As of 20 June 2016, the Bank of England’s Real Time Gross Settlement System (RTGS), which processes CHAPS payments, is open for an extra hour and 40 minutes, closing at 18.00 instead of 16.20. This gives banks and building societies the opportunity to extend their CHAPS service to their customers. The new scheme deadline for customer-to-customer payments is 17:40, and 18:00 for bank-to-bank payments. However, individual institutions are able to confirm their own individual, competitive cut-off times.
What is RTGS?
CHAPS payments are processed using SWIFT messages and the Bank of England’s Real-Time Gross Settlement system (RTGS). This system holds accounts for banks and certain other financial institutions with the Bank of England. A CHAPS payment can be settled in RTGS as a transfer from Direct Participant to another in "real time" and on a "gross" basis, meaning that transactions are irrevocably settled.
Why has CHAPS extended its operating hours?
The Bank of England, as operator of RTGS system, carried out a review of its operating hours in 2014. Its findings showed that extending the hours that CHAPS works would provide greater flexibility to businesses and financial institutions when making decisions on funding, investment and risk management, and a potentially longer window during which housing transactions can complete.
The extended settlement day also applies to other users of RTGS system, including Euroclear UK & Ireland which operates CREST, the UK’s securities settlement system.
What are the benefits of keeping CHAPS open for longer?
By allowing the CHAPS payments system to stay open for an extra hour and 40 minutes, this potentially enables the following to take place:
- Participants and other banks to provide more time to make a critical or high value payment, to individuals and businesses;
- Conveyancers to have a further opportunity for completing house purchases on the contracted day, maximising the chances of this in cases of delay;
- Financial stability risk to be further mitigated, giving financial institutions and large corporates more time in the day to settle their positions and ensure that all outstanding balances have been paid.
How the extended operating hours may impact you:
As a business making or receiving CHAPS payments
- If you make or receive CHAPS payments, for instance from abroad, you may be able to make CHAPS payments later in the day than currently possible. You may wish to contact your bank or building society to establish details of any changes to their service hours for CHAPS payments.
- Similarly, you may also want to discuss with your bank, what time you can expect to receive CHAPS payments if they are still being credited to your account on the same day.
- If you require receipt of funds before releasing high value items such as art, antiques or cars, you may need to adjust your hours of operation as necessary or communicate to your customers about any deadlines for receipt of funds.
- Ancillary services, such as your customers’ chosen pick-up/delivery services or your IT support, may also be affected, and if so you may wish to communicate or change arrangements with them.
As an individual making or receiving CHAPS payments
- If you are purchasing or selling a house, a CHAPS payment is typically used by solicitors during the conveyancing process to complete the house purchase. Extended service hours may allow them further opportunity to complete a transaction for a delayed house purchase. This helps the solicitor to potentially avoid having to defer completion to the next day, avoiding costs of over-night storage of furniture, hotels etc.
- If you are collecting high value items, or arranging pickup and delivery of them, and paying for them by CHAPS, this payment may be delayed until after the seller is willing to hand over the goods, or the delivery service is willing to collect them. You may wish to contact the businesses concerned to establish what their hours of operation are. Delays to CHAPS payment may occur for several reasons including checks for compliance with international regulations by the potentially multiple Direct and Indirect Participants.
- If you make or receive CHAPS payments, for instance from abroad, you may be able to make CHAPS payments later in the day than you do currently. You may wish to contact your bank or building society to establish details of any changes to their service hours for CHAPS payments.
- Similarly, you can expect to receive CHAPS payments at a later time than currently and still see your account credited same day.
Where can I find out more?
For any specific questions relating to your CHAPS payments, speak to your bank, building society or other payment service provider, who will be able to advise of the hours of service they will be offering. For any enquiries relating specifically to CHAPS Co, the scheme operator, contact:firstname.lastname@example.org. Alternatively, further information can be found at the links below.
What is CHAPS?
CHAPS manages the high value, same day payment system. Most commonly used by banks, building societies and other payment service providers (PSPs) to pay each other, it is the portal through which national and international sterling flows take place.
The settlement of CHAPS payments on the Bank of England’s RTGS system is carried out between 24 financial institutions that are Direct Participants of CHAPS. All other customers and institutions that send or receive CHAPS payments do so through these Direct Participants.
Direct Participants and Indirect Participants
Each day CHAPS processes around £270 billion on behalf of its Direct Participants, which have the ability to send payments directly to the CHAPS system. These Direct Participants in turn offer correspondent banking arrangements by which they process CHAPS payments for a further 5,000 payment institutions – including both financial and non–financial institutions. This arrangement allows these institutions, which are termed Indirect Participants, the ability to offer their respective customers the ability to access the CHAPS system, without being full participants of the scheme.
Last year CHAPS processed 92% of the value of all sterling payments exchanged between banks, with the vast majority (76%) being wholesale financial payments, both domestic and international. Most individuals are likely to have come across CHAPS payments when making a house purchase; payments of this type represent about 1% of the daily value processed.