Established in Feb-1984 by the Bankers Clearing House in London, CHAPS or Clearing House Automated Payment System offers customers the provision to transfer funds on the same day. It was established to enable organisations and businesses in the UK to receive and make payments successfully and quickly. CHAPS, is the UK’s real-time payment clearance system which is operated by CHAPS Co. (CHAPS Clearing Company) and the infrastructure is delivered by the Bank of England. Settlement of debts between CHAPS members is usually done in real-time and on a gross basis through disbursement accounts.
In other words, CHAPS is a Real Time Gross Settlement (RTGS) system (developed in Apr-1996) intended predominantly for high-value payments, even though there is no upper or lower limit of the value of transaction. Prior to 2008, CHAPS Euro used to provide clearance for euro-denominated disbursements and since the Bank’s decided not to be a part of Trans-European Automated Real-time Gross Settlement Express Transfer System (TARGET2), CHAPS Euro was discontinued on 16-May-08. Previous CHAPS Euro customers and members now perform their TARGET payments in euro through another country’s system.
The CHAPS Company is owned by members and for each member there is some holding in the company’s share. . A document of understanding (memorandum) between the CHAPS Company and Bank of England defines the services which RTGS will offer along with the level of service which is expected. In 2000, CHAPS was elected under the Financial Markets and Insolvency Regulations 1999 (FMIRs) and is an acknowledged interbank payment system under Part 5 of the Banking Act 2009. The payment directives are routed via Society for Worldwide Interbank Financial Telecommunication (SWIFT) to the RTGS system and settled separately through settlement accounts at the Bank of England.
It is imperative to note that payment can be made in sterling on the same day. This electronic bank-to-bank transfer facility has additional benefits apart from the same-day transfer provision:
Clearing House Automated Payment System is one of the biggest high-value system of payment across the world, offering well-organised, risk-free and irreversible payments. There are in excess of 25 direct participants and more than 5,000 financial organisations that use Clearing House Automated Payment System through one of the direct members. Below mentioned is the list of CHAPS (Clearing House Automated Payment System) direct participants comprising of old-style high-street banks and numerous custody and international banks:
Who uses CHAPS (Clearing House Automated Payment System)?
Direct participants in Clearing House Automated Payment Systems comprises of high-street banks, and numerous custody and international banks. Additionally, multiple financial organisations use the payment system indirectly by using direct participants to make the payments. This method is referred to as correspondent banking or agency banking. CHAPS or Clearing House Automated Payment Systems have the following use:
CHAPS is designed in such a way that credit risk does not arise during the course of usual operations. Payments made through the system are in real-time and are irreversible and the relevant member’s settlement account is debited immediately. A member cannot perform a CHAPS payment transaction until there are adequate funds available on its RTGS settlement account with the Bank of England.