Bank of England mandates LEI: CHAPS RTGS Payment Messages ISO 20022

Published on 10 July, 2024

By LEI Worldwide

Bank of England mandates LEI: CHAPS RTGS Payment Messages ISO 20022

ISO Standard 20022 is an open, globally standardised framework for reporting financial information. The GLEIF has previously outlined its support for ISO 20022 and the interoperability and inclusion of the Legal Entity Identifier within the ISO 20022 framework in order to enhance financial transaction data transparency and availability.

ISO 20022 covers various types of financial messages, including b2b payments, securities, trade finance, and foreign exchange. Many countries and financial institutions are adopting ISO 20022 to replace older messaging standards, and as such, the LEI, as a globally standardised legal entity identifier and system agnostic open source of data is perfectly suited for ISO 20022.

An LEI, or Legal Entity Identifier provides an instantly globally accessible reference point on any legal entity involved in regulated financial transaction.

CHAPS, ISO 20022 & LEI

CHAPS (Clearing House Automated Payment System) is a same-day sterling fund transfer system used in the United Kingdom by the Bank of England for financial transactions. Please refer to https://www.bankofengland.co.uk/payment-and-settlement/chaps for more information. CHAPS is used by more than 30 banks in the UK and many more organisations access and utilise the system. You can find out which other banks utilize the CHAPS system here ‘Which Banks Use CHAPS?”.

CHAPS facilitates high-value payments between banks and other financial institutions that need to be settled on the same business day.

The Bank of England have mandated the use of an LEI for both counterparties to a financial transaction within the CHAPS framework. Previously it was a recommendation from their 2 022 RTGS Renewal Programme.

We have seen a similar move in India, with the RBI mandating the use of the LEI for large value b2b transactions. You can find out more about the benefits of the RTGS system here: https://www.bankofengland.co.uk/payment-and-settlement/rtgs-renewal-programme/the-renewed-rtgs-service-key-benefits

In June 2023, BoE included and recommended the use of the LEI, however from May 2025 it became mandated.

Similarly to the LEI there is crossover between usage of CHAPS and the LEI system, besides the fact they are both ISO 20022 eligible, CHAPS is used by Financial Institutions to settle FX transactions, high value transactions (often in a regulated environment), and as such many of the CHAPS main participants would already have an LEI, Santander, Barclays, BNY Mellon, BNP Paribas (Validation Agent), Citi, Goldman Sachs, to name but a few.

Bank of Englands LEI Policy Statemment:

“From 1 May 2025, the Bank will mandate the use of LEIs for all payments between financial institutions, as set out since our 2020 policy statement. This requirement applies to payments made via a channel controlled by the DP until our proposed expansion to all channels from November 2027.

The Bank continues to encourage the inclusion of LEIs for all CHAPS payments where possible prior to this date.

It remains the Bank’s vision to widen the LEI requirement to all CHAPS payments over time.”

The BoE describe the benefits of the LEI in CHAPS payment messages as realistic when only there is greater adoption of the LEI across the payments sector in general. They name key benefits:

Improved resolution planning
Financial crime detection
Sanctions screening
Customer due diligence
Innovation in products/services

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WHAT THIS MEANS FOR YOUR FIRM

In practice, mandating the use of the LEI for CHAPS payment messages under ISO 20022 means that it is up to each DP to implement its own processes to meet the BoEs standards.

The BoE ask DPs to enrich their internal databases with LEIs to help meet their requirements and for the wider benefits to the economy.

The bank also expects DPs to keep all of their LEIs up to date and accurately reflecting their organizational structure. This means renewing your LEIs consistently.

In an increasingly globalized world, data standards are a strategic focus for the Bank of England. Promoting uptake of the LEI is a key part of our approach, as it provides a unique, global identifier that can be used across borders by all entities participating in financial transactions. Importantly, this identifier is connected to a free and open database of verified business information that is updated daily.

- Tanveer Bhatti, Lead Policy Analyst at the Bank of England

If you are a FI and utilize CHAPS and would like assistance integrating the LEI into your databases, LEI Worldwide have a service that can help. Please contact us at [email protected]. We can also help DPs set up automated annual LEI renewals internally to remove any risk associated with Lapsed LEIs.

Timeline for Updates:
Implementation Timeline and Updates

June 2023: The CHAPS system successfully migrated to the ISO 20022 messaging standard, setting the stage for enhanced data capabilities.
May 2025: LEIs will become mandatory for payments between financial institutions. Additionally, purpose codes for property payments and transactions between financial institutions will also be required.
November 2025: Further enhancements, including structured addresses and remittance information, will be mandated to ensure comprehensive adoption of the ISO 20022 standard across various transaction types.

Bank of England mandates LEI: CHAPS RTGS Payment Messages ISO 20022