Bank of England’s Real Time Gross Settlement payment system, which processes £277bn of money transfers a day including UK house purchases, resumes operations after being down for more than nine hours
By James Titcomb
4:14PM BST 20 Oct 2014
Update: The Bank of England says the system is back online, and that RTGS will remain open until 8pm on Monday four hours later than usual to process the backlog of orders.
CHAPS, which deals with the payments, says: “The Bank of England’s RTGS system is now processing payments again following a resolution of the technical issue experienced earlier today. As such, CHAPS is now processing the backlog of payments and is confident that all payments submitted today will be processed today.”
House purchases and other large transactions were unable to be completed on Monday after the infrastructure that processes large payments between British banks went offline, the Bank of England has said.
The central bank said the “Real Time Gross Settlement Payment System” (RTGS), which settles large transfers between banks, had gone offline at 6am on Monday morning. It remained so until late on Monday afternoon and will stay open until 8pm to deal with a backlog of payments.
The Bank said that the biggest payments were being processed manually and reassured the public that all payments would be on Monday, since the system has the capacity to process a large number of payments when it does go back online.
Smaller payments such as standing orders and direct debits use a different system and were not affected.
The RTGS is set up to settle large payments in real time, rather than at the end of the day, reducing risk.
The system which processes payments such as house purchases went down at 6am on Monday morning. The large banks were contacted early in the day, and the Bank disclosed the fault at around 11.30am.
Jonathan Harris, of the mortgage broker Anderson Harris said the issue could be “hugely inconvenient for buyers”.
“It is hugely fortunate that the Chaps system didn’t collapse on a Friday as this is by far the busiest day of the week for completions. However, with everyone pushing to complete on a Friday there are a proportion of deals which don’t happen maybe 15pc which are pushed back to the following Monday. These are already critical and if they are delayed yet again, it will be hugely inconvenient for buyers,” he said.
“Those in a long chain in particular will feel a cascading effect down the chain with potentially many people affected. Presuming the system is back up and running on Tuesday, then these deals should be able to complete then.”
The Bank of England said: “The Bank of England has identified a technical issue related to some routine maintenance of the RTGS payment system and has paused settlement while we resolve it.”
“We are working to address this issue as quickly as possible, and restart the RTGS payment system in a controlled manner. The most important payments are being made manually and we can reassure the public that all payments made today will be processed.”
The RTGS routes payments made through CHAPS (the Clearing House Automated Payments System), which settles important and time-sensitive payments, including house purchases.
According to the CHAPS website, it processed £70 trillion of payments last year and is used by 5,000 financial institutions.
A statement from CHAPS said it would be keeping operations running longer than normal on Monday afternoon to ensure that they go through.
” CHAPS is currently liaising with the Bank of England who are working hard to resolve the issue – which means payments submitted today will be processed,” it said.
The system helps keep the daytoday running of banks going by acting as an intermediary between banks. If a payment is going to be made between banks, RTGS credits the bank receiving the funds quickly, and takes funds from the bank sending money, removing the risk for the receiving bank.
In effect, RTGS sits at the top of the payment structure for banks, as shown by this Bank of England document:
The other major payment system that uses RTGS is CREST, which processes transactions for financial instruments such as shares and bonds. However, CREST is not believed to be affected.
Euroclear, which runs CREST, said: “Euroclear is monitoring the current technical issue with the RTGS system at the Bank of England. We are working closely with the BoE and if necessary will extend our own operational deadlines, to ensure that all settlement and payment instructions will be processed today.”
Around £277bn a day is processed through CHAPS, up from the £254.5bn in 2011:
The financial analyst Lorcan Roche Kelly said the event was “every central bank’s nightmare”.