Lloyd's Maritime and Commercial Law Quarterly
CHAPS TRANSFER OF FUNDS
Benjamin Geva*
1. Introduction
The Clearing House Automated Payment System (“CHAPS”) is a network enabling the clearing banks in the United Kingdom to pass and receive, on their own account as well as on behalf of their customers, guaranteed same-day value sterling payments through an automated electronic system. It is currently operated by the CHAPS and Town Clearing Co. Ltd, which was established in 1985 as part of the structure of the Association for Payment Clearing Services (“APACS”). CHAPS facilitates interbank communication as well as settlement. It has operated since 1984, initially under the auspices of the Bankers’ Clearing House. The basic objectives of its introduction were to enhance flexibility and efficiency in the sameday value/settlement payment service as well as to help reaffirm the position of London as a leading world financial centre.
This article examines the legal regime underlying the CHAPS system.1 Part 2 deals with Town Clearing, i.e., the machinery facilitating same-day sterling payments in London before and outside CHAPS. Part 3 is an overview of the CHAPS system. It describes the initial stages for its development, outlines the basics of the network, presents the rules governing CHAPS and its underlying committee structure, sets out the daily timetable and discusses the responsibilities of settlement members. Part 4 is an analysis of CHAPS payments. It deals with basic requirements as well as with unapplied and incomplete payments. Part 5 is a discussion of the machinery for executing CHAPS payments. It deals with access, routing, and
* Associate Professor of Law, Osgoode Hall Law School, York University, Toronto. This paper is part of a study on the allocation of risks in payment mechanisms supported by a grant from the Foundation for Legal Research of the Canadian Bar Association. For invaluable information, insight and feedback, the author is mostly obliged to Peter Wrigley of the Co-operative Bank, formerly Senior Inspector at the Bankers’ Clearing House. The author is also indebted to: Edward W. Stubbs, Chief Inspector of the Clearing House; John Chappenden of Midland Bank; S. Scott Housley, formerly of Girobank; Martin M. Karmel of the C.L.S.B.; and Clifford Payton, F. E. Reeves and Theresa M. May, all of APACS. Extensive information was also drawn from the sources listed infra, fn. 1. The research assistance of Harold Olij and Pearl Greenbaum is acknowledged with gratitude. However, the author assumes full responsibility for any error.
1. For extensive information on CHAPS, see R. T. Clark, CHAPS: A New Approach to Payment Systems (Inter-Bank Research Organisation, London 1982; prepared for the CHAPS project office; reprinted, with additions, by APACS, March 1987) (hereafter “Clark”); Members of the Bankers’ Clearing House, Payment Clearing Systems: Review of Organisation, Membership and Control (Banking Information Service, London, 1984), Appx. 3, at 37–41 (hereafter: “the Child Report”); M. A. Sangster, paper presented at the “Large Value Payment/EFT” session of the 1987 Canadian Payments System Conference of the Canadian Payments Association (Toronto, 21 and 22 September 1987). Information provided in this paper partly draws from interviews with those named in the acknowledgment, supra, and partly from these three sources.
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