The emergence of distributed ledger poses a certain challenge for the Bank of England, it also provides a chance for future improvement. Thus spoke Minouche Shafik, the central bank's deputy governor for markets and banking.

The Bank plays an essential part in sterling financial operations, she said speaking at a meeting 27 January. In fact, the Bank’s Real Time Gross Settlement system (RTGS), which provides transactions for various financial institutions in real time, settles about £500 billion every day between banks, which nearly equals one-third of the UK’s annual GDP. The importance of RTGS as a third party, however, may be undermined by the development of modern payment technologies. In particular, Shafik mentioned the use of distributed ledgers by challenger banks and non-banking payment institutions.

However, this technology may be employed by the Bank of England itself. The Bank is going to develop a blueprint for further improvement of its settlement system. This process cannot be quick and must not be conducted by the Bank exclusively because the impact of the decisions made will affect the whole population of the UK. Therefore, the blueprint is supposed to be ready by the end of 2016, and Shafik suggests a wide discussion between various banks and financial structures regarding this issue. The implementation of the plan should take place in 2017.

The economist doesn’t give any concrete recommendations as to what this plan should provide. But she mentions some important issues. What are the implications of the growing demand for a “24x7x365” payment system? Should a larger number of UK banks get direct access to RGTS? Should the Bank’s supervisory functions undergo certain changes in view of the developing distributed ledger technology? These are among the questions that the blueprint should answer. But the main goal is to introduce innovation and maintain stability at the same time, says Shafik.

Andrew Levich