Payment and settlement

The Bank of England acts as a settlement agent to enable financial institutions to make payments to each other. The Bank also operates CHAPS - the UK's high value payment system.


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. We are currently in the definition phase of a renewal programme to deliver the next generation of our settlement service, which supports our role as settlement agent.

Find out more about what payment systems are and how they work:

Payment Systems Regulator

What is a payment system?

Payment systems are a set of common rules and procedures, which 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.

Why is a settlement agent necessary?

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 requires an intermediary, known as a settlement agent, to use 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.

Our RTGS and CHAPS services

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 August 2019, we published our first combined Annual Report for RTGS and CHAPS as an important part of our commitment to transparency and accountability. The report covers from November 2017, when we took on responsibility for CHAPS, to the end of February 2019. 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. 

Governance of RTGS and CHAPS

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 impact the resilience of the payment system. 

For both RTGS and CHAPS, the Board is responsible for:

  • setting strategic aims
  • setting risk tolerance
  • reviewing the risk management frameworks and overseeing the risk profiles and risk mitigation
  • reviewing the audit programme
  • reviewing business continuity and crisis management

The Board works closely with the RTGS Renewal Committee – the sub-committee of Court responsible for overseeing the delivery of the RTGS Renewal Programme. The Board oversees the Renewal Programme’s engagement with the industry and the industry’s readiness to implement the changes required by the Programme. The Board advises the RTGS Renewal Committee on implications for the scope of the Programme arising from industry engagement.

The Board is chaired by the Bank’s Deputy Governor for Markets and Banking, Dave Ramsden. Its membership includes four independent, external appointees, in order to provide additional challenge, broader experience and insight into the Board’s decision-making.

  • The members are:

    • Chair: Dave Ramsden, Deputy Governor for Markets and Banking, and Senior Manager responsible for the implementation of strategic changes and the day-to-day operation of the RTGS and CHAPS Services under our internal application of the Senior Managers Regime
    • Sandra ‘Sandy’ Boss (independent member)
    • Kevin Brown (independent member)
    • Lazaro Campos (independent member)
    • Victoria Cleland, Executive Director for Banking, Payments and Innovation
    • Rob Elsey, Executive Director for Technology
    • Charlotte Gerken, Director for Cross-cutting and Insurance Policy
    • Noel Harwerth (independent member)
    • Andrew Hauser, Executive Director for Markets
    • Michael Jones, Head of Market Services (the area that operates RTGS and CHAPS)

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 is comprised of four board members: Sandra ‘Sandy’ Boss (Chair), Charlotte Gerken, Kevin Brown and Noel Harwerth.

The Board takes appropriate input from RTGS and CHAPS users, including through the Strategic Advisory Forum. 

The career experience of the independent members can raise the possibility that individuals may have an interest which could give rise to a potential conflict. The Board has robust procedures in place to manage such conflicts to ensure the integrity and impartiality of the Board’s decision-making.

RTGS and CHAPS risk assessment

In December 2018, we published an updated self-assessment of the RTGS and CHAPS services against the CPMI-IOSCO Principles for Financial Market Infrastructures, with point of assessment 30 June 2018. This marked the first integrated self-assessment covering RTGS and CHAPS following the Bank taking on responsibility for delivery of CHAPS. We plan to update the self-assessment broadly annually.

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 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 seventeen principles which apply to RTGS and CHAPS, we ‘observe’ fifteen and ‘broadly observe’ the other two (governance, and risk management). Please note, a number of the principles only apply to RTGS or CHAPS, not both. 

While the ratings are the same as the 2017 self-assessment for RTGS, there has been considerable progress made across both governance and risk management. Enhancements have been implemented as part of the development of combined governance and risk management arrangements for RTGS and CHAPS following the transfer of responsibility for CHAPS to us in November 2017. And we have continued to make enhancements after the point of assessment.  

We complete the self-assessment as operator of the RTGS and CHAPS services and not in our capacity as supervisor of financial market infrastructures or banks. 

Resilience of the RTGS service

The RTGS service needs to be extremely 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.

Changes to the RTGS service are carefully considered and tested, because of the potential for impact on our mission of maintaining monetary and financial stability. We engage on 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 which 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’.

Settlement services

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, 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.

Real-time gross settlement

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.

Delivery versus payment (DvP)

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.

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.

Deferred net settlement

Accounts in RTGS are used to settle the net obligations arising from customer transactions for the main sterling retail payment systems: Bacs, Cheque & Credit, Faster Payments, LINK and Visa Europe.

  • Bacs

    Bacs processes direct debits (for example utility bills) and direct credits (for example salaries and benefits) across a three-day cycle. Net settlement takes place in the RTGS service once a business day.

    Faster Payments Service

    The Faster Payments Service provides near real-time payments 24/7. It is used for standing orders, internet and telephone banking payments. Net settlement takes place three times each business day in the RTGS system.

    Cheque & Credit Clearing Company

    The Cheque & Credit Clearing Company settles cheques and paper credits between financial institutions in the RTGS system on a three-day cycle. A new image-based clearing system launched in October 2017. It is prefunded and settles on a next-day basis once a business day.


    LINK is the UK’s ATM network, which settles in 24-hour cycles. Cycles that take place over weekends and public holidays all settle on a net basis in the RTGS system the following business day.

    Visa Europe

    Visa Europe is one of the card systems that settles in 24-hour cycles. Cycles that take place over weekends and public holidays all settle on a net basis in the RTGS system the following business day.

  • Each of these systems settles on a multilateral, deferred net basis. Under the deferred net settlement model, details of customer payments are first exchanged between banks in batches or individually. RTGS does not need to be open for this exchange of customer payments. Some payments are already available to customers 24/7, such as Faster Payments and card payments. Processing customer payments occurs in other infrastructure, outside RTGS.

    In the periods between settlement cycles, potential settlement risk can therefore arise between settlement members. Final settlement of the resulting net movements takes place in the RTGS system once or more each business day, depending on the payment system.

    Prefunded deferred net settlement

    Prefunding eliminates settlement risk in systems that use it by capping the maximum net obligations of settlement members in that system. Settlement members must hold funds in a cash collateral account in RTGS equal to that cap. If a settlement member defaults, the cash set aside can be used to complete settlement. This eliminates credit risk between settlement members.

    Deferred net settlement

    This is periodic batch settlement between settlement members on a multilateral net basis. A feature of this model is that settlement risk exists in these payment systems, mitigated by arrangements in the individual systems.

Accessing and using reserves and settlement accounts

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 and indirect access to the CHAPS system.

  • Reserves accounts are effectively sterling current accounts for participants in the Sterling Monetary Framework.

    Reserves account holders must be banks or building societies that are authorised to take deposits in the UK, investment firms authorised by the Prudential Regulation Authority, or central counterparties.

  • Settlement accounts can be used to settle obligations that arise from participating in payments systems in central bank money. Reserves accounts can also be used as settlement accounts.

    To be eligible for a settlement account, a firm must hold a reserves account or be a financial market infrastructure or an e-money or payment institution authorised in the UK by the Financial Conduct Authority. They must also meet the criteria for settlement participation in the relevant payment systems.

  • We have created special accounts for direct settlement participants to hold funds to cover the maximum possible net debit positions they could reach in certain retail payment systems.

    For institutions that hold a reserves account, these balances form part of their overall reserves balance and are remunerated at the same rate. Cash collateral accounts are also available to non-bank payment service providers.

    If a participant defaults, the cash set aside can be used to complete settlement. This eliminates credit risk between direct participants.

    These accounts are provided to direct settlement participants in Bacs and the Faster Payments Service and, from October 2017, the Image Clearing System for cheques.

Requirements for use of RTGS accounts

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.

Fees for RTGS settlement

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.

There are two groups of tariffs for RTGS settlement.

  1. The RTGS tariffs for CHAPS and CREST settlement which take the form of an annual participation fee for each participant (account holder) and a per-item fee reflecting volume settled in RTGS.
  2. For the retail systems, there is an annual charge per settlement participant. We do not charge a per-item fee.

Separate, additional, fees are set for CHAPS Direct Participant for CHAPS Scheme activities.

The retail payment system operators and the operator of CREST set their own, separate, tariffs and fees.

  • On 20 June 2016, the CHAPS and CREST settlement day was extended by an hour and 40 minutes to a new later end-of-day of 6pm. The CHAPS deadline for customer payments changed to 5.40pm, although customer cut-off times set by providers may be earlier. We enabled these changes by extending the operating hours of the RTGS service.

    Identified benefits included enhanced risk management for financial market infrastructures, increased flexibility in market participants’ balance sheet management, and greater flexibility for end users. The Bank and the operators of CHAPS and CREST completed a review in late-2017 covering whether the identified benefits have been enabled by providers and adopted by users. The review included engagement with relevant stakeholders and considered whether further actions are required to encourage the realisation of benefits.

    Greater flexibility for end-users

    CHAPS and CREST service providers have passed on later cut-off times to customers. In summer 2017, an average of 6.1% of CHAPS daily values and 5.3% of volumes settled in the additional 100 minutes. We found that the change in hours enabled more customer CHAPS payments instructed late in the business day to settle on the same day.

    Improved risk management

    Some CHAPS and CREST service providers thought the extension has enabled improvements to operational stability through reduced time-pressure, providing additional time to manage incidents and calmer end-of-day processing.

    Improved balance sheet management

    As expected, there have been no significant changes to the timings of sterling money market or foreign exchange flows (and few trades that would need to settle later the same day). Separately, FMI members now have greater flexibility over how they meet their financial commitments to the FMI.

    Next steps

    The Bank has no current plans for changes to the operating hours of RTGS. In building the next generation of our RTGS service, the Bank will build the technical capability to operate at close to 24 hours during business days for real-time gross settlement and potentially to carry out periodic net settlement of retail systems over the weekend. This will ensure that there is flexibility to change the operating hours in the future in light of user demand.

This page was last updated 01 August 2019
Was this page useful?
Add your details...