The introduction of the new tiering criteria has reduced risks within the payment system CHAPS, after the Bank of England highlighted potential stability risks in the payment system, due to a large number of indirect participants processing high value payments via a small number of direct members.

CHAPS processes and settles high value and time-dependent sterling payments, and agreed to the changes being introduced, so any indirect participants processing payments above a certain value threshold could be identified. They engaged with the largest indirect participants to discuss the system risks they posed, the ways to reduce them and the option of joining the scheme directly.

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Indirect participants that join the scheme directly are reportedly better protected from the impact that an operational outage of a direct member could bring to the CHAPS community. The potential vulnerability that faces the indirect participants who rely on an extension of credit from direct members to fund their clearing has also been addressed by these changes.

Phil Kenworthy, managing director of CHAPS Clearing Company said: "CHAPS is systemically important to the UK financial infrastructure as it processes high-value, instantaneous payments between banks in excess of £270bn each day. The changes we have introduced have drawn real benefits to all CHAPS users, creating more stability within the financial market now, as well as establishing a positive template for mitigating risk in the future.

More than 4,500 financial institutions that have access to CHAPS as indirect participants have been impacted by the tiering critieria.

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