The European Central Bank’s (ECB) decision to delay its move to a new messaging standard in 2022 ended up costing the Bank of England £23 million as it was forced to adjust migration to a new settlement system to avoid compounding risks.

The UK central bank’s £431 million project to move to a Real-Time Gross Settlement (RTGS) system was largely a success, according to spending watchdog the National Audit Office (NAO), despite being replanned four times and seeing costs increase by £56 million beyond the original contingency plans.

The NAO reported that delays to an unrelated project at the ECB was among the causes of overspending on the Bank of England’s RTGS system renewal program, which started planning in 2016 and provides settlement services for sterling payments in the UK, worth around £790 billion a day.

The second re-plan during the winter of 2022-23 was a result of an external “shock” outside the bank’s control, the NAO said. “The ECB moved its migration date for the new messaging standard close to the Bank’s date, creating too high a level of change for users to manage safely.”

The ECB was moving to ISO 20022, a global standard for electronic data interchange in finance, which promises a single, rich, structured language for payments, replacing older formats like SWIFT MT. In October 2022, it announced a delay to its ISO migration program, putting it back to June 2023, just four weeks before the planned launch of the RTGS system.

“Consultation with RTGS users found that having the two migrations so close to each other resulted in too high a level of change for users to manage safely,” the NAO said. “The bank therefore decided to defer its migration date and launch date for the new system. The 2020 business case highlighted the possibility of such an external ‘shock’ occurring, and that it would require additional funding.”

The estimated overall cost of the RTGS program is £431 million, 15 percent above what was planned and more than the original 11 percent risk contingency. Still, the costs remained lower than the industry standard for similar projects, the NAO said.

“In our view, the bank could have considered retaining a cost range at this stage or estimating a higher contingency to factor in ‘unknown’ risks, to better reflect the level of uncertainty.”

However, the auditors added: “The increase in cost was reasonable given the size and complexity of the program, and the number of uncertainties and risks that the bank had to manage.”

In 2020, the bank contracted Accenture as its technical delivery partner. The previous RTGS relied on mainframe technology and was difficult to maintain because of its specialist hardware and the shortage of skills. The new platform is still internally hosted, but relies on “cloud-native” technologies, making it more flexible. ®