View more on these topics

BoE creates oversight boards after mortgage system failure

The Bank of England is to strengthen oversight of its payments systems, after a glitch in October prevented borrowers from accessing mortgages. 

The Bank’s real time gross settlement system, which allows money to be transferred between banks in real time to fund investment banking and consumer loans, was down for nine hours in October.

The fault also affected the Clearing House Automated Payment System, which processes high value same day transfers, used by solicitors to transfer the mortgage during the house-buying process.

Following an independent review of the failure by Deloitte, the Bank has set up a strategy board to oversee the systems. It will be chaired by the Bank’s deputy governor for markets and banking Minouche Shafik, and also features the bank chief operating officer and chief information officer.

In addition, a further RTGS delivery board will review and ovesee all future changes to the RTGS.

Deloitte’s report found that the system was crashed by the introduction of defects as part of changes made in April 2013 and May 2014, and that housing transactions were delayed as a result. 

Deloiitte found that all submitted payments worth a total value of £289.3bn, were settled within the day’s operating hours after the Bank extended its day to 8pm, mitigating any substantive risks to financial stability, financial loss or long-term damage to the economy.

However, the report says the outage caused “considerable inconvenience” to those affected, with around half of the housing transactions due on the day delayed by several hours. 

Shafik says: “The RTGS system is vital to the effective functioning of the UK economy and the financial system.

“Participants in the RTGS system – and most importantly, their customers – rightly expect it to meet extremely high standards of service, availability and resilience. The Bank is committed to meeting those high expectations, including through the full and timely implementation of the recommendations contained in this independent review.”

The Bank has paid £4,095 in compensation in nine cases following the collapse, but does not expect any further claims. 

Treasury select committee chair Andrew Tyrie says: “The economy depends on a wholly reliable payment system. Any failure – even if brief – can have very serious consequences.

“The Bank has already accepted that it needs to strengthen its governance of the system, look again at its contingency plans, and to reform the RTGS board.

“All of these are steps in the right direction. The next Treasury committee may well want to examine this failure, the Deloitte review and proposals for ensuring that a similar episode doesn’t happen again.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. What does the Acronym RTGS stand for?

  2. Philip – Real Time Gross Settlements as per para 2 line 1 – it should have been capitalised and the acronym parenthesised next to it. Same for Clearing House Automated Payment System (CHAPS).

  3. Actually, this is quite worrying because this event appears to suggest that there was no independent fail-safe to act as a back up if anything were to go wrong. What did surprise me is that the total losses only amounted to £4k for a nine-hour outage….amazing!

Leave a comment