The Bank of England has set a provisional 2020 deadline for the completion of a wholesale revamp of the UK's real-time gross settlement (RTGS) system, with the aim of improving stability and increasing the scope for electronic settlement in central bank money.
The UK's central bank has issued a consultation paper laying out its blueprint for modernisation of the 20-year old system following extensive discussions with market participants.
The review, led by deputy governor Minouche Shafik - who quit the bank earlier this week for a tenured position at the London School of Economics - highlights five key requirements for the next generation of RTGS system. These are that the service must:
- Be capable of responding to the changing structure of the financial system.
- Recognise that payment system users want simpler and more resilient pathways for their payments.
- Be capable of interfacing with a range of new technologies being used in the private sector, including distributed ledgers, if/when they achieve critical mass.
- Remain highly resilient to the increasingly diverse range of threats to continuity of service.
- Have the capacity to support the future evolution of regulatory and monetary policy tools.
To meet these demands, the Bank says it will have to undertake a comprehensive rebuild of the current technology platform, the costs of which will recouped from future users by a rise in tariffs.
A timetable for delivery of the new service will be published in 2017, with the provisional aim of completion in 2020, says Andrew Hauser, executive director for banking, payments and financial resilience.
“The world of payments is changing rapidly, and central banks need to keep pace if we are to deliver our mission of monetary and financial stability effectively in the years to come, whilst also enabling innovation and competition where we can," he says. "Taken together with prospective reforms to retail payments underway in the industry, these changes are designed to keep the UK payments infrastructure at the leading edge globally whilst underscoring our commitment to maintaining stability and confidence.”