Bank of England Sees Support for Extending Settlement Window

With the world and payments and settlements rapidly evolving, the Bank of England says it has been “encouraged” by the level of support for extended RTGS settlement hours, noting the current hours are “unlikely to remain sufficient in an increasingly 24/7 and global world”.

The paper discusses feedback to its discussion paper published in February 2024, which explored longer hours for both the UK’s RTGS and CHAPS systems, which argued that extended hours would bring multiple advantages – and challenges – across the payments ecosystem.

“While we have not yet made a final decision, given the importance of industry preparation and collaboration, we want to share our vision now and continue to update as it evolves over time,” writes Victoria Cleland, executive direct for payments at the Bank. “Our central expectation is that we will extend RTGS and CHAPS settlement hours, with the ambition of achieving near 24×7 operations around the turn of the decade. This will support our vision for continued innovation in the payments landscape alongside driving enhancements for cross-border payments. We expect to achieve near 24×7 with a phased implementation, starting with enabling earlier settlement at 1.30am (UK time), no earlier than 2027.”

Cleland also reports that before making a final decision, the Bank wants to understand in more detail the impact of an extension on individual firms, customers, and public institutions, as well as the overall UK and global economy, market functioning and wider payments landscape. “We aim to balance providing an open platform for innovation, preserving the role of central bank money, and proposing feasible change for the Bank and industry,” she states.

The Bank says the main use case cited was enhancing cross-border payments by increasing overlap with other RTGS systems (in particular APAC, EU, and the Americas). Respondents also noted potential benefits for liquidity management and innovation. Staffing and system upgrades were the key cost drivers highlighted.

No strong objections were raised against aiming for near 24×7 over the next 10 years, and there were calls for clarity on the long-term ambition as soon as possible to aid planning and prevent inefficient investment. The Bank says respondents also stressed the need for a clear business case and consideration of system capabilities and delivery requirements before extending to near 24×7. Most prefer a phased implementation over several years, with at least two years’ lead time ahead of the first stage.

The feedback also suggests a preference for extending CHAPS into the morning on weekdays as a first step, to increase overlap with EU and APAC countries and to avoid operational issues associated with later closing or weekend operations. There is some demand to enable a longer window for CHAPS extensions in contingency (up to 10pm rather than the current ability to extend to 8pm) and to explore additional settlement times for retail systems. For any change to RTGS and CHAPS hours, there is strong demand for flexibility for participants to choose when to use non-core hours, and a preference for a similar level of service support from the Bank during non-core hours as during current hours.

The paper lays out the Bank’s vision for how it will potentially execute the transition to longer windows, notably it will extend in a phased transition, with no move before 2027; it will also extend earlier, rather than later, in the day in its initial stages. It also pledges to work with the industry with the intent of finally moving to near 24/7 “around the turn of the decade”.

One of the challenges cited with enhancing and accelerating FX settlement is the limited inter-operability between different jurisdictions’ payments systems. While work continues on enhanced payments using tokenisation and distributed ledger technology, an extended UK system in particular would be helpful for the FX industry given the UK’s central role in the market.

The Bank of England says it will release a consultation paper in 2025 which will lay out its final proposal, ahead of a final decision later that year or early in 2026. It has also pledged to provide at least one year’s notice of any changes.