Does a non-bank PSP need to hold a Bank of England settlement account to become a direct settling participant in a payment scheme?
In order to become a direct settling participant in a payment scheme which settles at the Bank, non-bank Payment Service Providers (<a href="/glossarycollection/payment-service-provider" style="color:#48277C;" target="_blank" title="Payment Service Provider"><u>PSP</u></a>) must hold a settlement account in the Bank’s RTGS system.<br/><br/>
A settlement account is not a traditional commercial account. A settlement account is only used to settle the payment obligations arising from payment schemes which settle at the Bank. A non-bank PSP will still require commercial bank relationships in order to undertake its commercial banking needs including making other types of payments, financing and investments. In particular, participants in DNS schemes will need a relationship with a CHAPS direct participant to fund and de-fund their settlement account from their commercial bank account – although that is not to say direct participation in CHAPS would remove the need for a commercial bank relationship.<br/><br/>