Following engagement with the financial industry and users, the CHAPS and CREST settlement day will be extended from summer 2016 by one hour and forty minutes to 18:00. Customer cut-off times set by banks and other financial institutions may be earlier than this, the CHAPS deadline for customer payments will be 17:40. The Bank expects direct participants in CHAPS and CREST to pass on the full benefits to their customers. The Bank is enabling these changes by extending its own hours for operating its Real-Time Gross Settlement (RTGS) system.
In the lead up to implementation:
- Financial institutions will be preparing for and making changes to their staffing, budgets, IT systems, and legal documentation to enable changes to the service provided to customers.
- The Bank will be hosting a dedicated market wide forum which will include representatives from the financial industry as well as end-users.
- The Bank, working with other financial authorities, will determine how to monitor the delivery of benefits to end-users.
- This site will be updated on a regular basis with additional information, to support implementation, as it becomes available.
Implementation of the extended CHAPS and CREST settlement day is scheduled for 20 June 2016.
Benefits identified include:
- enhanced risk management for financial market infrastructures – market participants will be able to make CHAPS payments later in the day to fulfil sterling cash obligations;
- increased flexibility in balance sheet management – financial market participants and corporates will be able to undertake some funding and investment decisions later in the typical business day of corporates; and
- greater flexibility for end-users – the settlement day will be aligned more closely with the typical business day, allowing corporates to make high-value transactions later in their business day such as paying suppliers; and for conveyancers to complete house purchases using CHAPS later.
Developing the policy
The decision to extend the settlement day follows a review instigated in early 2014 by the Bank. During the course of 2014, the Bank gathered input from a range of stakeholders including the system operators that settle in RTGS, financial institutions that hold accounts in RTGS and representatives of key stakeholders groups.
A paper was issued to relevant stakeholders in November 2014 which set out the Bank’s proposal to operate RTGS later each business day in order to enable a longer CHAPS and CREST settlement day. In response to a request from the Bank, operators of the CHAPS and CREST systems (CHAPS Co and EUI) engaged with their users on the detail of how and when the changes could be implemented.
The Bank also concluded, in November 2014, that there were no strong drivers to settle retail systems’ net interbank obligations beyond the current RTGS hours. The retail systems do not require RTGS to be open for the clearing and exchange of customer instructions between direct participants and are therefore available to end-users.
Current and future summary CHAPS and CREST timetables
|Start of MT103/MT202 settlement
|Start of DvP/FOP settlement1,2
|End of equity DvP settlement
|End of gilt DvP settlement
|Start of DBV settlement3
|End of DBV settlement
|End of MT103 settlement
|End of MT202 settlement
||End of FOP settlement
|Latest end of contingency extension
||Latest end of contingency extension
1 DVP refers to Delivery-versus-Payment, where the simultaneous delivery of securities occurs against the payment of funds within a securities settlement system.
2 FOP refers to free of payment, a delivery of securities which is not linked to a corresponding transfer of funds.
3 DBV refers to Delivery-by-Value, whereby a member may borrow or lend cash against collateral in CREST for an agreed term. The system selects and delivers an agreed value of collateral securities meeting pre-determined criteria against cash from the account of the cash borrower to the account of the cash lender and reverses the transaction at the end of the agreed term.