kafai - Fotolia

Bank of England to migrate from core system with a one-off big bang

The Bank of England will migrate from its current core settlement system with a 'big-bang' migration before the end of 2025

This article can also be found in the Premium Editorial Download: Computer Weekly: Modernising IT at the Bank of England

The Bank of England plans to complete the replacement of the 23-year-old core system it uses to settle payments between banks, with a big-bang migration before 2025.

The real-time gross settlement (RRTGS) system settles payments made on payment systems including the clearing house automated payments system (Chaps) and bankers’ automated clearing services (BACS). It has been in use since 1996 and is essential in ensuring money flows in the economy. On an average day, the system settles £600bn worth of transactions.

The bank published a contract notice in the Official Journal of the European Union in February, inviting potential providers to express their interest. A technology delivery partner will be announced in May 2020, and the contract is currently for a maximum cost of £150m and includes technology and support.

The supplier that wins the contract will take on an assignment of national importance and will support a carefully planned project over six years that will culminate in a huge system migration.

Victoria Cleland, executive director of banking, payments and innovation at the Bank of England, said: “I expect a big bang cutover because what you have with RTGS is the core ledger supporting payment transactions worth hundreds of billions of pounds a day, and we can’t have some members on it while others are not.”

After talks with the Bank of England’s internal IT department, it is likely the bank will keep the existing system up and running alongside the new one for a period as a fallback. “So if there was any problem, we know we could recover back to that,” said Cleland.

Part of the challenge is ensuring all organisations that link in to the RTGS are also prepared for the cutover. “It is not just the Bank of England that needs to be ready – we need to know the whole industry is ready,” said Cleland.

Goals for modernisation

The Bank of England’s goals include utilising modern IT, increasing the number of companies that connect directly to the system and making it available 24 hours a day.

While, like most major IT systems, there have been many small upgrades to the RTGS system over the years, the pace of change in the industry around it meant a major upgrade was required.

“It gets to the point where if you were to make fundamental changes, such as making it available 24/7 and increasing capacity, it is better to start from scratch,” said Cleland.

This has also meant timelines have changed. Back in 2016, the Bank of England set 2020 as the date to replace RTGS, but it is now expected to be finalised in 2025.

“When the programme started, it was looking at a timeline, but we have done a lot of work with the industry to establish what they want and how best to deliver that,” said Cleland.

“We are looking at 2025 for completion, with a number of transition states as we head to that. What we want to achieve is more ambitious now, and we are doing some exciting work around innovation and looking at ways of bringing in participants.”

The research part of the project established five broad goals: higher resilience, broader access, wider interoperability, improved user functionality and strengthened end-to-end risk management.

In May 2017, the bank came up with a blueprint which set out the main goals of the new RTGS system.

Cleland said the Bank of England is looking at the way the financial services industry is changing and wants a system that not only offers greater functionality, but is easier for new organisations to join. This would include reducing the amount of testing involved. The bank has already made a policy change which states that non-bank companies can become members.

“This was brought in last year to help generate competition and innovation,” said Cleland.

One new non-bank member is financial technology firm Transferwise, which offers a payments service. More are set to join. The Bank of England wants the system to be tailored to businesses, rather than simply off-the-shelf. When it comes to the specification for the IT partner, security, resilience and payments expertise are top of the list of priorities.

Cleland said she does not expect the cloud to be used at this stage, and discussions have been held over the role of distributed ledger technology in the new system.

“We decided not to use distributed ledger technology because we haven’t seen it used at this scale and for something so important. But we are keen to see if firms using this technology can link to the system. Although we are not using the technology, we are enabling others to use it,” she said.

Read more about IT at the Bank of England

Read more on IT for financial services

Data Center
Data Management