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This change better aligns the CHAPS and CREST settlement day with the typical business hours of many users of these systems. Direct participants are expected to pass on the full benefit of the extension to their customers by setting later cut-off times for them.
Users will therefore benefit from increased flexibility to initiate transactions that can settle later in the day – examples include high-value payments made by financial institutions, corporates or households for property conveyancing payments; and balance sheet investment and funding decisions undertaken by financial institutions and corporates.
The decision to extend the settlement day follows a review instigated in early 2014 by the Bank of England as settlement agent for the major sterling payment and securities settlement systems (through the operation of its Real-Time Gross Settlement (RTGS) infrastructure). The changes were decided by the CHAPS and CREST system operators, CHAPS Co and Euroclear UK & Ireland, informed by engagement with organisations that provide sterling payment and securities settlement services and representatives of significant user sectors.
Over the coming months, the Bank of England, CHAPS Co and Euroclear UK & Ireland will be working to raise awareness of the changes, and to ensure that the benefits are passed on to users through the setting of later cut-off times.
Minouche Shafik, Deputy Governor, Markets and Banking, said: “This is a welcome step forward for the CHAPS and CREST payment and settlement systems. Extending the settlement day will provide greater flexibility to businesses and financial institutions when making decisions on funding, investment and risk management, and a longer window during which housing transactions can complete. We expect all participants to implement the change and pass on the benefit to customers.”