BoE to open UK payments system to non-bank competition

THE Bank of England is to set out plans by the middle of this year to widen access to Britain’s interbank payment system, part of effort to boost the country’s financial infrastructure.

The Bank wants to allow a variety of financial firms to compete with the major banks that currently have access to the high-speed payments system, the financial plumbing which handles £500bn of transactions a day.

The reforms are also designed to lessen financial stability risks like hacking and fraud.

A major outage last month of the Bank of England’s Real-Time Gross Settlement (RTGS) system in 2014 put Britain’s financial infrastructure in the spotlight.

“The reforms outlined today will keep the UK at the leading edge globally by increasing resilience, broadening access and expanding functionality,” said Andrew Hauser, the Bank’s executive director for banking, payments and financial resilience in a statement.

“They are also designed to improve risk management across the system and ensure continuity of service.”

In most countries, payment systems for high-value transactions are handled completely by the central bank but in Britain it is split between the Bank of England and a company owned by major British banks called CHAPS Co.

The Bank said both it and the International Monetary Fund believed this structure posed a risk.

The Bank said that for security reasons it withheld some information from CHAPS – and that this in turn meant CHAPS could not manage operational risks to the BoE’s satisfaction.

As a result, the Bank said it would buy out CHAPS later this year and bring RTGS operations fully in-house. (Reuters)