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Critical Bank of England systems outage puts the spotlight back on a major settlements overhaul

The worst RTGS outage in nearly a decade was resolved without too much loss of hair but will renew enthusiasm for a core settlement engine replacement due in 2024...

RTGS outage

The Bank of England’s real-time gross settlement (RTGS) system – the banking engine at the heart of the economy, which settles the equivalent to UK gross domestic product every five days – failed for some six hours on August 14 due to an undisclosed “technical” issue.

The incident was the worst RTGS outage in nearly a decade.

It emphasises the importance of BoE’s ongoing work to modernise the technology underpinning the settlement system, which facilitates the safe transfer of funds between parties. Settling in central bank money mitigates the risk of the settlement agent defaulting, and settling under the RTGS model prevents credit exposures between banks building up in the settlement process. (Reserves that banks hold in accounts in the RTGS infrastructure also provide a buffer against liquidity shocks.)

Little harm was done as a result of the incident. (RTGS outages have been well rehearsed including in SIMEX Series annual disaster response exercises.) The BoE was able to play rapid catch-up in settling the £750 billion daily that flows through its systems, saying in a short update late Monday that “we do not anticipate that there will be any outstanding payments to settle when we close the system this evening.”

The RTGS runs on a 28-year-old IT stack (believed to be mainframe-based; the details of its precise architecture are somewhat closely guarded) that is being switched to a new core ledger in 2024, if the stars align.

The modernisation programme will, the Bank of England hopes, “enable future changes to be more efficient, less resource intensive and quicker”, allow far more organisations to open accounts with the central bank (currently some 220 have RTGS accounts and there is a lengthy queue), and allow for additional functionalities via API.

RTGS outage: No blood, no foul...

Very helpful.... A post-mortem from Deloitte on an earlier RTGS outage in 2014.
Very helpful.... A post-mortem from Deloitte on an earlier RTGS outage in 2014.

Deloitte, contracted to write a post-mortem for a severe RTGS outage in 2014, said that incremental changes made since the settlement system was launched in 1996 “have resulted in an increase in complexity and a system which is now more difficult to understand and maintain…"

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