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Bank of England payment system crashes Bank of England payment system crashes
(about 2 hours later)
People buying or selling a house and businesses trying to shift large sums of money faced delays on Monday after the Bank of England mechanism used for transferring money failed. Homebuyers were left in limbo on Monday after a Bank of England system used for transferring money failed for most of the day, raising fears that buyers would be left without keys to their new homes.
The behind-the-scenes payment system – which processes about £277bn of transactions daily – failed to open as usual at 6am. An 88-year-old woman in Sheffield was among those caught up in the collapse of the behind-the-scenes payment mechanism, which processes about 140,000 payments worth an average £277bn a day.
Shortly after 4pm, the Bank of England announced that the system was online again, and would run until 8pm in an attempt to clear the backlog of payments. The system failed to open at 6am and remained shut until 3.30pm – usually the cut-off point for money to be transferred for house sales. The Bank of England, which did not announce the shutdown for more than four hours after the system had been due to open, was forced to extend opening hours by four hours to 8pm to clear the backlog of payments.
Estate agents were among the first to report concerns, with one describing how an 88-year old woman was ready to move and had the contents of her house packed up on the driveway when the payment problem hit. While the clearing house automated payment system (Chaps) was down, there were fears that homebuyers and sellers around the country would be left unable to complete purchases on time and that big businesses, which also use the system, would fail to make payments.
The Bank said the retail-time gross settlement system (RTGS) had been hit by a technical issue and could give no indication of when it might be resolved. The largest, most crucial payments would be processed manually into computers by staff at the Bank. Estate agents were among the first to raise concerns, with the National Association of Estate Agents warning of the “cascading” effect of the delay on payments scheduled for later in the week, and a knock-on effect on van hire and transferring gas and electricity services.
This so-called Chaps system – which stands for clearing house automated payment system – processes 92% of transactions between banks and is used to process large-value transactions, such as house purchases. The average payment is £2.1m. Kaye Orwin of Andersons estate agents in Sheffield had been dealing with two families aiming to complete their moves. She said her day had started with a call from solicitors to say that “money had been put in the system from the purchase at the bottom of the chain but then it couldn’t come out”.
Andrew Montlake, at the mortgage broker Coreco, said: “If there are going to be Chaps issues then we won’t know yet – transfers usually need to be done by 3pm if someone is to complete on that day. It’s worth adding that Monday is not the biggest completion day – Fridays tend to be the most popular day.” By 4pm, when the money had still not been transferred, the solicitors arranged a legal undertaking agreeing that payments would be made as soon as the system recovered. This allowed the buyers to get their keys.
Some estate agents were finding problems earlier in the day. Kaye Orwin of Andersons estate agents in Sheffield said two families were aiming to complete their moves on Monday. “The solicitors called to say that money had been put in the system from the purchase at the bottom of the chain but then it couldn’t come out,” said Orwin. The sellers who were next up the chain, an 88-year-old woman and her son, were already packed when things went wrong. “The removal van was sat on the driveway,” said Orwin. “We’ve opened the garage and they are putting things in there for now. The buyers at the bottom of the chain have to be out of their rental home today.” She said that in more than 20 years of selling homes she had never experienced this kind of problem.
She said the sellers who were next up the chain, an 88-year-old woman and her son, were already packed when things went wrong. “The removal van was sat on the driveway,” said Orwin. “We’ve opened the garage and they are putting things in there for now. The buyers at the bottom of the chain have to be out of their rental home today,” said Orwin, who said in more than 20 years selling homes she had never experienced this kind of problem. “It is stressful enough moving house anyway without this kind of thing happening.”
Chaps, which usually closes at 4pm each day, is being extended to give customers more time to process transactions. Other sellers and buyers took matters into their own hands. In Great Missenden, Buckinghamshire, Amanda Hart let her buyers borrow the keys even though the money had not arrived. “It’s an inconvenience, and I’m bugged and annoyed,” she said. “There were purchases that I was going to make today with these funds, which I can’t now make. And there are creditors I was going to pay off, which could mean another day’s interest.” Hart, who is moving in with her partner, is not trapped in a chain.
The systems for processing direct debits and internet transactions is not affected by the problems at Chaps, which was due to an attempt to add a new bank to the system over the weekend. Banks also took steps to alleviate any problems. Barclays said it usually processed transactions 24 hours early for homebuyers while Royal Bank of Scotland said that payments for five customers it knew were facing difficulty were processed through a different system.
The Bank of England said it had “identified a technical issue related to some routine maintenance of the RTGS payment system and has paused settlement while we resolve it”. Nationwide building society said it had staff working late to make sure that payments went through.
“ We are working to address this issue as quickly as possible, and restart the RTGS payment system in a controlled manner. The most important payments are being made manually and we can reassure the public that all payments made today will be processed,” the Bank said. It was not immediately clear how many people were affected by the glitch but last October nearly 2,500 house purchases a day were completed on a Monday, according to analysis of Land Registry data by Neal Hudson at property firm Savills, making Monday the third most popular day of the week to move house. Transaction levels are up markedly on 2013, suggesting more deals will have been caught in the chaos.
Phil Kenworthy, managing director of Chaps, said the system was currently unable to process any payments. “Chaps is liaising with the Bank of England, which is working hard to resolve the issue – which means payments submitted today will be processed. Chaps will be extending its operational day to enable its participants to submit and receive Chaps payment instructions later than normal,” he said. Chaps is a crucial part of the financial system, processing 92% of transactions between banks, and is used in large-value transactions. The average payment is £2.1m. It is unusual for it to be out of action for almost an entire day. It was shut for six hours in 2007 and briefly last year.
Kenworthy said anyone waiting for a Chaps payment should contact their bank. Andrew Tyrie, who chairs the Treasury select committee of MPs, said he would be writing to the Bank to demand answers.
“A crucial part of the UK’s financial infrastructure failed for several hours today,” he said. “I will be writing to the Bank of England to find out why. The whole economy depends on a reliable payment system. We need to have confidence that the cause has been found and addressed.”
Only weeks ago the Bank said it had a new contingency plan for the collapse of the payments system.
The Law Society was also concerned. Its vice-president, Jonathan Smithers, said: “We are talking to the relevant bodies to see if we can obtain some understanding of why the system has failed and assurances that this will not occur again.”
The systems for processing direct debits and internet transactions are not affected by the problem at Chaps, which is thought to have been due to an attempt to add a new bank to Chaps over the weekend.
The Bank of England gave few clues other than to say at 11.15am that it had been hit by a technical issue “related to some routine maintenance of the RTGS (real-time gross settlement system)”. By 4.05pm it said the system was working and would extend hours to “maximise the opportunity for settlement”. It has a backup system but did not use it.
Chaps said it was confident that all payments submitted would be processed. “To help customers and to ensure payments can be processed today Chaps is extending its operating times until 19.40,” the service said on Monday. “Customers are advised to contact their own bank for any queries they may have on their specific payments.”