Electronic Transfer of Funds
Guidelines on the Electronic Transfer of Funds 1999
The Professional Practice Committee have been in correspondence with the Committee of Scottish Clearing Bankers regarding electronic transfer of funds in which the following information has been given. The Committee felt that this information should be published for the benefit of the profession as a whole.
CHAPS is a Real Time Gross Settlement (RTGS) system. This means that every payment is settled immediately at the Bank of England by passing a debit against the remitter bank’s Sterling Settlement account and crediting the beneficiary bank’s settlement account. This gives finality for the payment and removes credit risk for the receiving bank and enables funds to be credited same day to customer accounts.
To enable the funding and flow of funds member banks have to ensure their Bank of England Account has enough liquidity. This is not as straightforward as it sounds. The CHAPS system processes about twice the UK’s GDPevery week. In effect, therefore, money is ‘‘washing’’ round the system as people pay each other for goods and services. The country overall simply does not have a limitless supply of ‘‘cash’’ and payments in high value same day systems have to be scheduled. Member banks can find themselves in the position of having to wait for incoming funds before any further payments can settle at the Bank of England.
Most settlement member banks have electronic banking packages that enable customers to key and authorise their own CHAPS payments. This will nearly always be quicker than instructing the payment via a branch or call centre. Problems with systems, accuracy of keying, or the funding issues noted above are the only reasons such payments would not reach their destination within several minutes of being released in the customer premises. Traditionally, solicitors have tended not to use such packages.
The CHAPS Clearing Company has 17 settlement members. This means that if you are a customer of a financial institution that is not one of these 17 members then issues arise which are outwith the sphere of CHAPS. How payments are handled and the timing of passing payment instructions between a participating bank/building society and a settlement member is a matter solely for the two institutions involved.
With regard to the suggestion that ‘‘Scottish’’ transactions be routed through Edinburgh, the view is that, with today’s technology, there is no need for such a system as there would be no benefit. A possible exception might be a slightly later cut-off time than the present 1530 hours deadline but the benefit would be marginal and the costs prohibitive.
The banks advise that what some members of the profession perceive as delays are in fact simply part of the processing system. The Professional Practice Committee reaffirmed the view that settlement of transactions with a cheque drawn on the clients’ account should remain the norm in Scotland, unless the parties agree otherwise.
