border payments

We have continued to input extensively to international efforts led by the Financial Stability Board, the BIS Committee on Payments and Market Infrastructures, and other relevant international organisations and standard-setters to enhance cross border-payments via the G20 Roadmap. This work is structured around 15 priority actions, which collectively aim to address the challenges of high costs, low speed, limited access and insufficient transparency. The Financial Stability Board has developed an ambitious set of targets for improving cross-border payments by 2027.

We are taking an active role in progressing delivery against the 15 priority actions. The Bank ‘s Executive Director for Payments, Victoria Cleland, chairs the Financial Stability Board’s Cross Border Payments Coordination Delivery Group; the Bank also chairs an expert panel on harmonisation of API protocols.

By reducing manual intervention and facilitating more timely data exchange across the payment chain, APIs can facilitate more efficient and faster cross-border payments. APIs are already successfully used, among other things, for account validation, compliance screening, message repairs and investigations. Supporting greater harmonisation of API protocols can help to avoid fragmented approaches between jurisdictions and maximise the potential benefits arising from their use.

During 2024, there were a number of important consultations on measures to enhance cross-border payments.

• The Financial Action Task Force issued a consultation in February on proposals to update its Recommendation 16 on Payment Transparency, which includes important provisions to help enhance cross-border payments.
• In July, the Financial Stability Board issued consultations on recommendations to address frictions in data flows related to cross-border payments and to promote a level playing field between bank and non-bank payment service providers.

We have continued to advocate for specific measures proposed under the G20 Roadmap Priority Actions including, wider uptake and use of Legal Entity Identifiers. Legal Entity Identifiers are 20-character standardised alpha-numeric code that enables unambiguous identification of legal entities, linking to consistent reference information about an entity and its organisation structure. Wider uptake of Legal Entity Identifiers could enable a range of enhancements in cross-border payment processes.

A number of our other workstreams can contribute to enhancing cross-border payments.

• Our adoption of ISO 20022 improves payment system interoperability, reducing processing costs for payment service providers and aligning payment rails across jurisdictions.
• Longer and better aligned settlement hours could speed up cross-border payments, reduce settlement risk and simplify liquidity management.
• Increased direct access to payment systems can speed up payments and reduce costs through reducing the number of intermediaries a payment goes through.

Adoption of ISO 20022

Since the migration to ISO 20022 in June 2023, all CHAPS Direct Participants must be able to receive enhanced ISO 20022 payment messages. The Bank has made the ISO schemas and technical guidance available on MyStandards.

The data sent in CHAPS payments must now contain, at minimum, the requirements and rules for the existing MT message formats; sending enhanced data is optional. However, we have encouraged Direct Participants to send enhanced data (ie above that required or supported in existing MT message formats) where possible, considering relevant international guidance.

We have a working group of CHAPS Direct Participants focused on enhanced data. It acts as an advisory forum to the Bank to support a cohesive implementation of ISO 20022 enhanced data for CHAPS payments. We are mandating use of Purpose Codes and Legal Entity Identifiers for CHAPS payments between financial institutions as well as the use of Purpose Codes for property transactions.

We expect to mandate the use of structured addresses and structured remittance data for all CHAPS payments when SWIFT retires MT payment messages – expected in November 2025.

For further information on the phased adoption of ISO 20022 see Box D: ISO 20022 for RTGS and CHAPS.

Benefits of ISO 20022 adoption

ISO 20022 is an established international financial services messaging standard that will bring significant benefits to the UK’s payments industry. This includes greater resilience, security, user experience and innovation. It will also facilitate greater competition in payments.

The adoption of the ISO 20022 messaging standard for CHAPS and aspects of RTGS will mean the availability of richer, enhanced and more structured data in UK payments. Implementation of the emerging international standard will increase the efficiency of payments by reducing manual interventions, it will improve resilience and security via enhanced means to identify suspicious transactions and will open up new opportunities for analytics, enhancing competition and innovation in the market.

Domestic coordination and wider adoption

A Standards Advisory Panel provides strategic advice to the Bank and Pay.UK on standard issues including facilitating a wider strategic direction for UK payment standards. The panel works closely with UK Finance’s Standards Engagement Forum.

To help realise the benefits of ISO 20022, we have worked with a wide range of external stakeholders to provide advice, guidance and information to CHAPS Direct Participants and the wider industry. This includes webinars and other materials that aim to inform, support and encourage native adoption.

We are seeking to catalyse the development of a standard approach to best practice for using ISO 20022 enhanced data for CHAPS payments. Market guidance has already been published for property payments and corporate payments. We have recently set up a Corporate Remittance Working Group with the support of UK Finance and the Association of Corporate Treasurers.

5: Renewed

We aim to ensure that safe and resilient settlement in central bank money remains at the core of the rapidly changing payments landscape. We are doing this through: our multi-year programme to renew RTGS, which will culminate in the launch of the new core ledger and the settlement engine; and our future roadmap for RTGS – a programme of work to design further strategic enhancements as part of continuous RTGS service evolution.

RTGS Renewal Programme

The objectives of the RTGS Renewal Programme are to increase resilience, competition and innovation within the payments landscape. The renewed RTGS needs to meet user demand for simpler and more highly resilient pathways as well as building capacity and flexibility to interface with new payment technologies as adoption increases. Importantly, it will need to achieve this while demonstrating clear value for money.

In June 2023, we successfully migrated CHAPS payments to ISO 20022, the latest global financial messaging standard. This marked a significant milestone in the multi-year programme to renew RTGS.

Figure 1: RTGS Renewal vision

Transition State 3 (TS3)

In line with the vision above, the renewed RTGS service will deliver a more resilient, flexible and innovative sterling settlement system to support monetary and financial stability.

• A modular design for the new core ledger and settlement engine will support an increased cadence of change. It will enable future changes to be more efficient, less resource intensive and quicker.
• Strengthened resilience through increased perimeter security through the creation of a dedicated secure zone; improvements to dual-site functionality to reduce the impact of technical issues on service availability; and a trusted independent store of data to enhance the ability to recover from extreme loss of data integrity and cyber attacks.
• From TS3, RTGS will be operational near 23/7 although this will be for some administrative tasks, including a participant moving money between its own accounts. The current settlement windows will not change at this point. We are working with industry to assess the case for extending settlement hours as part of the future roadmap for RTGS.
• We are facilitating greater direct access to central bank money settlement for a wider range of participants to help reduce tiering risks and promote competition and innovation. RTGS will be able to accommodate a substantially higher number of account holders; offer streamlined and simplified onboarding; and we are putting in place a more proportionate, risk-based assurance model.

Functionality

The primary externally visible change for TS3 is a new core ledger and settlement engine for RTGS. This is the system that hold accounts and supports the transfer of funds between them.

• We are introducing a new and enhanced user interface for RTGS (BERTI, which stands for Bank of England Real Time Interface). This provides a simpler user access model than today and participants will largely be able to self-manage their users.
• We are moving fully to ISO 20022 messages – we introduced ISO 20022 for CHAPS payments in June 2023. From TS3, ISO 20022 will be used for all statements and various notifications delivered by Swift. Participants will also be able to request intraday statements. We will also adopt ISO 20022 for the net settlement instructions submitted to RTGS for settlement by several payment system operators.
• We will be able to accept CHAPS payments up to 10 days in advance, providing resilient benefits; we are enhancing the current Liquidity Saving Mechanism to seek to provide greater liquidity savings, lowering liquidity costs.
• We will deliver additional APIs; and the new reporting and analytics service will be opened up to all users, not just CHAPS Direct Participants. APIs provide richer access to payment and liquidity data, enabling smoother payments processing and more automated liquidity management.

Future Roadmap for RTGS

We are also progressing an ambitious programme – the Future Roadmap for RTGS – of continuous RTGS service evolution, which covers strategic change initiatives beyond the introduction of the new core ledger and settlement engine.

Our vision for the future roadmap is for RTGS to act as an open platform for the UK financial services industry and to facilitate safe and efficient settlement in central bank money. We aim to continuously evolve the service to make sure it meets the changing needs of the industry, in responding to immediate frictions and in making strategic enhancements.

We are currently prioritising design and business case analysis of new ways to connect to RTGS, a synchronisation interface, and extended RTGS settlement hours.

Close industry collaboration is at the heart of our work on the future roadmap for RTGS. Since May 2023, we have been working closely with industry as part of co-creation to define business cases and design of priority features before we decide which features to implement and in what order. This includes thematic engagement groups on each priority feature, consultations, surveys, bilateral meetings and other industry forums.

New ways to connect to RTGS

One of the categories of features we are prioritising is new ways to connect to RTGS to enhance its resilience in light of new services and evolving threats. This category also includes work to enhance settlement contingency.

We have continued to progress our policy and design work on introducing an additional (non-Swift based) channel to RTGS, including as part of co-creation with industry.

We issued a Request for Information which sought insight from potential suppliers of an additional network on what solution they could provide. We are also currently considering which of the RTGS services could, or should, use the additional channel.

Facilitating innovation in wholesale settlement

The future roadmap features of synchronisation and extended settlement hours are key to facilitate innovation in wholesale payments as mentioned in the Bank’s Discussion paper on innovations in money and payments and to support the G20 roadmap to enhance cross-border payments.

Synchronisation

We are working closely with industry to design a synchronised settlement interface to RTGS. If introduced, it would allow RTGS to interoperate with other ledgers (eg overseas RTGS and other assets such as land registries) and help interface with new payment technologies such as DLT to facilitate innovation.

Synchronisation could expand access to central bank money settlement by coordinating settlement in RTGS with the transfer of one or more other assets on another ledger.

This year, we have progressed the design and business case work on the synchronisation functionality. We have explored and consulted the industry via co-creation on key design topics such how earmarking of funds would work and what control options would be available to RTGS account holders.

We have also completed a proof of concept with the London BIS Innovation Hub called Project Meridian, which explored how synchronisation could work in practice. Project Meridian tested an end-to-end synchronised transaction between a digitised asset ledger and RTGS using APIs.

In June 2024, we announced Meridian FX – a collaboration between the BIS Innovation Hub London and Eurosystem centres, the ECB and the Bank of England. Building on the insights from the first phase of Project Meridian (focused on housing), this phase will explore how synchronisation can be applied to streamline foreign exchange (FX) transactions involving RTGS systems in multiple jurisdictions. The experiments will run through the end of 2024, with the final report due for release by spring 2025. The findings will feed into our ongoing work to design a synchronisation interface in RTGS that can support a wide range of use cases.

Extending RTGS settlement hours

From the implementation of the new core ledger and settlement engine for RTGS, RTGS will be technically capable of operating 23/7. While settlement will remain 12/5 initially, the system will be open longer for balance enquiries as well as transfers between a participant’s own accounts.

We published a discussion paper in February 2024 to seek views on a longer-term vision to extend settlement hours. Two of the biggest benefits noted by respondents were enhancing cross-border payments as well as liquidity management for retail payments. Staff and system costs were identified as the biggest cost impacts of an extension.

An initial response paper will be published shortly. It will summarise the industry feedback received and update on the Bank's progressing analysis - including our initial thinking on the future ambition for RTGS and CHAPS settlement hours. We will continue to engage with industry over the coming months to formulate a full proposal on future RTGS and CHAPS settlement hours, which we will outline in a consultation paper in 2025. After reviewing feedback on the proposal, the Bank will make a final decision in late 2025 or early 2026.

Annex

Key speeches

Speech title	Speaker	Date
Money and payments: a ‘black ships’ moment?	Jon Cunliffe	26 October 2023
ISO 20022: Reaping the benefits for the payments ecosystem	Victoria Cleland	31 October 2023
The Real Time Gross Settlement service: an open platform to drive innovation	Victoria Cleland	25 January 2024
Modernising the trains and rails of UK payments	Sarah Breeden	15 April 2024
Building operational resilience at the heart of the financial system	Sasha Mills	30 April 2024
The importance of central bank reserves	Andrew Bailey	21 May 2024
A multi-tool for cross-border payments: the power of Legal Entity Identifiers	Victoria Cleland	9 July 2024