Bank of England: Payment Systems Oversight Report 2011
12 April 2012
The 2011 Payment Systems Oversight Report offers public accountability for statutory function of the Bank, as well as increasing transparency about the performance of the overseen payment systems, and acting as a tool to encourage further risk reduction by the owners and operators of these systems.
This annual report on the Bank’s oversight of payment systems sets out how the Bank has exercised its responsibilities under Part 5 of the Banking Act 2009 since the previous Oversight Report in March 2011.
The main UK payment systems have continued to demonstrate high levels of operational availability. Since March 2011, systems have delivered reductions in risk. Further work remains necessary in some areas. These include the following:
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Tiering in the wholesale payment systems: In February 2012, the CHAPS Board agreed amendments to the CHAPS Rules to ensure systemically important banks become members rather than participate indirectly.
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Credit and liquidity risks in central counterparty (CCP) payment arrangements: LCH.Clearnet Ltd and ICE Clear Europe are exploring options for reducing unsecured intraday credit exposures to their payment and commercial concentration banks.
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Default arrangements for Bacs: An agreement is now in place to ensure that settlement could complete in the event of a member defaulting with a debit position in excess of Bacs’s default fund. During 2012, Bacs will be aiming to introduce limits on the maximum size of members’ debit positions to address the risk that excessive uncollateralised credit exposures could build up in stress scenarios.
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Governance weaknesses, particularly in relation to CHAPS, Bacs and Faster Payments Service (FPS): The process of addressing these weaknesses has begun, but further progress is required to ensure there is adequate staff resource, and that governance arrangements ensure sufficient priority and accountability for systemic risk management.
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Contingency arrangements: The systems have undertaken a number of tests to prove the effectiveness of their business continuity arrangements. Recently, the emphasis has shifted to strengthening contingency plans for a financial crisis.
Chapter 1 of this Oversight Report summarises how the Bank has implemented the statutory framework for payment systems oversight under Part 5 of the Banking Act 2009 since March 2011, and its priorities for further work. Chapter 2 summarises the main developments in recognised payment systems, as well as in SWIFT.
Press release
Full report
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