Minouche Shafik, the Bank of England's deputy governor for markets and banking, has announced plans to modernise the UK’s sterling settlement infrastructure. Specifically, the real time gross settlement (RTGS) system, which allows banks to settle their obligations to each other electronically and immediately via the central bank, is now in need of updating, 20 years since its introduction.

The proposed plans are in response to the changing requirements of individuals and businesses, as well as technology innovations such as cashless, real-time and mobile payments options as well as the emergence of distributed ledger technology (DLT).

Regulation is also driving the need for a modernised RTGS system. In particular, the Payments Systems Regulator (PSR), which launched in 2015, is placing more focus on competition and innovation.

Shafik said in her speech: “In the pursuit of financial stability, the importance of resilience can hardly be overstated: a persistent disruption to people’s ability to make and receive payments would cause great damage to the UK economy.”

She also explained that the plans for the modernised sterling settlement system will seek to respond to four “overarching questions”:

1. What should the bank’s policy objectives be in the delivery of sterling settlement in central bank money?
2. What functions should the UK High Value Payments System have?
3. Who should be able to access it, and how?
4. What should the role of the Bank of England be in the delivery of that service?

The Bank of England will seek input from a wide range of stakeholders in the first part of 2016, before consulting formally on a small number of alternative ways forward later in the year. The blueprint for the high-value sterling settlement will be ready by the end of 2016 and technological development will begin in 2017.