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Bank of England announces rebuild of RTGS

The Bank of England has outlined its plans for a more accessible, resilient and interoperable real time settlement system.

The Bank of England has published a consultation paper, inviting comments on proposals for a comprehensive update of the UK’s real time gross settlement system (RTGS).

The RTGS is the central platform which performs fund transfers from one bank to another in UK sterling. Its reserves are the vault which provides monetary and financial stability in the UK with a stock of £300 billion in ‘cash’ which exists purely electronically. The RTGS has existed in its current form since 1996 and, as the system’s 20th birthday approached, the Bank recognised that it was due for modernisation in the light of the rapid and fundamental change now occurring in the payments market.

The consultation paper acknowledges that the capacity of the current RTGS to respond to change is limited: its current operation could impede innovation and competition and increase the risk of service quality diminishing within the near future. The aim of the revamp, according to Andrew Hauser, Executive Director for Banking, Payments and Financial Resilience is to keep the UK payments infrastructure at the leading edge globally whilst underscoring our commitment to maintaining stability and confidence

The attributes of a new-look RTGS should be five-fold:

  • It must be open to non-bank payment service providers (subject to safeguards) to respond to the changing structure of the financial system. This would allow it, in a timely way, to cope with the new payment providers which will emerge following the implementation of the PSD II in January 2018.
  • It should be able to interoperate directly with a wider range of payment services to provide real-time 24 hour operation across those systems. This would deal with the present day problem that different payment types travel through different systems that do not speak to each other, causing delays, extra costs and a lack of convergence.
  • It should be able to interface with a wide range of new technologies and so allow services to emerge which, using rich data tools, provide customers with far greater information about their finances. The bank clearly has an eye on distributed ledger as one of these technologies but states that further work is required to bring this technology to a sufficient level of maturity.
  • The new system must be highly resilient to cyber-attack and other fraud. Together with great service improvements, technologies can bring heightened risks of fraud. The new system, therefore, is to be designed with data integrity at its heart, with systems to provide an extra messaging channel and to reduce the vulnerability of smaller-sized providers to outrages at their agent bank.
  • Lastly, the system should be built to be flexible enough to cope with the future evolution of regulatory and monetary policy e.g. further expansion of direct participation, improvements in data and reporting tools and also flexibility for the bank in its monetary policy options.

Work on the new system is to begin in 2017, with a view to completion in 2020. Responses to the Bank’s consultation should be submitted by 7 November 2016. The Bank will also be holding industry briefings on 4 and 11 October - see BofE website for details.

The BofE specifically notes that a key priority for its work will be coordination with the other initiatives on payments, PSDII and open banking APIs. These are all issues techUK is working on in its financial services programme. For further information, please contact

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