payment systems was formalised, with the establishment of the bankers ’ clearing house, which was owned and controlled by the major retail banks. in 1985 following a series of reviews the association of payments clearing services ( apacs ) was created as an umbrella organisation for three clearing companies, including the chaps & town clearing company. it had responsibility for the chaps system, providing high - value, same - day settlement with a minimum value of £10, 000 ( equivalent to around £29, 000 in today ’ s prices ). 5 today there is no minimum value, but chaps settles around £330 billion every working day, representing 93 % of non - cash payments in the uk. around 40 % of chaps payments originate from organisations based overseas, reflecting the uk ’ s strong links to the global economy. bringing chaps into the bank when rtgs was established in 1996, it became the settlement infrastructure for chaps, increasing financial stability by ensuring the highest value payments were settled real time in central bank money. the chaps co clearing company ltd ( chaps co ) continued to operate the chaps scheme from a member perspective until last year. bringing chaps in - house marked an important milestone in our ongoing work to make chaps and rtgs safer, more secure, more accessible, and in line with international best practice. until last year, the uk was unusual in that a private sector company ( chaps co ) was responsible for the governance and rulebook6 of the high - value payment system, while the bank provided the underlying settlement infrastructure. in 2017 the bank ’ s analysis concluded that there were structural constraints in this model. given the status of rtgs as critical national infrastructure, chaps co could not be given the full range of information on rtgs that it would need to identify and manage risks across the whole payment system. these constraints meant that, while chaps co had made important enhancements to its existing model, it was unable to fully meet regulatory expectations to act as an effective end - to - end systemic risk https : / / www. bankofengland. co. uk / monetary - policy / inflation / inflation - calculator the rulebook ( or ‘ chaps reference manual ’ ) sets out the requirements that a member needs to adhere to as a participant in chaps. the rules are designed to deliver a safe, secure, and resilient chaps payment system. all speeches are available online at www. bankofengland. co

so it seems sensible to link minimum capital requirements to a confidence level. in its work, the basel committee's approach has been to set those requirements equivalent to an investment grade rating. it is important that this rating level is maintained. first there is growing evidence that without it a large bank would have insufficient freedom of operation as their counterparties'limits on unsecured exposures stemming from interbank, swap and fx transactions to the bank concerned would be too small. second, the frequency of banking crises does not suggest that the current minimum level of regulatory capital is too high : four out of the g - 10 countries have suffered a banking crisis over the last decade. another important issue is the possible impact of any new capital requirements on the business cycle. it has been argued that capital requirements can potentially contribute to a credit crunch because in a period of severe downturn, they can become binding should write - offs and loan loss reserves reduce the amount of capital which a bank has available to back new lending. if banks are insufficiently forward - looking in their assessments of risk, more risk - sensitive capital requirements could lead to an added pro - cyclical effect to the extent that capital requirements would increase in recessions as the average riskiness of borrowers rose. it is therefore essential that banks take a longer term view of creditworthiness. we think, however, that such fears of procyclicality are exaggerated and are more than matched by the other benefits from the new regime - in particular, the reduced opportunities for regulatory arbitrage and the incentives given to banks to strengthen their risk management. moreover, a number of factors seem likely to mute the impact of the new proposals on the cycle. first, many banks have a buffer of capital well above the regulatory minimum. second, in a recession, demand for bank credit may anyway fall. third, to the extent that banks ( and ratings agencies ) assign assets to risk categories in a forward looking manner, it should be possible to avoid wholesale reclassifications to lower credit - risk categories during cyclical downturns, particularly those of normal amplitude. conclusion the new accord will make a significant contribution to strengthening the international system. but even under the current accord, banks should find themselves better placed than in the past to deal with any sudden downturn. a soft landing for the us still seems the most likely outcome but the system is in far better shape now than a decade ago to absorb, if necessary, a somewhat harder bump. i