Shearman & Sterling LLP | Financial Regulatory Developments Focus | Bank of England Consults on Phased Move to Global Messaging Standards for UK Payment Systems
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  • Bank of England Consults on Phased Move to Global Messaging Standards for UK Payment Systems
    06/06/2018
    The Bank of England has published a consultation on adopting ISO 20022, the global messaging standard for payments which was first introduced in 2004 by the International Organization of Securities Commissions. Ten jurisdictions have already implemented the standard and another nine are intending to implement it by 2023, including the U.S., Canada, Singapore and the Eurozone. The consultation has been prepared in conjunction with the U.K. New Payment System Operator and the U.K. Payment Services Regulator.

    It is intended that ISO 20022 will be adopted across the U.K.'s three main interbank payment systems, namely CHAPS, BACS and Faster Payments. The BoE took over responsibility for the operation of the CHAPS system in November 2017 and the NPSO is responsible for the operation of BACS and Faster Payments. The fact that the three payment systems currently all have different information requirements, methodologies, formats, standards and rulebooks means that it can be difficult and expensive to move customers' payments between the systems and costly for new entrants wishing to participate in payment systems. Moving to ISO 20022 will address these and related issues.

    Adoption of ISO 20022 will be facilitated by forthcoming major changes to the payment systems infrastructure: the renewal of the infrastructure of the BoE's Real Time Gross Settlement service for CHAPS payments and the New Payments Architecture which will replace BACS and Faster Payments.

    The consultation sets out proposals developed over 18 months in close consultation with a wide range of stakeholders across the U.K. payments landscape. It is envisaged that implementation will be a complex, multi-phase and multi-year process. Three key complimentary proposals are outlined:

    (i) Establishing a common message format for credit payments across CHAPS, BACS and Faster Payments, which will be known as the Common UK Credit Message, or CCM. The CCM will replace the individual payment systems' requirements with a common set of definitions, structures and rules for inputting data into a payment message. In addition to providing domestic interoperability, the CCM has also been designed to be compatible with the international harmonization framework, HPVS+, which will ensure efficiencies in cross-border payments.

    (ii) Implementing the CCM in CHAPS, including proposals to phase in data enhancements and to make mandatory the inclusion of several pieces of information in a CHAPS message that are not currently required (for example by requiring, for a CHAPS payment between financial institutions, a Legal Entity Identifier or other organizational identifiers and details of the purpose of the payment).

    (iii) Migrating CHAPS to ISO 20022 on a phased basis starting in 2021 at the earliest.

    The BoE has also published a separate factsheet to accompany the consultation.

    Comments on the consultation are invited by July 18, 2018. Respondents will need to register via the consultation webpage to provide comments. The BoE plans to publish a response to the consultation by the end of 2018.

    View the consultation.

    View the consultation webpage.

    View the factsheet.

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