The Bank promotes stability in sterling payments in four ways: through its operation of RTGS; through the provision of liquidity insurance to the banking system; through its supervision of CHAPS, the other recognised payment systems, CREST and Central Counterparties; and through the prudential supervision of banks by the PRA. As discussed at the Open Forum in November, where there are coordination or market failures the Bank can and has used its unique position to shape financial markets for the public good. 7 The Bank of England has a long history of using its convening powers to solve collective action problems, not least the introduction of RTGS itself in the mid-1990s. Around the same time, the Bank also had to step in to take over the design and construction of the UK’s securities settlement infrastructure CREST, after the collapse of the Stock Exchange’s TAURUS project. We were strong supporters of the Continuous Linked Settlement 8 initiative, which since 2002 has played a major role in reducing settlement risk in foreign exchange transactions. More recently, the Bank has taken opportunities to modernise and innovate in response to the changing external environment. For example, the Bank has overhauled its framework for liquidity provision and is preparing to introduce polymer banknotes. 7  The Open Forum session on the role of central banks in financial markets can be watched here: https://www.youtube.com/watch?v=SJCilk1XdZ0&index=12&list=PLslyOrpjJ0z38nDN-8fCiDKpCDpKMKZc9. 8  Further information on the Continuous Linked Settlement system can be found here: http://www.clsgroup.com/Pages/default.aspx.
And rapid growth of non-bank payment providers could have profound implications for the business models of banks, challenging their revenue streams, altering the economics of credit provision and changing the risks to financial stability. 5  The Faster Payments Scheme launched in May 2008 and allows payments to be made 24 hours a day, seven days a week. 6  Further information on the One Bank Research initiative can be found here: http://www.bankofengland.co.uk/ research/Pages/onebank/agenda.aspx  BIS central bankers’ speeches  3  New payments technologies also pose practical challenges, such as ensuring they interface effectively with legacy IT systems in banks and payments infrastructure. What does all of this mean for the future of RTGS? Because of the changing context I have described, the Bank of England has decided the scope of the blueprint should be broad. We need to understand these trends, whilst recognising that there is considerable room for debate about the impact of the current wave of technological innovation. We need to think about to whom we give access to the advantages of central bank money with its unique qualities of finality of settlement. Trying to predict the future is a risky business, but when we make decisions about investment in systems that will last for a decade or more, they need to enable the kinds of changes that users will demand. So we need to make sure that we have “optionality” built in so that we can cope with different states of the world.