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This Annual Report is an important part of our wider commitment to transparency and accountability. Through this report, we are sharing our strategic themes, and how we work with industry to deliver effective RTGS and CHAPS services while providing value for money.

Strong operational resilience of RTGS and CHAPS is important to help avoid major operational disruption, which could impact financial stability. As such, further enhancing the operational resilience of the RTGS and CHAPS services is one of our key priorities. In common with regulated firms and Financial Market Infrastructures, we aim to comply with the new operational resilience requirements set out by the regulatory authorities. Strong arrangements for operational resilience also support our compliance with the Principles for Financial Market Infrastructures – especially Principle 17 – Operational risk, as well keeping us within our risk tolerance statements. See off any country showers with a pair of robust waterproof trousers. Designed to be worn independently or over your normal trousers, they provide extensive coverage against even the heaviest of British downpours - keeping you dry and comfortable throughout.

1. Introduction

The Policy Statement: Implementing ISO 20022 Enhanced Data in CHAPS sets out the Bank’s policy position for the implementation of enhanced data in CHAPS through the ISO 20022 messaging standard. It includes a roadmap for how we intend certain policies around enhanced data to evolve in the years following implementation. It also summarises the responses to the policy questions under Section 2 of the July 2020 Industry Review, which followed the November 2018 consultation response document. The most recent self‐assessment for the RTGS and CHAPS services was concluded at 31 October 2021. Overall, we self‐assessed that the Bank had achieved ‘observed’ status for all but one of the principles relevant to the Bank’s RTGS and CHAPS services. The exception was ‘ Principle 3 – Framework for the comprehensive management of risks’ where we remained ‘broadly observed’ for our 2021 self-assessment, based on a continued conservative view that some further enhancements are required and a small number of risk management processes need time to further mature. This is to ensure that our risk management approach across all three risk domains is sufficiently consistent and integrated, enabling us to enhance the extent to which we can aggregate and consider risk in a more holistic manner. The next PFMI self-assessment has a point of assessment of 31 October 2022 and will be published afterwards. Since summer 2022, we have been providing a Pilot platform for CHAPS Direct Participants, to support extended testing of enhanced ISO 20022 messages prior to live implementation. For 2019/20, our focus was on ‘ consolidation’, including how we undertake end-to-end risk management for CHAPS and maturing our governance arrangements. This 2022–24 strategy will be based on continuing to deliver safe, resilient and well-run core RTGS and CHAPS services and continuing preparations for the transition to the renewed RTGS system.

We also contributed to industry activity to codify a Sector Response Framework – which sets out how organisations across the sector and government are connected, and how they will respond to incidents individually and together; our CHAPS Participant Engagement Form is recorded as one of the incident response groups. We also engaged on sector principles for responding to the operational paralysis of a Global Systemically Important Bank. 3.3: Well run On-boarding to RTGS and CHAPS Over 2021/22, our RTGS and CHAPS services continued to play a central role within the domestic and international landscape. Our mission is supported by four strategic themes for delivery, summarised below: During this period, our staff also successfully managed a series of incidents; none of which had an impact on our targets for service availability. To support our staff throughout this period, significant focus has been given to the dynamic management of resourcing and prioritisation to ensure delivery of key work streams. In particular, we continued to deprioritise certain aspects of our non-critical work such as: streamlining our approach to CHAPS data production and internal reporting; as well as the frequency of our structured horizon scanning and emerging risk process. 3.1: Responsive Stakeholder engagement Direct Participants that opted to migrate to these messages to ISO 20022 when CHAPS transitions from MT to ISO saw these messages migrate on 19 June 2023.For 2020/21, our focus was on ‘ augmentation’, with further maturity of our risk management arrangements, enhancing the CHAPS rulebook and seeking to maximise the financial stability benefits of CHAPS being part of the central bank. Complete the internal and external preparation work for the renewed RTGS service including the new ISO 20022 messaging standard.

If domiciled outside England and Wales, provide information about company status and settlement finality through a legal opinionIn July 2022, the Bank published Additional Guidance on mandating ISO 20022 enhanced data in CHAPS, providing further detail around scope, data quality and our approach to compliance. The Bank does not intend to publish further policy papers on the implementation of enhanced data within CHAPS in the near term, as we recognise the need for industry to have certainty over the future direction of policy. In the event of major developments impacting the implementation of enhanced ISO 20022 data in CHAPS, the Bank will consider whether there is a net benefit to industry of updating its approach and will use existing forums to communicate to relevant stakeholders.

Safe and resilient: we have improved our operational resilience and risk management frameworks, with a new operational resilience framework adopted in April 2022. We have supported industry work to codify a framework setting out how different industry groups interact during operational incidents and we continue to play an active role in enhancing preparation for incidents. CHAPS volumes grew year-on-year from March 2021 to February 2022, partly reflecting that the economy was recovering from the disruption caused by Covid. CHAPS is commonly used for housing and other property transactions; in 2021 temporary changes in Stamp Duty led to elevated volumes. To accommodate this, we extended the CHAPS settlement day on 30 June and 30 September 2021. A number of the banks providing services to UK retail customers – such as individuals and conveyancers – also extended cut-off times for relevant client channels. We have worked with CHAPS Direct Participants to document a contractual methodology for the allocation of centrally borne losses by the Bank in the context of CHAPS. Updated contracts were signed with CHAPS Direct Participants in 2021. The changes aim to provide increased certainty and transparency for CHAPS Direct Participants of the likely financial impact on them, should there be a centrally borne loss. 3.4: Renewed Volumes have also grown as the property market recovered from deep decline in mid-2020. Notably during 2021, activity was brought forward into the months of March, June and September, ahead of Stamp Duty holiday deadlines.first considers the Bank’s monetary and financial stability objectives, ensuring any decisions are consistent with the Bank’s overall mission;