The Bank of England has completed the replacement of the UK financial system’s “beating heart”, and is making good progress in its goal of providing “silent operations”.
Its replacement of the real-time gross settlement (RTGS) system, which processes £800bn in payments a day, is now live, after a staged project that began with early plans in 2017.
Back then, 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.
RTGS settles payments made on 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.
When work really got moving in the RTGS replacement project, in 2019, the bank said it would switch from the then 23-year-old system in a “Big Bang” migration in 2025. This has now been completed without any headlines, a reflection of the regulator’s mantra of “silent operations”, which means nobody notices when it meets its target and things work 99.95% of the time.
Today systems have been replaced with a combination of off-the-shelf technologies and an in-house written core engine at the centre.
In 2023, Victoria Cleland, at the time executive director of banking, payments and innovation at the Bank of England, who heads up the project from the business side, said a “Big Bang cutover” was opted for because, as RTGS is the core ledger supporting payment transactions, worth hundreds of billions of pounds a day, the regulator didn’t want to “have some [finance firms] on it while others are not”.
Few beyond the finance sector would have noticed what has been a huge eight-year project, which CIO and technology lead Nathan Monk described as “a hell of a journey”.
In 2017, the bank came up with a blueprint that set out the main goals of the system to replace the legacy RTGS, and a year later, Monk was brought on board. At the time, he was recruited to head up the technology implementation in the project, and was made CIO two years ago.
He joined when the Bank of England had just decided to go out to market and find a partner. In 2019, it appointed Accenture as its technology delivery partner to coordinate the replacement of RTGS.
Silent ‘Big Bang’
It finally went live in April this year, when the new core settlement engine was completed. “That’s the ‘beating heart’ and where all of the logic about how all the payments are settled [sits],” said Monk.
This signalled the completion of the replacement, and he said things have run smoothly since. “Silent operations has always been our mantra, and we’ve had a couple of months under our belts,” said Monk. “It is still relatively early with a new complicated platform, but we’re making good progress.”
The complexity and scale of the project was a huge engineering challenge, with a peak of about 500 IT professionals working on it.
The new system sees it move away from the traditional mainframe technologies that have prevailed among financial institutions, using “more modular, loosely coupled technologies”, according to Monk.
“It’s an ecosystem of products, off-the-shelf best-of-breed type products, and then we built the code for the core ourselves, because there’s nothing off the shelf that met our requirements or needs,” he said. “It’s going from legacy technology, embracing new technologies, but then being built through off-the-shelf products with a bespoke core.”
The project hit a hurdle early on, when, like every other organisation, it faced pandemic-related disruption – but not every organisation was performing open heart surgery on a nation’s critical financial infrastructure. “We have had to navigate some quite big shocks,” said Monk. “We ran straight into Covid-19, so that was a real challenge at the outset. We were trying to deploy new infrastructure, where people couldn’t be in the same building.” It also had equipment shortages to navigate as a result of Covid-19 impacting the logistics sector.
He said delays to a project of this size and importance to the economy is highly complicated and required significant work to resolve. “It’s not just a case that if something happens we just then go and announce a new date, we have to go and reconfirm that with all participants and with the other financial institutions around the world,” said Monk.
Industry buy-in
Coordinating with the finance sector is critical. The bank had its work cut out to ensure the entire industry joined it on its modernisation journey. In fact, according to Monk, this was “one of the big complexities” of the programme, “because it’s not just us changing something, we’re having to change with industry”.
For example, as part of the project, they moved to the latest ISO 20022 international financial messaging standard, which meant the banks themselves had to change the way their systems worked.
He said organisations like the US Federal Reserve, the European Central Bank and the Swift payments network are all making changes, which the Bank of England needs to “navigate around”.
“It’s quite a complex landscape when we try to land these big market infrastructure changes,” added Monk. “We need to work with these other institutes around the world in order to make sure that we can all land safely and give the core participants the time they need to be able to work with us.”
It is complexities like this that make it the biggest project Monk has ever worked on, and “one of the biggest the Bank of England has done”.
Today, it has about 100 technologists working with the system on a daily basis, and the workload is heavy. “We have a full road map, then we’ve got future developments; all the patching and upgrades,” he said. “It takes a lot of energy and effort to keep the platform up and running, or fed and watered, as I call it. Then we’ve got the change teams that are also changing the capabilities around it as well.”
These future capabilities were the prime reason for the platform to be built in the first place, according to Monk. Efficiency gains will be made by, for example, the reduction in datacentre requirement for the system, but he said: “It’s about how we improve resilience and security, but not necessarily cost play per say, but it’s leveraging the platform for future innovation and enabling us to keep it up to date.
“We’re currently working with industry for other exciting opportunities, and we’re looking to leverage and use the new platform for innovation.”
“It had its 29th birthday just before we retired it, so it’s had almost 30 years of optimisation and sweating the asset.”
Methodology change
It’s not just the core system that has been replaced through this project, but also out-of-date ways of working on IT projects.
“One of the things that it has been an opportunity to do is take a step back and ask, ‘How do we want to provide these services in the future?’” said Monk.
He said the organisation has moved to more of a scaled, agile approach. “We’ve created value streams; we’ve got product owners and technical teams sitting with our business colleagues together with our fusion teams,” added Monk.
It has also changed how it works with the wider industry, with closer integration. “We’re co-creating and co-sourcing research and development road maps with industry now,” he said.
