1: Executive summary
Expanding RTGS access can deliver financial stability benefits while enabling greater competition and innovation in payments. Access to central bank money – the safest form of money – eliminates settlement and counterparty risk, promoting greater trust among market participants and overall market stability. Providing efficient access to more firms, and different types of firms (such as non-bank payment service providers (NBPSPs)) helps to foster diverse payment arrangements and increases competition in the provision of payment services.
Balancing the benefits of expanded RTGS access against potential risk implications remains a key priority to us. Providing access to payment firms that are not operationally and financially sound could affect the wider payments ecosystem. As such, it is important for us to continually assess and evolve our RTGS access policies to reflect different types of firms seeking access, and the functionality they need to offer resilient payment services to end users.
In February 2024, we published a discussion paper on reviewing access to RTGS accounts for settlement. We sought feedback on four priority areas to further improve access to settlement in central bank money, remove unwarranted barriers, and realise the capabilities and benefits of the renewed RTGS service.
- Priority 1: Enhancing the Bank/FCA process for consideration of NBPSPs seeking access to RTGS.
- Priority 2: Understanding demand of foreign banks for access to RTGS to support payment system settlement.
- Priority 3: Clarifying requirements for Financial Market Infrastructures (FMIs) to access RTGS.
- Priority 4: Review of the CHAPS value threshold.
We are very grateful to the industry for active engagement with our work. We received 20 formal responses to the discussion paper and heard additional views through informal industry sessions.
In response to the feedback on our discussion paper, we have undertaken several concrete actions to facilitate greater direct access to RTGS and will continue to make further enhancements. We have published:
- new RTGS rules which include eligibility criteria for use of RTGS accounts for settlement as well as settlement services;
- a revised RTGS access policy combining and updating our access policies for settlement and omnibus accounts; and
- a revised guide for NBPSPs seeking access to UK payment systems.
We are also updating website content to provide clear information to inform decisions between direct and indirect access, including for foreign banks.
A significant change we have made is the introduction of stage gates to enable applicants seeking access to RTGS, including new and small FMIs, to build internal capacity and confidence before launching their services externally. These changes are accompanied by tangible developments, with the move to a renewed RTGS service in the first half of 2025, further increasing capacity and easing the onboarding of new participants.
Looking ahead, we are exploring whether and on what terms we could offer NBPSPs settlement accounts (which are typically unremunerated) with safeguarding facilities.
We are also supporting efforts to reform the regulatory regime for NBPSPs to support enhanced access to RTGS. This includes working with HM Treasury and the Financial Conduct Authority (FCA) to identify and address unwarranted regulatory barriers to access and developing policies that support the participation of NBPSPs in UK payment systems.
We are keen to engage further with the industry to inform our policy work on addressing concentration risk within CHAPS and the appropriateness of the current threshold for direct access. In particular we wish to engage with CHAPS indirect participants to help us better understand their interest in, and potential obstacles to, seeking direct access.
To realise the benefits of access and meet the needs of a dynamic payments landscape, we have adopted a responsive approach to evolving our RTGS access policies. We were the first G7 central bank to offer RTGS access to NBPSPs. In 2021, we introduced omnibus accounts enabling the world’s first blockchain-based wholesale payment system settling in central bank money. Simplification of participant onboarding processes and requirements supported a doubling of CHAPS direct participants between 2008 and 2023.
These initiatives to enhance access are in line with the priorities identified in the G20 Roadmap for Enhancing Cross-Border Payments and our Future Roadmap for RTGS. Feedback on our discussion paper confirmed that we have a positive story to tell overall on RTGS access policies. Our current access policies represent a strong foundation, as the three types of firms set out in the international framework produced by the Committee on Payments and Market Infrastructures (CPMI) – NBPSPs, FMIs and foreign banks – already have access to RTGS accounts for settlement, reducing an important barrier to fast and efficient cross-border payments.
2: Summary of industry feedback
Our discussion paper encouraged respondents to think strategically about current and future access to RTGS across four priority areas:
- Priority 1: Enhancing the Bank/FCA process for consideration of NBPSPs seeking access to RTGS – this section outlined our considerations to strengthen assessment and ongoing compliance process for NBPSPs, to better assess their readiness to meet RTGS access requirements.
- Priority 2: Understanding demand of foreign banks for access to RTGS to support payment system settlement – this section set out the factors that can encourage or discourage foreign banks to use their reserves accounts for direct settlement purposes.
- Priority 3: Clarifying requirements for FMIs to access RTGS – this section set out our intention to prepare for increasing numbers of new FMIs seeking access to RTGS. We included considerations to introduce proportionate requirements and expectations for non-systemic FMIs, and a mobilisation stage for start-up FMIs.
- Priority 4: Review of the CHAPS value threshold – this section outlined our plans to review our approach to managing tiering risks in the CHAPS system, including by reviewing the current 2% value threshold.
We received 20 responses from a range of stakeholders, including banks, NBPSPs, trade associations, and other institutions which already have or are keen to obtain direct access to RTGS. Overall, respondents were supportive of the RTGS access review, calling it timely in supporting market developments. Respondents confirmed that the Bank has a positive story overall on RTGS access policies.
Feedback on the four priority areas
Respondents were in broad agreement with the four priority areas presented in the discussion paper. Key feedback included:
Priority 1: Enhancing the Bank/FCA process for NBPSPs seeking access to RTGS
Respondents agreed that a robust process is needed for assessment and monitoring purposes before access to RTGS is granted. They would appreciate further details explaining the basis of the proposed nine-month timeframe for applicants to demonstrate evidence of carrying out regulated activities before the FCA starts a full assessment to support access to RTGS. A few respondents suggested a 12-month timeframe or defining a set of criteria/thresholds to evidence the applicant’s preparedness instead of a time-based requirement.
Priority 2: Understanding foreign banks’ demand for access to RTGS to support payment system settlement
UK subsidiaries or branches of banks incorporated outside the UK are eligible to participate in the Sterling Monetary Framework. A reserves account must be held in RTGS which can then also be used to support direct settlement access to UK payment systems.
Most respondents on this priority noted that indirect access (through one or more sponsor banks) could cater for the different business needs and models of foreign banks. They highlighted that foreign banks may wish to minimise costs from their payments business while valuing the additional sterling services bundled into their correspondent relationships with their sponsors. This bundling can help them access and navigate the UK market in a cost-efficient way. They also highlighted the perceived high upfront operational and technological costs of meeting the regulatory requirements for direct participation as a potential barrier. Most respondents noted the migration to ISO 20022 and technological advancement could help lower the technical barriers.
To encourage foreign bank direct participation for settlement, most respondents suggested more transparent, easy to access and easy to understand information on the costs, benefits, choices, and process for accessing RTGS. They also suggested the Bank develop a guidance document or conduct workshops with clear information on the technological, operational, and supervisory requirements to help firms in their cost benefit analysis.
Priority 3: Clarifying requirements for FMIs
Respondents thought the access criteria for FMIs would benefit from periodic reassessment to cater for emerging market developments. They suggested that we consider the developments in new types of FMIs and digital assets, leveraging the findings from our parallel consultations on systemic stablecoins and digital securities sandbox.
Most respondents supported the proposal to develop a discretionary mobilisation stage that would allow FMIs to build internal capacity and confidence before launching their services externally. These respondents noted that some customers may only want to engage institutions which have been granted access to RTGS, hence requested timely and granular guidance on the incremental mobilisation stages to support internal planning for initial operations and subsequent expansions.
Priority 4: Review of the CHAPS value threshold
Most respondents who commented on this section shared concerns that reducing the current 2% value threshold above which CHAPS participants are expected to seek direct access, could impact the viability of their business models. They also noted potential operational risks if many firms were to be onboarded to RTGS at once. They recognised that a balanced onboarding strategy is needed to mitigate such concerns, with consideration given to the impact of significantly more direct participants on liquidity usage in CHAPS.
Other barriers to accessing RTGS
NBPSP respondents highlighted barriers to access stemming from limited safeguarding options for NBPSPs. NBPSPs can currently open a settlement account in RTGS but they are not allowed to open a reserves account or hold client funds overnight in RTGS for safeguarding purposes, and therefore must safeguard client funds with commercial banks. They highlighted that this could create a competitive disadvantage for NBPSPs as they compete with commercial banks. These respondents noted that there is a limited number of commercial banks willing to offer safeguarding services to NBPSPs, limiting competition and potentially creating concentration risk. To mitigate these risks and encourage competition, they suggested that we consider granting NBPSPs the option to safeguard funds overnight with the Bank through settlement accounts.
3: Our actions to enhance access
We are grateful to everyone who responded to the discussion paper. Having taken the feedback into account, we have progressed several actions.
Access to RTGS for NBPSPs
We co-operate closely with the FCA to assess an application from an NBPSP to open an RTGS settlement account. Since our discussion paper, Reviewing access to RTGS accounts for settlement, was published in February 2024 the Bank and the FCA have made three changes to the co-operation framework to enhance the assessment process:
- Requiring an applicant to undertake regulated activities for at least nine months before a full assessment. The FCA retains discretion to waive this requirement where appropriate.
- Undertaking a s166 assessment involving an independent review of the applicant’s activities, compliance, or controls prior to the FCA providing an objection or non-objection to the Bank granting RTGS access.
- Setting an expectation that fast-growing firms will be subject to enhanced supervision by the FCA when granted RTGS access.
These improvements deliver a more focussed and efficient process by ensuring compliance with regulatory requirements from the outset, helping to identify and address key risks at an earlier stage. As a result, NBPSPs will see a smoother onboarding process and less likelihood of replanning onboarding timelines.
We have also updated the guide for NBPSPs seeking access to RTGS to reflect these changes proposed under Priority 1.
Access to RTGS for foreign banks
We are updating our website to make information about access to RTGS and CHAPS easier to navigate for industry stakeholders, including foreign banks. This responds to feedback for more transparent, easy to access and easy to understand information on requirements and processes for accessing RTGS. We are consolidating key information onto a single page and adding more detail on the application process as well as costs and benefits of different methods of accessing RTGS. We will keep this content current as we make further changes to RTGS through our Future Roadmap that could lower the cost of direct access; and work with the Association of Foreign Banks to promote awareness of this information.
Publication of RTGS rules
We have published new RTGS rules to clearly set out our expectations for RTGS participants. These rules apply to all RTGS participants, including FMIs. The rules provide clarity for prospective and current RTGS users of the obligations in the RTGS and CHAPS contractual documentation. The rules provide more detail – in plain language – on our expectations and the actions we may take if we have concerns regarding an RTGS participant, in line with the RTGS legal documentation.
The rules set out the eligibility criteria for different types of accounts in RTGS and the provision of settlement services. A specific annex for payment systems covers transparency, change management, and engagement with settlement participants.
Publication of the RTGS access policy
We have published a revised RTGS access policy combining and updating our access policies for settlement and omnibus accounts. It sets out our access policies for settlement accounts, intraday liquidity, prefunding, and settlement services for payment system operators. It includes information about stage gates and our considerations in assessing applications for access to RTGS, including how we assess the balance of risks to financial stability and the Bank.
Introduction of stage gates
The revised RTGS access policy introduces live-proving and mobilisation stages for applicants seeking new, or expanded, access to RTGS, including new and small FMIs. Depending on the circumstances, an applicant may go through none, one or both of the stages. It allows applicants to test connectivity and grow their business in a controlled way subject to restrictions to mitigate risk.
This approach supports innovation and competition, while containing risks to our objectives. It ensures that new services have been rigorously tested and sufficient controls are in place prior to full-scale operation.
- Live proving helps applicants to demonstrate that their technology and processes can work in practice, validate their business models and meet assurance requirements. Entry into live proving is for institutions that are ready to operationalise and start testing their RTGS access model/services.
- Mobilisation allows an applicant to grow its business through RTGS safely while continuing work to meet any final participant assurance or regulatory requirements in parallel. Mobilisation is intended for institutions to demonstrate that they have implemented necessary controls, and these are sufficient to manage any risks we have identified.
Access to RTGS is likely to be restricted during these stages. For example, applicants that are in the early stages of their operation may face restrictions on how they can use their RTGS account while they demonstrate safe and robust operations. The number and nature of restrictions will be dependent on the level of protection needed to mitigate risk posed to us or our objectives. Restrictions will be lifted once the relevant exit criteria have been satisfied.
We are also exploring ways we can experiment with applicants before they enter these stage gates. This could support the testing of envisaged RTGS access arrangements without directly connecting to the RTGS infrastructure.
4: Future policy outlook
Settlement accounts with safeguarding facilities for NBPSPs
We acknowledge industry feedback that flagged that reliance on a small number of commercial banks for safeguarding has made it harder for NBPSPs to obtain access to safeguarding accounts and may put NBPSPs at a competitive disadvantage relative to banks. Work is underway to explore whether, and if so on what terms, we could offer NBPSPs settlement accounts with safeguarding facilities. Typically, settlement accounts are unremunerated. Allowing NBPSPs to safeguard client funds in RTGS could help to enhance growth opportunities and innovation by levelling the playing field in the payments ecosystem. It would also decrease operational risk as back and forth movements between an NBPSP’s RTGS client funds settlement account and a commercial bank account would no longer be required. These benefits must be evaluated relative to the potential risks from increased NBPSP access to our balance sheet as well as the implications for monetary and financial stability.
Support of NBPSP regulatory reform
We will continue to support the FCA and HM Treasury in enhancing and reforming the broader NBPSP regulatory framework to facilitate direct access to RTGS.
In September 2024, the FCA published a consultation paper on strengthening the safeguarding requirements for e-money and payments firms. The proposed changes aim to address weaknesses in the current safeguarding approach and could be a valuable step forward in enhancing the NBPSP regime and supporting NBPSPs’ access to RTGS.
Further industry engagement on the CHAPS direct participation threshold review
We acknowledge that there is a role for indirect access to CHAPS to cater to firms’ various business models. A healthy market for indirect access provision may also provide innovations in the service itself.
Before deciding whether, when, or by how much we would lower the CHAPS direct participation threshold, we are keen to better understand the mitigants to concentration risk within CHAPS, potential implications of expanded direct access including the impact to existing CHAPS direct participants’ business models, and the risk of one or more indirect access providers leaving the market. We will closely engage with the industry to further understand the nature of these costs and risks and assess any financial stability implications before making a decision. Insights from industry engagement will inform our future work in this area.
5: Conclusion
This update underscores our commitment to continually evolving and adapting our RTGS access policies in line with market developments, focusing on resilience, innovation, and competition. It builds on our previous enhancements and will continue to leverage and realise future opportunities of our renewed RTGS service, which will be able to support a significantly larger number of participants and allow for more streamlined onboarding of new participants. To realise this, we will continue working with our stakeholders – including the FCA, HM Treasury, and industry – over the coming months on the key areas mentioned above.