fps rules v13 - faster payments rules... · 2020-05-05 · aggregator an entity which provides a...

of 109

FPS RULES

V13.2

RULES FOR THE FASTER PAYMENTS SERVICE

Effective 1st March 2019

© 2011 and as updated by Pay.UK. No use of the Faster Payments Scheme Limited or the Pay.UK

Limited logo or branding is permitted without the prior written authority of Pay.UK. Any such use will

be considered a breach of copyright and a breach of the intellectual property rights of Faster

Payments Scheme Limited and/ or Pay.UK Limited.

of 109

CONTENTS

Section Page

1. DEFINITIONS AND INTERPRETATION .................................................................................................................. 3

2. CONDITIONS OF PARTICIPATION ...................................................................................................................... 19

3. DECISIONS IN RESPECT OF PARTICIPATION .................................................................................................... 25

4. RIGHTS AND DUTIES OF PARTI CIPANTS ....................................................................................................................................................................................................................... 29

5. RESPONSIBILITY FOR RELEVANT THIRD PARTIES ........................................................................................... 32

6. PAYMENTS ........................................................................................................................................................ 33

7. SETTLEMENT ARRANGEMENTS ....................................................................................................................... 35

8. OPERATING UNDERTAKINGS ........................................................................................................................... 38

9. WITHDRAWAL, SUSPENSION AND EXCLUSION .................................................................................................40

10. AMENDMENTS TO THE FPS RULES ...................................................................................................................48

11. APPEALS PROCESS ........................................................................................................................................... 50

12. ASSURANCE PROCESS TO FACILITATE THE COMPANY’S ROLE AS SYSTEMIC RISK MANAGER ....................... 53

13. FINANCIAL OBLIGATIONS ................................................................................................................................. 56

14. GOVERNING LAW AND JURISDICTION ............................................................................................................... 59

15. MISCELLANEOUS ...................................................................................................................................................... 60

Schedule 1 ....................................................................................................................................................................... 62

DCS PARTICIPANT COMMITMENT TO THE SUPPLIER AGREEMENT ................................................................. 62

Schedule 2 ....................................................................................................................................................................... 68

REFERENCE DOCUMENTS ................................................................................................................................ 68

Schedule 3 .................................................................................................................. ......................................71 PRO

FORMA SETTLEMENT TRUST DEED

Schedule 3A ................................................................................................................. ....................................94

EXPLANATORY GUIDANCE TO THE PRO FORMA SETTLEMENT TRUST DEED

of 109

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In the FPS Rules, the following terms have the meanings assigned to them as follows:

Acceding DCS

Participant

A DCS Participant which joins FPS.

Additional Volume

Fees

Has the meaning given to it in Schedule 1 Annex B (Proportion of Additional

Volume Fee) being where the total number of Chargeable Transactions

processed in a Year is greater than the Anticipated Annual Volume for that Year,

additional Volume Fees are payable to the Supplier.

Admissions Decision

Maker

The individual(s) or committee to whom the Pay.UK Board may delegate its

decision making power from time to time, for the specified circumstances as set

out in these Rules, in Particular Rules 2.1, 2.2, 3.1, 3.2, 3.3, 8.9, 9.2,9.3, 9.5 and 11.

Aggregator An entity which provides a combination of software services and connectivity

which taken together provide gateway capability for a Payment Service Provider

(including a DCS Participant or DCNSP) to connect to the Central Infrastructure

and enters into or accedes to a Participation Agreement with the Company as an

Aggregator.

Anticipated Annual

Volumes

The volume of transactions for which the Company has agreed to pay the

Supplier the applicable volume related fees during each Year of the Initial Term.

Appeal Means an appeal against a Relevant Decision, pursuant to Rule 11.

Appeal Panel The panel established by the Pay.UK Board’s senior Independent Non-Executive

Director in accordance with Rules 11.4 to 11.6 (the Appeals Process).

Appeals Process The procedure for establishing an Appeal Panel and conducting appeals against

Relevant Decisions by a DCS Participant, Prospective DCS Participant, DCNSP,

Prospective DCNSP or Prospective Direct Agency as set out in Rule 11.

Appellant A DCS Participant or Prospective DCS Participant or DCNSP or Prospective

DCNSP which invokes the Appeals Process.

of 109

Articles of Association The Articles of Association of the Company.

Asynchronous

Payment Request

A Payment Request which is accepted by the Central Infrastructure on behalf of

the DCS Participant, the DCNSP, Direct Agency or Third Party Beneficiary to

which it is addressed, which is not a Synchronous Payment Request e.g.

Standing Order, Forward Dated Payment or Corporate Bulk Payment.

Authorisation

Request

A request from the Central Infrastructure to the Submitting DCS Participant to

authorise a single Payment Request from a DCNSP, Direct Agency, FIM agency or

a corporate or to authorise a FIM or DCA file.

Authorisation

Response

A response from the Submitting DCS Participant to the Central Infrastructure in

response to an Authorisation Request.

Bacs Electronic payment system managed by Pay.UK Limited (formerly managed by

Bacs Payment Schemes Limited).

Bank DCS Participant A Bank PSP which is admitted to participation as a DCS Participant in the Faster

Payments Service and includes a Bank DCS (SCA) Participant.

Bank DCS (SCA)

Participant

A Bank DCS Participant that is not a participant in the Sterling Monetary

Framework.

Bank of England The Governor and the Company of Bank of England of Threadneedle Street

London EC2R 8AH.

Bank PSP A Payment Service Provider which is a credit institution (as defined in the PSRs

2017) or such other type of Payment Service Provider (not being a Non-Bank

PSP) as may be specified from time to time by the Company as being eligible to

be treated as a Bank PSP for the purposes of the FPS Rules and the other

Reference Documents.

Banking Act The Banking Act 2009.

Base Proportion Has the meaning given to it in Schedule 1 Annex A (Proportion of Volume Fees).

Board (or Pay.UK

Board)

The board of directors of the Company, who may act through a committee,

individual, body, forum or working group to which the Pay.UK Board may

of 109

delegate its decision making power or authority from time to time.

Board Committee A committee that reports into the Pay.UK Board, either directly or indirectly.

Central Infrastructure

or CI

The system relating to the automated clearing and settlement of payments

between the DCS Participants, which is administered by the Company for the

benefit of the Participants.

Changes A change to the Supplier Agreement, including to the scope or standard of

Services.

CHAPS The sterling same day payment system operated by the Bank of England in

which payment obligations between participants are settled individually on a

gross basis in the Bank of England's real time gross settlement system ("RTGS").

Charges Means the basis upon which the Supplier is to be paid for the provision of the

services as outlined in the Supplier Agreement from time to time.

Clearing The process of exchanging Payment Requests, the subject of the FPS Rules.

Commissioners The Commissioners for Her Majesty's Revenue and Customs in the United

Kingdom.

Company Pay.UK and any successor companies who operate the Faster Payments Service

and underlying payment system.

Company Reserve An amount equivalent to the costs of operating the Company for a period as

determined by the Company in its reasonable discretion.

Completion Funds

Account

An account (denominated in sterling) held at the Bank of England (as Settlement

Service Provider) in the name of each DCS (RF) Participant that is used to settle

any Single Amount payable by the DCS (RF) Participant in respect of a

Settlement Cycle to the extent such Single Amount is not settled from the DCS

(RF) Participant's Settlement Account.

Completion Funds

Account Agreement

The agreement entered into between the Bank of England (as Settlement

Service Provider) and a DCS (RF) Participant which governs the Completion

Funds Account held at the Bank of England (as Settlement Service Provider) in

of 109

the name of the DCS (RF) Participant and which forms part of the RTGS Account

Mandate Terms and Conditions.

Data Protection Laws Data Protection Laws means any legislation in force from time to time in the United Kingdom concerning the processing of data relating to living person including any legislation:

(a) which implements the European Union Directive entitled Directive 95/46/EC of the European Parliament and of the Council of 24th October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, including until and

including 24 May 2018, the UK Data Protection Act 1998;

(b) which implements the European Union Directive entitled Directive 2002/58/EC of the European Parliament and of the Council of 12th July

2002, concerning the processing of data and the protection of privacy in the electronic communications sector, including the Privacy and

Electronic Communications (EC directive) Regulations 2003; and

(c) from and including 25 May 2018, which implements, supplements or

comprises the Regulation (EU) 2016/679 (as may be amended or superseded from time to time) on the protection of natural persons with

regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection

Regulation) furthermore which may be enacted under the UK Data

Protection Act 2018;

DCNSP Directly Connected Non-Settling participant is an organisation that:

(a) is not a DCS Participant, Direct Agency or FIM-only agency;

(b) satisfies the DCNSP Criteria;

(c) is connected to the Central Infrastructure to send and receive payments

via the Central Infrastructure; and

(d) is sponsored by a Bank DCS Participant in accordance with Rules 2.3 and

3.

DCNSP Criteria The criteria set out in Rule 2.2.

DCS (OF) Participant A Non-Bank PSP which is admitted to participation as a DCS Participant in the

Faster Payments Service on condition that it shall hold at all times, in its

Settlement Account and Settlement Collateralisation Account, only own funds

of 109

(and not any Relevant Funds).

DCS Participant A Bank PSP or a Non-Bank PSP which, in accordance with the FPS Rules, is

responsible for the settlement of any Payment Request in which it is expressed

to be the Submitting Participant and/or the Receiving Participant, and

comprises any or all of:

(a) a Bank DCS Participant;

(b) a DCS (OF) Participant; and

(c) a DCS (RF) Participant.

DCS Participation

Agreement

The participation agreement between or adhered to by the Company and the

DCS Participants.

DCS Participation

Criteria

The relevant criteria applicable to a DCS Participant as set out in Rule 2.1

(Participation Criteria).

DCS (RF) Participant A Non-Bank PSP which is admitted to participation as a DCS Participant in the

Faster Payments Service on condition that it shall hold at all times, in its

Settlement Account and Completion Funds Account, only either or both of:

(a) Relevant Funds; and

(b) own funds that are the subject of an STB Entitlement.

Deed of Charge The deed of charge entered into or to be entered into or adhered to by: a) each

Bank DCS Participant; b) each DCS (OF) Participant; and c) the Bank of England

(as security trustee), pursuant to the FPS AA.

Default Arrangements The arrangements put in place by the Company to limit systemic and other

types of risk which arise in the event of a DCS Participant appearing to be

unable, or likely to become unable, to meet its obligations in respect of a

Payment Request.

Default Event Has the meaning given to it in Rule 9.2.2.

Direct Agency A Payment Service Provider that is not a DCS Participant, DCNSP, FIM-only

of 109

agency or corporate, but is connected to the Central Infrastructure to send and

receive payments via the Central Infrastructure and who is sponsored by a Bank

DCS Participant.

Direct Corporate

Access or DCA

A facility provided for corporates to send files of payments direct to the Central

Infrastructure, rather than via a DCS Participant or a Direct Agency.

Direct Payment Credit

Request

A request received by a Receiving DCS Participant that sponsors a DCNSP, Direct

Agency or Third Party Beneficiary to inform it of the credit to the DCNSP, Direct

Agency's or Third Party Beneficiary's account with that Receiving DCS

Participant, where the DCNSP, Direct Agency or Third Party Beneficiary has

received a Payment Request direct from the Central Infrastructure.

Direct Payment

Response

The response sent to the CI from a Receiving DCS Participant in respect of a

Direct Payment Credit Request.

Early Termination Fee Fees payable to the Supplier that are incurred as a result of the termination of

the Supplier Agreement prior to the end date.

EMRs 2011 The Electronic Money Regulations 2011.

Exclusion Event Has the meaning given to it in Rule 9.3.1.

Exclusion Time Has the meaning given to it in Rule 9.3.3.

Exempt Information Has the meaning specified in section 84 of the Freedom of Information Act 2000,

or in section 73 of the Freedom of Information (Scotland) Act 2002, as

appropriate.

Extended Industry

Sort Code Directory

(EISCD)

The Extended Industry Sort Code Directory is a directory that contains

information about all banks/building societies connected to any of the UK

clearing systems: FPS, Bacs, CHAPS and Cheque and Credit Clearing (including

the Image Clearing System).

Faster Payments

Identifier (FPID)

A unique identifier for each Payment Request sent using FPS.

Faster Payments The whole faster payments service that allows electronic payments to be made

of 109

Service or FPS as described in the FPS Rules and the Reference Documents, comprising the

Central Infrastructure; DCS Participant systems; the systems of DCNSP's, Direct

Agencies, FIM-only agencies, corporates and Third Party Beneficiaries; and the

Settlement Service Provider's settlement system.

Faster Payments

Scheme Limited

Faster Payments Scheme Limited, a company incorporated in England

with registered number 7751778.

FCA The Financial Conduct Authority of the United Kingdom, or such body that

succeeds or replaces it from time to time under Part 1A of the UK Financial

Services and Markets Act 2000.

File Input Module or

FIM

A module in the Central Infrastructure that supports file inputs from DCS

Participants, DCNSP's, Direct Agencies and FIM-only agencies.

FIM-only agency A Payment Service Provider sponsored by a Bank DCS Participant that submits

files of payments using FIM, but is otherwise not directly connected to the CI. A

FIM-only agency is not a Direct Agency or a DCNSP.

Financial Year Means the financial year of the Company for the purposes of section 390 of the

Companies Act 2006.

FPS Accounts

Agreement or FPS AA

The FPS Accounts Agreement entered into between or adhered to by the

Company, the DCS Participants and the Bank of England (in its separate

capacities as Settlement Service Provider and security trustee).

FPS Costs Has the meaning given to it in Rule 13.1 (FPS Costs).

FPS Payment Means a payment message (both submitted and/or received) sent by a

Participant through the System.

FPS Rules or Rules This document.

Group Company Has the meaning given to it in the relevant Participation Agreement.

Initial Term Has the meaning given to it in the Supplier Agreement.

Legal Documents The FPS Rules, the DCS Participation Agreement, the other Participation

Agreements, the FPS Accounts Agreement, the Deed of Charge, each Settlement

of 109

Trust Deed, the Completion Funds Account Agreement, the Articles of

Association of the Company and any other document designated by the Pay.UK

Board as a Legal Document from time to time.

Losses All liabilities, costs, expenses, damages, losses, loss of profit, loss of reputation,

ex gratia payments, and all interest, penalties and legal and other reasonable

professional costs and expenses, all whether incurred directly or indirectly.

Market Infrastructure

Resiliency Service

(MIRS)

A contingency payment settlement service provided by SWIFT to the Bank of

England in respect of its RTGS system that offers a market infrastructure

operational resilience in the event of unavailability of its RTGS system. When

activated, MIRS calculates accurate balances for all RTGS accounts and provides

final settlement in central bank money for CHAPS payments and clearings and

RTGS transfers.

Monthly Fee A monthly fee charged for each DCS Participant, DCNSP, Aggregator, Third Party

Beneficiary and Direct Agency and to enable them to connect to the Central

Infrastructure directly. Where a DCS Participant, DCNSP, Direct Agency or Third

Party Beneficiary uses an Aggregator, only the Aggregator is charged this fee.

Non-Bank DCS

Participant

Either or both of a DCS (OF) Participant and a DCS (RF) Participant.

Non-Bank PSP A Payment Service Provider which is an authorised electronic money institution

(as defined in the EMRs 2011) or an authorised payment institution (as defined

in the PSRs 2017).

Non-Responding

Third Party

Beneficiary

A Third Party Beneficiary that receives third party payment notifications from

the Central Infrastructure and does not respond to them.

Participant A DCS Participant, a DCNSP, an Aggregator, a Direct Agency, a Third Party

Beneficiary, or a FIM-only Agency.

Participation

Agreements

In the case of a DCS Participant, the DCS Participation Agreement and, in the

case of any other Participant, any relevant participation agreement concerning

the participation of that Participant in FPS between the Company and the

of 109

relevant Participant.

Pay.UK Pay.UK Limited, a company incorporated in England with registered

number 10872449. Pay.UK is the company which acts as system operator

of the BACS, Faster Payments and ICS payment systems

Payment Request A message sent via the Central Infrastructure to make a payment through FPS.

Payment Service

Provider

Has the same meaning given to it in the PSRs 2017.

Personal Data Has the meaning given to that term in the Data Protection Laws and includes

Personal Data in respect of data subjects who are customers of the DCS

Participants.

Pre-Funding Account Any or all of:

(a) each Reserves Collateralisation Account;

(b) each Settlement Collateralisation Account; and

(c) each Completion Funds Account.

Pre-Funding

Document

Any or all of:

(a) the Deed of Charge;

(b) each Completion Funds Account Agreement; and

(c) each Settlement Trust Deed.

Prospective DCNSP Any person wishing to become a DCNSP.

Prospective DCS

Participant

Any person wishing to become a DCS Participant.

Prospective Direct

Agency

Any person wishing to become a Direct Agency.

Prospective Non- Any person wishing to become a Non-Bank DCS Participant.

of 109

Bank DCS Participant

PSRs 2017 The Payment Services Regulations 2017.

Public Authority DCS

Participant

A DCS Participant which is a Public Authority under the Freedom of Information

Act 2000 (as defined therein) or a Scottish Public Authority under the Freedom of

Information (Scotland) Act 2002 (as defined therein), as appropriate.

Receiving Participant The DCS Participant responsible for settling, as payee, a Payment Request

accepted by him including, in the case of a Bank DCS Participant, accepted by

one of his sponsored DCNSPs, Direct Agencies or Third Party Beneficiaries or by

the Central Infrastructure (as applicable) on his behalf.

Reference Documents Each of the documents listed in Schedule 2 and any other document designated

by the Pay.UK Board as a Reference Document from time to time.

Regulations The Financial Markets and Insolvency (Settlement Finality) Regulations 1999.

Relevant Access

Condition

An additional condition imposed in relation to becoming a DCS Participant or a

Bank DCS Participant sponsoring a Relevant Third Party, specific to that DCS

Participant or Relevant Third Party (as the case may be) or imposed in relation

to becoming a DCNSP specific to that DCNSP. For the avoidance of doubt, the

conditions set out as DCS Participation Criteria, DCNSP Criteria and Relevant

Third Party Participation Criteria in Rule 2 shall not constitute a Relevant Access

Condition. An additional condition imposed in order to ensure compliance with

the DCS Participation Criteria, the DCNSP Criteria or Relevant Third Party

Participation Criteria in Rule 2 may constitute a Relevant Access Condition. A

Relevant Access Condition may be prescribed in connection with a DCS

Participant or a DCNSP.

Relevant Decision A decision, or in the case of (b) below a provisional determination, of the Pay.UK

Board or the Admissions Decision Maker (as the case may be) relating to:

(a) the eligibility of a Prospective DCS Participant to become a DCS

Participant in accordance with the DCS Participation Criteria or of a

Prospective DCNSP to become a DCNSP in accordance with the DCNSP

Criteria pursuant to Rule 3.1;

of 109

(b) the eligibility of an existing DCS Participant to remain a DCS Participant

under the DCS Participation Criteria or of a DCNSP to remain a DCNSP

under the DCNSP Criteria;

(c) the imposition of a Relevant Access Condition on a Prospective DCS

Participant or a Prospective DCNSP pursuant to Rule 3.1;

(d) the imposition of a Relevant Subsequent Condition on a DCS Participant

or a DCNSP pursuant to Rule 3.3;

(e) the suspension or exclusion of a DCS Participant or DCNSP due to a

Default Event or the Exclusion of a DCS Participant or DCNSP due to an

Exclusion Event pursuant to Rule 9;

(f) the eligibility of a Relevant Third Party to become a sponsored

participant in accordance with the Relevant Third Party Participation

Criteria pursuant to Rule 3.2;

(g) the imposition of a Relevant Access Condition in relation to the

sponsorship of a Relevant Third Party pursuant to Rule 3.2;

(h) the imposition of a Relevant Subsequent Condition in relation to the

sponsorship of a Relevant Third Party pursuant to Rule 3.3; or

(i) a determination to instruct a DCS Participant to suspend a Relevant

Third Party from FPS pursuant to Rule 9.2.8.

Relevant Funds Means:

(a) in relation to a DCS (RF) Participant which is an authorised payment

institution

(i) sums received from, or for the benefit of, a payment service user

(as defined in the PSRs 2017) for the execution of a payment

transaction (as defined in the PSRs 2017), and

(ii) sums received from a Payment Service Provider for the

execution of a payment transaction (as defined in the PSRs

of 109

2017) on behalf of a payment service user (as defined in the PSRs

2017);

(b) in relation to a DCS (RF) Participant which is an authorised electronic

money institution, funds that either

(i) have been received in exchange for electronic money (as defined

in the EMRs 2011) that has been issued, or

(ii) have been received by the DCS (RF) Participant for the execution

of payment transactions (as defined in the EMRs 2011) that are

not related to the issuance of electronic money.

Relevant Subsequent

Condition

An additional condition specific to that DCS Participant, DCNSP or Relevant

Third Party, but excluding a Relevant Access Condition. For the avoidance of

doubt, the conditions set out as DCS Participation Criteria, DCNSP Criteria and

Relevant Third Party Participation Criteria in Rule 2 shall not constitute a

Relevant Subsequent Condition.

Relevant Third Party An existing or Prospective DCNSP, Direct Agency, Third Party Beneficiary or FIM-

only agency, as the case may be, sponsored by a Bank DCS Participant.

Relevant Third Party

Participation Criteria

The conditions set out in the FPS Rules which must be satisfied in respect of a

prospective sponsorship of a Relevant Third Party: namely, as regards a DCNSP

(Rule 2.3); Direct Agency (Rule 2.4); Third Party Beneficiary (Rule 2.5); or FIM-only

agency (Rule 2.7), respectively.

Relief Event A failure or delay by the Company to perform one or more obligations under the

Supplier Agreement, an act or omission by a DCS Participant or the Bank of

England, the Supplier acting in compliance with specific instructions issued by

an authorised officer of the Company or a dependency that is not a Supplier

obligation not being fulfilled.

Reserves

Collateralisation

Account

Has the meaning given to it in the Deed of Charge.

of 109

Responding Third

Party Beneficiary

A Third Party Beneficiary that receives third party payment requests from the CI

and responds to them in near real time.

RTGS Account

Mandate Terms and

Conditions

The terms and conditions on which the Settlement Service Provider offers

accounts in the RTGS system to the relevant DCS Participant.

Settlement Account An account (denominated in sterling) maintained at the Bank of England and

used, inter alia, to settle all FPS payment obligations.

Settlement

Collateralisation

Account

Has the meaning given to it in the Deed of Charge.

Settlement Cut-Off The time at which a Settlement Cycle ends, when the Single Amount is fixed for

settlement purposes.

Settlement Cycle The period between the cut off times for payments being settled for one

settlement and the next settlement. Over weekends and bank holidays a

Settlement Cycle therefore includes several calendar days.

Settlement Finality

Directive

Means Directive 98/26/EC of the European Parliament and the Council of 19 May

1998 on settlement finality in payment and securities settlement systems.

Settlement Service

Provider

The financial institution contracted to be the settlement agent for FPS; this is

the Bank of England.

Settlement Trust

Deed

A settlement trust deed (in such form and on such terms as may be specified by

the Company from time to time and as agreed by the Company with the Bank of

England) which the Company requires each DCS (RF) Participant to execute and

maintain (as settlor and trustee), in respect of its Settlement Account and

Completion Funds Account, to support (amongst other things) the insulation of

the funds of payment service users (as defined in the PSRs 2017) or, as the case

may be, electronic money holders from the claims of creditors of the DCS (RF)

Participant. The present form of the Settlement Trust Deed (together with

explanatory guidance) are set out in Schedule 3 and Schedule 3A to these FPS

Rules.

of 109

Single Amount The amount determined for a DCS Participant in accordance with Rule 7.1.1

(Single Amount).

Single Claim Has the meaning given to it in Rule 7.3.2(b) (Settlement Due).

Single Undertaking Has the meaning given to it in Rule 7.3.2(a) (Settlement Due).

Special Resolution

Regime

"SRR" means the Special Resolution Regime in Part 1 of the Banking Act 2009.

Settlement Trust

Beneficiary or STB

The Settlement Service Provider in its capacity as holder of an STB Entitlement.

STB Entitlement A beneficial interest that arises from time to time in favour of the Bank of

England (as Settlement Service Provider) under, and in accordance with, the

terms of the Settlement Trust Deed executed by a DCS (RF) Participant for the

purpose of ensuring that funds are available to the Bank of England (as

Settlement Service Provider) to settle, inter alia, any Single Amount payable by

the DCS (RF) Participant in respect of a Settlement Cycle in accordance with

Rules 7.1 to 7.4 (each inclusive).

Sterling Monetary

Framework

The Bank of England's framework for its operations in the sterling money

markets.

Submitting

Participant

The DCS Participant responsible for settling a Payment Request submitted to

the Central Infrastructure by it or, in the case of a Bank PSP, submitted by a

DCNSP, Direct Agency, FIM-only agency or corporate which such Bank DCS

Participant sponsors.

Supervisory

Assessment

An assessment undertaken by either or both of the FCA and the Commissioners

covering, inter alia, the following areas in respect of a Prospective Non-Bank

DCS Participant:

(a) governance arrangements;

(b) safeguarding customer funds; and

(c) financial crime.

of 109

Supplier The supplier of the Central Infrastructure from time to time, being, as at the date

of adoption of these Rules, Vocalink Limited.

Supplier Agreement The agreement relating to the provision of managed services from time to time

in respect of the provision of the Faster Payments Service.

Synchronous

Payment Request

A Payment Request sent via the CI and accepted (or rejected) in near real time

by the DCS Participant, DCNSP, Direct Agency or Responding Third Party

Beneficiary to which it is addressed e.g. a single immediate payment.

System The system (operating as part of the Faster Payments Service) relating to the

clearing and settlement of FPS payment obligations between DCS Participants.

Third Party

Beneficiary

An organisation (such as a credit card company or utility) that:

(a) is sponsored by one or more Bank DCS Participants;

(b) has an account with each Bank DCS Participant which sponsors it;

(c) is directly connected to the Central Infrastructure to receive Payment

Requests; and

(d) is identified by one or more unique sort codes.

Volume Fee The Volume related fees payable by the Company to the Supplier during each

Year of the Initial Term.

Withdrawal Time Has the meaning given to it in Rule 9.1.3.

Working Day Any day except a Saturday, Sunday, or a bank or public holiday in England.

Year 1 January to 31 December (inclusive) of any calendar year.

1.2 Interpretation

1.2.1 In the FPS Rules any reference to the FPS Rules or to any other agreement or

document (including without limitation, any of the Reference Documents) shall be construed

as a reference to the FPS Rules or such other agreement or document as the same may

from time to time be amended, varied, supplemented, novated or replaced.

of 109

1.2.2 Subject to Rule 1.2.3, any capitalised or defined terms referred to in any of the Reference

Documents which are used in the FPS Rules but not defined in this Rule 1, shall (save as the

context otherwise requires) have the meanings respectively given to them in the relevant

Reference Documents.

1.2.3 References to or capitalised or defined terms used in the FPS Rules but defined in the

Supplier Agreement have the meanings given to them in the Supplier Agreement.

1.2.4 Any reference in the FPS Rules to any statute or statutory provision shall (save as the

context otherwise requires) be construed as a reference to such statute or statutory

provision as the same may be subsequently amended, re-enacted or consolidated.

1.2.5 Words importing one gender shall (where appropriate) include any other gender and

words importing the singular shall (where appropriate) include the plural and vice

versa.

1.2.6 The headings in the FPS Rules are for ease of reference only and shall not affect their

interpretation.

1.2.7 If there is a conflict between any provisions of the FPS Rules and any provision of any of the

Reference Documents then the relevant provision of the FPS Rules shall apply.

1.2.8 The FPS Rules and the Reference Documents shall be deemed to apply to all of the

Participants save that those provisions in the Reference Documents which expressly relate to

specific Participants shall apply only to those Participants or those Participants as

determined by the Company in accordance with Rule 1.2.9.

1.2.9 Subject as otherwise expressly provided in the FPS Rules, if there is any doubt or dispute

about the application of any provision of the Reference Documents including as to whether

any such provision applies to a Participant then the Company shall determine such doubt or

dispute and its decision shall (in the absence of manifest error) be final and binding on the

relevant Participant.

1.2.10 The provisions of the FPS Rules and the other Reference Documents apply to each type of

participation to which a person is admitted (or is applying to be admitted) in the Faster

Payments Service, as well as to each of its participations. This means that if, for example, a

of 109

Non-Bank PSP is admitted (or is applying to be admitted) to participation both as a DCS (OF)

Participant and as a DCS (RF) Participant:

(a) those provisions of the FPS Rules and/or the other Reference Documents that are

expressed to apply to a DCS (OF) Participant or a DCS Participant, shall apply in

respect of the Non-Bank PSP's participation (or prospective participation) in FPS as a

DCS (OF) Participant;

(b) those provisions of the FPS Rules and/or the other Reference Documents that are

expressed to apply to a DCS (RF) Participant or a DCS Participant, shall apply in

respect of the non-Bank PSP's participation (or prospective participation) in FPS as a

DCS (RF) Participant; and

(c) those respective provisions shall, unless the Company determines otherwise, apply

separately and cumulatively in respect of its respective participations as a DCS (OF)

Participant and a DCS (RF) Participant.

of 109

2. CONDITIONS OF PARTICIPATION

2.1 It is a condition of becoming and remaining a DCS Participant that a person must:

(a) hold a sterling Settlement Account at the Bank of England, or (in the case of a Bank DCS

Participant) use a sterling Settlement Account held by a Group Company of the DCS

Participant at the Bank of England, in each case which the Bank of England has agreed

may be used for the purpose of settling FPS payment obligations;

(b) in the case of a Bank DCS Participant, be a Bank PSP and, in the case of a Non-Bank DCS

Participant, be a Non-Bank PSP;

(c) have at least one unique reachable sort code in the EISCD;

(d) have the ability itself and/or through a third party including an Aggregator to comply

on a continuous basis with the technical and operational requirements of the System as

set out in the Reference Documents from time to time and, in the case of a Bank DCS

Participant, to procure that any Relevant Third Party which it sponsors has the ability

itself and/or through a third party including an Aggregator to comply on a continuous

basis with the technical and operational requirements of the System as set out in the

relevant Reference Documents;

(e) validly execute and remain party to the DCS Participation Agreement, the FPS Accounts

Agreement and

(i) (in the case of a Bank DCS Participant and a DCS (OF) Participant) the Deed of

Charge, or

(ii) (in the case of a DCS (RF) Participant) a Settlement Trust Deed (as settlor and

trustee);

(f) abide by the FPS Rules and

(i) (in the case of a Bank DCS Participant other than a Bank DCS (SCA) Participant)

hold a sterling Reserves Collateralisation Account with the Bank of England,

of 109

(ii) (in the case of a DCS (OF) Participant or a Bank DCS (SCA) Participant) hold a

sterling Settlement Collateralisation Account with the Bank of England, and

(iii) (in the case of a DCS (RF) Participant) hold a sterling Completion Funds Account

with the Bank of England;

(g) (in respect of a Prospective Non-Bank DCS Participant) ensure that the Bank of England

and the Company receive confirmation from the FCA and, if applicable, the

Commissioners that (i) the relevant regulatory body has undertaken a Supervisory

Assessment in respect of the Prospective Non-Bank DCS Participant, and (ii) on the basis

of the Supervisory Assessment, the relevant regulatory body has no objection to the

Prospective Non-Bank DCS Participant opening and maintaining a Settlement Account

and a relevant Pre-Funding Account or otherwise being admitted as a Non-Bank DCS

Participant in FPS;

(h) (in the case of a DCS (RF) Participant) at all times ensure that it holds, in its Settlement

Account and Completion Funds Account, only either or both of

(i) Relevant Funds, and

(ii) own funds that are the subject of an STB Entitlement,

and that it keeps such funds segregated from any other funds that it may hold from time

to time;

(i) (in the case of a DCS (OF) Participant) at all times ensure that it holds, in its Settlement

Account and Settlement Collateralisation Account, only own funds (and not any Relevant

Funds);

(j) if required by the Company and at the Company’s sole discretion, provide an external

legal opinion confirming

(i) that each Legal Document to which that DCS Participant is (or will become) a party

constitutes (or will constitute) a legal, valid and binding obligation on that DCS

Participant and an obligation which is capable of being enforced against such DCS

Participant,

of 109

(ii) that, following any exclusion of a DCS Participant under Rule 9, the DCS

Participant shall remain liable for each Single Amount it is calculated as owing in

accordance with these Rules, any fees owing to the Supplier, any fees owing to the

Company and any other fees payable pursuant to Rule 9 notwithstanding such

exclusion under Rule 9, and

(iii) such other matters as the Company considers necessary or appropriate to have

confirmed in the interests of the safety, integrity or efficiency of the Faster

Payments Service;

(k) pay, when first becoming a DCS Participant, an amount determined by the Pay.UK Board,

or approved by the Admissions Decision Maker and approved by the Pay.UK Board. Such

an amount shall be a fair and reasonable estimate of the cost of a new DCS Participant

joining FPS (including but not being limited to technical implementation and Supplier

costs) and shall be calculated using non-discriminatory and objectively justifiable

criteria; and

(l) pay the ongoing FPS Costs and Supplier costs as described in and to the extent required by

Rule 13.

2.2 It is a condition of becoming and remaining a DCNSP that:

(a) the DCNSP must have, or is eligible to have, at least one unique reachable sort code

in the EISCD as a sponsored institution of the relevant sponsoring Bank DCS Participant;

(b) the DCNSP must be able to settle obligations using the sponsoring Bank DCS

Participant’s Settlement Account at the Bank of England;

(c) the DCNSP must have the ability itself and/or through a third party including an

Aggregator to comply on a continuous basis with the technical and operational

requirements of the System for a DCNSP, as set out in the Reference Documents;

(d) the DCNSP and the sponsorship relationship between the Bank DCS Participant and the

DCNSP are compliant with all applicable laws, statutes, bye-laws, regulations, orders

and regulatory policies including the regulatory oversight obligations on the Company

as a recognised payment system under Part 5 of the Banking Act and as a designated

payment system pursuant to the Regulations;

of 109

(e) the DCNSP must validly execute and remain party to a Participation Agreement and

abide by the FPS Rules;

(f) if required by the Company and at the Company’s sole discretion, the DCNSP must

provide an external legal opinion confirming that each Legal Document to which that

DCNSP is (or will become) a party constitutes (or will constitute) a legal, valid and

binding obligation on it and an obligation which is capable of being enforced against it;

(g) the DCNSP must pay, when first becoming a DCNSP, an amount determined by the

Pay.UK Board, or by the Admissions Decision Maker and approved by the Pay.UK Board.

Such an amount shall be a fair and reasonable estimate of the cost of a new DCNSP

joining FPS (including but not being limited to technical implementation and Supplier

costs) and shall be calculated using non- discriminatory and objectively justifiable

criteria; and

(h) the DCNSP must pay the Monthly Fee as described in and to the extent required by Rule

13.

2.3 It is a condition of a Bank DCS Participant sponsoring, and continuing to sponsor, a DCNSP

that:

(a) the DCNSP is able to settle obligations using such sponsoring Bank DCS Participant’s

Settlement Account at the Bank of England;

(b) the DCNSP and the sponsorship relationship between such Bank DCS Participant and

the DCNSP are compliant with all applicable laws, statutes, bye-laws, regulations,

orders and regulatory policies including with the regulatory oversight obligation on

the Company as a recognised payment system under Part 5 of the Banking Act and as a

designated payment system pursuant to the Regulations; and

(c) such Bank DCS Participant ensures that the DCNSP and the sponsorship relationship

with the DCNSP are, and continue to be, in compliance with (a) to (b) above.

2.4 It is a condition of a Bank DCS Participant sponsoring, and continuing to sponsor, a Direct

Agency that:

(a) the Direct Agency is a Payment Service Provider;

of 109

(b) the Direct Agency has, or is eligible to have, at least one unique reachable sort code

in the EISCD as a sponsored institution of such Bank DCS Participant;

(c) the Direct Agency is able to settle obligations using such sponsoring Bank DCS


(d) the Direct Agency has the ability itself and/or through a third party including an


requirements of the System for a Direct Agency, as set out in the Reference Documents;

(e) the Direct Agency and the sponsorship relationship between such Bank DCS Participant

and the Direct Agency are compliant with all applicable laws, statutes, bye-laws,

regulations, orders and regulatory policies including with the regulatory oversight

obligations on the Company as a recognised payment system under Part 5 of the

Banking Act and as a designated payment system pursuant to the Regulations; and

(f) such Bank DCS Participant ensures that the Direct Agency and the sponsorship

relationship with the Direct Agency are, and continue to be, in compliance with (a) to (e)

above.

2.5 It is a condition of a Bank DCS Participant sponsoring, and continuing to sponsor, a Third

Party Beneficiary that:

(a) the Third Party Beneficiary has, or is eligible to have, at least one unique reachable sort

code in the EISCD as a sponsored institution of such Bank DCS Participant;

(b) the Third Party Beneficiary is a customer of such sponsoring Bank DCS Participant with

their own account;

(c) the Third Party Beneficiary is able to settle obligations using such sponsoring Bank DCS


(d) the Third Party Beneficiary has the ability itself and/or through a third party including

an Aggregator to comply on a continuous basis with the technical and operational

requirements of the System for a Third Party Beneficiary, as set out in the Reference

Documents; and

of 109

(e) such Bank DCS Participant ensures that the Third Party Beneficiary and the sponsorship

relationship with the Third Party Beneficiary are, and continue to be, in compliance with

(a) to (d) above.

2.6 Financial institutions, that are not eligible for Direct Agency or Third Party Beneficiary

status, can be granted access to the Scheme using DCA.

2.7 It is a condition of a Bank DCS Participant sponsoring, and continuing to sponsor, a FIM-only

agency that:

(a) the FIM-only agency is a Payment Service Provider;

(b) the FIM-only agency is a customer of such sponsoring Bank DCS Participant with their

own account;

(c) the FIM-only agency has the ability itself and/or through a third party including an


requirements of the System for a FIM-only agency, as set out in Schedule 2;

(d) the FIM-only agency and the sponsorship relationship between such Bank DCS

Participant and the FIM-only agency are compliant with all applicable laws, statutes,

bye-laws, regulations, orders and regulatory policies including with the regulatory

oversight obligations on the Company as a recognised payment system under Part 5 of

the Banking Act and as a designated payment system pursuant to the Regulations; and

(e) such Bank DCS Participant ensures that the FIM-only agency and the sponsorship

relationship with the FIM-only agency are, and continue to be, in compliance with

(a) to (d) above.

of 109

3. DECISIONS IN RESPECT OF PARTICIPATION

3.1 Admissions Process

(a) A Prospective DCS Participant may submit an application in writing to the Pay.UK

Board providing that it agrees to comply with the Appeals Process under Rule 11 and

providing that in doing so it agrees to comply with Rule 13. Any application must set out

sufficient detail for the Company to satisfy itself of the Prospective DCS Participant’s

compliance, and its ability to continue to comply, with the DCS Participation Criteria

applicable to it.

(b) The Pay.UK Board or Admissions Decision Maker shall consider and determine

whether the Prospective DCS Participant can comply, and can be expected to continue

to comply, with the DCS Participation Criteria applicable to it, and if so satisfied it shall

accept the application (on the basis of Relevant Access Condition(s) if considered

necessary by the A d m i s s i o n Decision Maker) and notify the P a y . U K Board of

such acceptance.

(c) The Pay.UK Board or Admissions Decision Maker will notify the Prospective DCS

Participant and the Pay.UK Board in writing of the decision (and any Relevant Access

Condition(s) or reasons if applicable) within 3 months after receiving the application

described in Rule 3.1(a) or such longer period as agreed between the Company and the

Prospective DCS Participant. Such a decision shall be a Relevant Decision. The Pay.UK

Board will be notified of the Relevant Decision within the same timescale.

(d) If a Prospective DCS Participant is refused admission as a DCS Participant in the System

or disagrees with any Relevant Access Condition(s) imposed on it, it shall be entitled to

appeal against that Relevant Decision by using the Appeals Process but, for the

avoidance of doubt, such a Prospective DCS Participant shall not be admitted to

participation in FPS until such an appeal has been resolved.

(e) A Prospective DCNSP may submit an application in writing to the Pay. UK Board

providing that it agrees to comply with the appeals process under Rule 11 and providing

that in doing so it agrees to comply with the relevant provisions of Rule 13. Any

application must set out sufficient detail for the Company to satisfy itself of the

Prospective DCNSP’s compliance, and its ability to continue to comply, with the DCNSP

Criteria.

of 109

(f) The Pay.UK Board or Admissions Decision Maker shall consider and determine

whether the Prospective DCNSP can comply, and can be expected to continue to

comply, with the DCNSP Criteria, and if so satisfied it shall accept the application (on the

basis of Relevant Access Condition(s) if considered necessary by the A d m i s s i o n s

Decision Maker) and notify the P a y . U K Board of such acceptance.

(g) The Pay.UK Board of Admissions Decision Maker will notify the Prospective DCNSP

and the Pay.UK Board in writing of the decision (and any Relevant Access Condition(s)

or reasons if applicable) within 3 months after receiving the application described in

Rule 3.1(e) or such longer period as agreed between the Company and the Prospective

DCNSP. Such a decision shall be a Relevant Decision. The Pay.UK Board will be notified

of the Relevant Decision within the same timescale.

(h) If a Prospective DCNSP is refused participation in FPS or disagrees with any Relevant

Access Condition(s) imposed on it, it shall be entitled to appeal against that Relevant

Decision by using the Appeals P rocess but, for the avoidance of doubt, such a

Prospective DCNSP shall not be s o admitted until such an appeal has been resolved

and shall only be admitted if the Prospective DCNSP is accepted by the Company for

sponsorship by a Bank DCS Participant in accordance with Rule 3.2.

3.2 Admissions Process for Bank DCS Participants to Sponsor a Relevant Third Party

(a) A Bank DCS Participant may submit an application to sponsor a prospective Relevant

Third Party in writing to the Pay.UK Board. Any application must set out sufficient

detail for the Company to satisfy itself of the sponsoring Bank DCS Participant and its

prospective Relevant Third Party’s compliance, and their ability to continue to comply,

with the Relevant Third Party Participation Criteria.

(b) The P a y . U K B o a r d o r A d m i s s i o n s Decision Maker shall consider and determine

whether the sponsoring B a n k DCS Participant and their prospective Relevant Third

Party can comply, and can be expected to continue to comply, with the Relevant Third

Party Participation Criteria, and if so satisfied it shall accept the sponsoring Bank

DCS Participant’s application (on the basis of Relevant Access Condition(s) if considered

necessary by the Admissions Decision Maker) and notify the Board of such acceptance.

The sponsoring Bank DCS Participant of the Relevant Third Party is wholly responsible

for the actions of its sponsored Relevant Third Party under Rule 5.

of 109

(c) The Admissions Decision Maker will notify the sponsoring Bank DCS Participant and the

Pay.UK Board in writing of the decision (and any Relevant Access Condition(s) or reasons

for refusal of sponsorship if applicable) within 3 months after receiving the application

described in Rule 3.2(a) or such longer period as agreed between the Company and the

sponsoring Bank DCS Participant. Such a decision shall be a Relevant Decision. Pay.UK

Board will be notified of the Relevant Decision within the same timescale.

(d) If a Bank DCS Participant is refused permission to sponsor a Relevant Third Party or

disagrees with any Relevant Access Condition(s) imposed on it, it shall be entitled to

appeal against that Relevant Decision by using the Appeals Process but, for the

avoidance of doubt, such a prospective Relevant Third Party shall not become a

participant of the System until such an appeal has been resolved. The Company expects

a Bank DCS Participant to, and the Bank DCS Participant shall, invoke the Appeals

Process described in Rule 11 in the circumstances and according to the requirements set

out in Rule 11.11 and Rule 11.12.

(e) Each Bank DCS Participant shall take all necessary steps as designated by the Company

to allow the prospective Relevant Third Party to become a sponsored Relevant Third

Party, provided any Appeals Process initiated in respect of its admission has been

completed.

3.3 Imposition of Relevant Subsequent Condition

(a) The Pay.UK Board or Admissions Decision Maker may, from time to time, consider and

determine whether a Relevant Subsequent Condition is required in relation to a particular

Bank DCS Participant, a particular DCNSP or sponsored Relevant Third Party arrangement

and if so satisfied, acting reasonably and in good faith, the Pay.UK Board or Admissions

Decision Maker shall impose a Relevant Subsequent Condition on such a DCS Participant,

DCNSP or in relation to such a sponsorship of a Relevant Third Party (as the case may be).

(b) The Pay.UK Board or Admissions Decision Makers will notify the Bank DCS Participant,

DCNSP and the Pay.UK Board in writing of the decision to impose a Relevant Subsequent

Condition within 5 Working Days after the decision is taken. Such a decision shall be a

Relevant Decision.

of 109

4. RIGHTS AND DUTIES OF PARTICIPANTS

4.1 Each Participant accepts responsibilities and liabilities applicable to them under the FPS Rules

as principal and not as agent for any other party.

4.2 Each Participant must comply with the relevant obligations and functions of that Participant as

set out in the Reference Documents in Schedule 2.

4.3 Each Participant agrees and acknowledges that, for the purposes of administering FPS, the

Company may co-operate or discuss the performance and operation by a Participant in respect

of its participation in FPS with:

(a) regulatory bodies from time to time and/or as may be required by laws, statutes, bye-

laws, regulations, orders, regulatory policies (including any requirement or notice of any

regulatory body) from time to time in force; and

(b) in the case of any Bank DCS Participant, those Relevant Third Parties sponsored by that

Bank DCS Participant and any Aggregator providing services to such Bank DCS

Participant;

(c) in the case of any other Participant, the relevant sponsoring Bank DCS Participant and

any Aggregator providing services to such Participant; and

(d) in the case of any Aggregator, the Participants to which it provides the services of an

Aggregator.

This would include co-operating with the Bank of England should a DCS Participant or DCNSP

be subject to the Special Resolution Regime.

4.4 Each Participant must promptly inform the Company as follows:

(a) in the case of any Bank DCS Participant, those Relevant Third Parties sponsored by that

Bank DCS Participant and any Aggregator providing services to such Bank DCS

Participant;

(b) in the case of any other Participant, the relevant sponsoring Bank DCS Participant and

of 109

any Aggregator providing services to such Participant; and

(c) in the case of any Aggregator, the Participants to which it provides the services of an

Aggregator.

4.5 For the purposes of the Regulations, each DCS Participant must (except if such request

is frivolous or vexatious) provide to any interested person who requests it within 14 days of

such request and upon payment by such person of a reasonable charge:

(a) details of the systems which are designated for the purposes of the Settlement

Finality Directive in which such DCS Participant participates; and

(b) information about the main rules governing the functioning of such systems.

4.6 For the purposes of the Regulations, each DCS Participant must upon:

(a) the passing of a creditor's voluntary winding up resolution (or analogous procedure in

the jurisdiction of incorporation of such DCS Participant) in respect of that DCS

Participant; or

(b) a trust deed granted by it becoming a protected trust deed,

notify the Company and the Bank of England that such a resolution (or analogous procedure)

has been passed, or, as the case may be, that such a trust deed has become a protected trust

deed.

4.7 Each DCS Participant agrees to contribute in the manners and proportions decided by the

Company from time to time to the liabilities reasonably incurred by the Company in

respect of FPS. Notwithstanding the provisions of this Rule 4.7, no DCS Participant shall be

obliged to contribute:

(a) to the FPS Costs other than in the manner and proportion set out in Rule 13.1; and

(b) to the liabilities incurred by the Company as described in Schedule 1, other than in the

manner and proportion set out in Rule 13.2 and Schedule 1.

4.8 Each Participant agrees to cooperate in a timely fashion with the Company in respect of any

reasonable request made by the Company and the other Participants concerning the

of 109

processing, operations or services of FPS and including in respect of any reasonable request

made by the Company concerning the development or enhancement of the System, any

project commenced by the Company to effect such development or enhancement and, where

necessary, to ensure that its personnel with appropriate skills, competence and seniority as

may reasonably be required in relation thereto are assigned to such requests and/or projects.

4.9 Each Participant shall take all necessary steps as designated by the Company to allow a

Prospective DCS Participant to become a DCS Participant or a Prospective DCNSP to become a

DCNSP, provided any appeals process initiated in respect of its admission has been completed.

4.10 Each DCS Participant agrees to ensure that all ‘Bacs addressable’ sort codes for credits

assigned to that DCS Participant are able to receive payments via the Faster Payments Service,

except where it can be demonstrated there is no business requirement to make or receive

payments via the Faster Payments Service and the DCS Participant has actively stated the

reasons why the sort code should not be made FPS addressable.

of 109

5. RESPONSIBILITY FOR RELEVANT THIRD PARTIES

5.1 Each B a n k DCS Participant shall be wholly responsible for the actions and omissions of any

Relevant Third Party or other person which it sponsors in relation to FPS, which, if carried

out by the B a n k DCS Participant itself, would cause or have caused the Bank DCS Participant

to be in breach of any of its obligations under the DCS Participation Agreement or the FPS Rules,

including its obligations in respect of the Reference Documents. A Bank DCS Participant's

responsibility for those acts and omissions shall be the same as if it had carried out the act or

omission itself.

5.2 Bank DCS Participants are required to work with any entity that they sponsor in relation to

FPS to ensure that all Bacs addressable sort codes for credits assigned to those entities are able

to receive payments processed by the Faster Payments Service, except where it can be

demonstrated that that entity has no business requirement to make or receive payments via the

Faster Payments Service and has actively stated the reasons why their sort codes should not be

made FPS addressable.

5.3 Each Bank DCS Participant shall provide to the Company at any time on and as soon as

practicable after a request by the Company and otherwise within one month after the period of

each six months after 1 January and 1 July in each Year full, complete and accurate details of the

total number of FPS Payments in such six month periods by that Bank DCS Participant for any

Relevant Third Party sponsored by the Bank DCS Participant and of any of its systemically

important customers.

5.4 Each Aggregator shall provide to the Company at any time on and as soon as practicable after a

request by the Company and otherwise within one month after the period of each six months

after 1 January and 1 July in each Year full, complete and accurate details of the total number of

FPS Payments in such six month periods by any Participant for which they may provide the

services of an Aggregator.

of 109

6. PAYMENTS

6.1 Eligible Payment Requests

In order for a Payment Request to be eligible for Clearing it must:

(a) comply with the specification of a Payment Request as set out in the Reference

Documents;

(b) not be subject to conditions imposed on the Receiving Participant, DCNSP or

Direct Agency with respect to the payment; and

(c) be submitted by DCS Participants, DCNSPs or Direct Agencies directly or via FIM (or

FIM-only agencies via FIM or by corporates submitting via DCA) to DCS Participants,

DCNSPs, Direct Agencies or Third Party Beneficiaries identified as such in the

Extended Industry Sort Code Directory.

6.2 Revocability of Payments

6.2.1 A Payment Request cannot be revoked once the following point is reached:

(a) for a Payment Request submitted individually by the DCS Participant: the point when

the Payment Request leaves the DCS Participant's system for transmission to the

Central Infrastructure;

(b) for a Payment Request submitted individually by a DCNSP or Direct Agency

sponsored by the Bank DCS Participant: the point when the Authorisation Response

authorising the payment leaves the relevant Bank DCS Participant's system for

transmission to the Central Infrastructure;

(c) for a Payment Request in a FIM file submitted by the Bank DCS Participant: the

point when the Bank DCS Participant's acceptance of the FIM Authorisation Request

for that file leaves the relevant Bank DCS Participant's system for transmission to the

Central Infrastructure;

(d) for a Payment Request in a FIM file submitted by a DCNSP, Direct Agency or a FIM-

only agency sponsored by the Bank DCS Participant: the point when the Authorisation

Response authorising the file of payments leaves the relevant Bank DCS Participant's

system for transmission to the Central Infrastructure;

of 109

(e) for a Payment Request in a file submitted via DCA, sponsored by the Bank DCS

Participant: the point when the Authorisation Response authorising the file of

payments leaves the relevant Bank DCS Participant's system for transmission to the

Central Infrastructure; or

(f) for a Payment Request in a file submitted via DCA sponsored by a DCNSP or Direct

Agency which itself is sponsored by the Bank DCS Participant: the point when the

Authorisation Response authorising the file of payments leaves the relevant Bank

DCS Participant's system for transmission to the Central Infrastructure.

Each point specified in this Rule 6.2 is the point (for the relevant type of Payment Request)

at which the Payment Request takes effect as having been entered into the System for the

purposes of the Regulations.

6.2.2 A Synchronous Payment Request (Single Immediate Payment) is irrevocable (for the

purposes of settlement and of the Regulations) when the Receiving Participant's

acceptance of the Payment Request, or the Direct Payment Response indicating

acceptance, leaves the Receiving Participant's system for transmission to the Central

Infrastructure;

6.2.3 An Asynchronous Payment (SOP, FDP or DCA) Request is irrevocable (for the purposes of

settlement and of the Regulations) when the Central Infrastructure sends the payment

acceptance to the Submitting Participant or, in the case of a DCS Participant, its DCNSP,

Direct Agency, or to the FIM module or the DCA module as appropriate.

of 109

7. SETTLEMENT ARRANGEMENTS

7.1 Single Amount

7.1.1 In respect of a particular Settlement Cycle there will be only one single amount payable to or by

each DCS Participant (the “Single Amount”) which will be determined by the Central

Infrastructure, on behalf of the Company which acts as principal and not as agent of any DCS

Participant, at the relevant Settlement Cut-Off as being the net sum of the amounts set out in

all the Payment Requests accepted in that Settlement Cycle in accordance with the FPS Rules in

which the DCS Participant is expressed to be a Submitting and/or Receiving Participant.

7.1.2 The Central Infrastructure, on behalf of the Company, will notify each DCS Participant of its

Single Amount in accordance with the Functional Specification and other Reference Documents.

7.1.3 Settlement of the Single Amount represents the point of settlement finality. Settlement finality

occurs at the time of settlement of the Single Amount stored by SWIFT, except when the Market

Infrastructure Resiliency Service (MIRS) is in use as the active RTGS system, when settlement

finality occurs at the time of settlement of the Single Amount applied to the SWIFT MIRS

database.

7.2 No Bilateral Obligation or Set-off

7.2.1 Neither the transmission nor the processing of any Payment Request nor any payment made to

a third party by the Receiving Participant as directed by, or otherwise in connection with, such

Payment Request shall by itself create any bilateral debt (or other similar claim whatsoever)

between the DCS Participants or between a DCS Participant and the Company. The DCS

Participants waive any such bilateral obligations, bilateral liabilities or other similar claims

between the DCS Participants or between a DCS Participant and the Company which might

otherwise arise by implication or operation of law but for the FPS Rules as a result of the actions

specified in the previous sentence.

7.2.2 The determination by the Central Infrastructure on behalf of the Company of the Single Amount

does not constitute or result in any form of set-off, novation, or other aggregation of bilateral

gross claims.

7.3 Settlement Due

7.3.1 The Single Amount in respect of each DCS Participant and a Settlement Cycle is due for

of 109

settlement on the earlier of:

(a) either

(i) the relevant time on the Working Day on which that Settlement Cycle is due to be

settled, as specified in the FPS Procedures; or

(ii) if a DCS Participant does not make funds available (either by way of its

Settlement Account or its Pre-Funding Account) to the Settlement Service

Provider equal to its Single Undertaking (as defined below) at the time

specified in sub-paragraph (i) above and the Company has contacted that DCS

Participant and the Settlement Service Provider to enquire whether funds will be

made available within a reasonable time after settlement as per sub- paragraph

(i) above has failed, the time specified by the Company (in its absolute

discretion);

whichever is the later of (i) or (ii) above; or

(b) the moment when the Company excludes a DCS Participant under Rule 9.3.

7.3.2 (a) If a DCS Participant's Single Amount in respect of a Settlement Cycle is a negative number

such DCS Participant will have an obligation towards all other DCS Participants (as joint but

not several creditors and each such DCS Participant acting as principal and not as agent of

any other person) to make funds available in full with the Settlement Service Provider for

settlement purposes in respect of the same Settlement Cycle equal to such Single Amount

(a "Single Undertaking").

(b) If, at any time, a DCS Participant's Single Amount in respect of a Settlement Cycle is a

positive number, such DCS Participant (as principal and not as agent of any other person)

will have a claim against all other DCS Participants (as joint but not several obligors) to

cause the Company to use its best endeavours to procure that such Single Amount is

settled by the Settlement Service Provider out of the funds made available to it (a "Single

Claim") in respect of the same Settlement Cycle.

7.3.3 Each DCS Participant must pay any Single Undertaking determined in respect of it, even if it

has challenged the validity of the corresponding Single Amount, pending the outcome of

that challenge.

7.4 Default Arrangements

of 109

The Company confirms that its Default Arrangements include:

7.4.1 the rights and powers reserved to the Company to suspend or exclude a DCS Participant in

accordance with

(a) the terms of the DCS Participation Agreement, and

(b) Rules 9.2 and 9.3;

7.4.2 the provisions, and the operation of the provisions, of the Pre-Funding Documents;

7.4.3 the giving by the Company or a DCS Participant of any payment instruction to the Settlement

Service Provider the execution of which results or is to result in the realisation (in whole or in

part) of an STB Entitlement in accordance with the Settlement Service Provider's obligations

under the FPS Accounts Agreement and the Settlement Service Provider Agreement;

7.4.4 any step taken in connection with the execution of a payment instruction or the realisation (in

whole or in part) of an STB Entitlement as referred to in Rule 7.4.3; and

7.4.5 the operation of the settlement arrangements set out and contemplated by

(a) Rules 7.1 to 7.3 (each inclusive), and

(b) clause 5 (Non-Paying DCS Participant Shortfall) of the FPS Accounts Agreement.

of 109

8. OPERATING UNDERTAKINGS

8.1 Each DCS Participant will either:

(a) implement processes to check for duplicate Faster Payments Identifiers (FPIDs) on

receipt, and require that DCNSP’s, Direct Agencies and Responding Third Party

Beneficiaries which a Bank DCS Participant sponsors will do so also; or

(b) acknowledge and accept that Losses would not have been incurred by that DCS

Participant, DCNSP, Direct Agency or Responding Third Party Beneficiary had that DCS

Participant, DCNSP, Direct Agency or Responding Third Party Beneficiary adopted such

processes as set out in Rule 8.1(a) above, and that such Losses will not be recoverable.

8.2 Each Participant will notify the Company and the Supplier of any material planned changes to

that Participant’s processing arrangements, and technical specifications, in that Participant’s

system to the extent that such changes may adversely affect the Supplier's provision of the

services.

8.3 Each Participant will ensure that its relevant technical and other personnel responds within a

reasonable time to, and complies with, all reasonable requests from the Company and the

Supplier in relation to the maintenance and operation of service components owned and/or

managed in connection with FPS.

8.4 Each Bank DCS Participant will impose obligations on Direct Agencies and Third Party

Beneficiaries which it sponsors that are substantially similar to those obligations set out above

in Rules 8.2 to 8.3 in relation to the manner in which those Direct Agencies and Third

Party Beneficiaries use the FPS.

8.5 Each Bank DCS Participant will ensure that its agreements with Direct Agencies and Third Party

Beneficiaries which it sponsors enable the DCS Participant to comply with Rule 9.2.8.

8.6 No Participant will bring any claims or proceedings against the Supplier in relation to any

breach or alleged breach of the Supplier Agreement (including in negligence) by the Supplier,

and require that only the Company brings any such claims on behalf of the relevant

Participants under the Supplier Agreement. The Supplier has the benefit of this Rule 8.6

under the Contracts (Rights of Third Parties) Act 1999.

of 109

8.7 Each Bank DCS Participant will state in its contracts with Direct Agencies that it sponsors

that any claims or proceedings in relation to the Faster Payments Service should be brought, in

the first instance, against the Bank DCS Participant rather than against the Company or the

Supplier.

8.8 Each DCS Participant and each DCNSP will act in a manner that seeks to avoid the Supplier

suffering from a Relief Event.

8.9 Each Participant agrees the Company may:

(a) suspend FPS where the P a y . U K Board, or the Admissions Decision Maker having

been delegated this power by the Pay.UK Board, decides it is necessary to protect the

security and integrity of the FPS;

(b) cooperate with the Supplier and its authorised sub-contractors as is reasonably

required to enable the Supplier to perform the services in accordance with the Supplier

Agreement; and

(c) provide the Supplier (in reasonable detail) with all information relating to the Company

and DCS Participants that is reasonably required to enable the Supplier to provide the

services in accordance with the Supplier Agreement.

8.10 Each Participant will:

(a) cooperate with the Supplier and its authorised sub-contractors as is reasonably

required to enable the Supplier to perform the services in accordance with the Supplier

Agreement;

(b) provide the Supplier (in reasonable detail) with all information relating to themselves

that is reasonably required to enable the Supplier to provide the services in accordance

with the Supplier Agreement; and

(c) otherwise comply in all material respects with the requirements and activities set out in

the Supplier Agreement that are specified to be carried out by Participants generally, or a

Participant individually.

of 109

9. WITHDRAWAL, SUSPENSION AND EXCLUSION

9.1 Withdrawal of a DCS Participant

9.1.1 Any DCS Participant shall be entitled to withdraw from FPS by giving written notice to the

Pay.UK Board , and subject to Rule 9.1.3, a proposed time and date of withdrawal.

9.1.2 On receiving a notice of withdrawal, the Company shall acknowledge receipt of the notice

to the DCS Participant who has given it as soon as reasonably practicable.

9.1.3 The time and date on which a withdrawal by a DCS Participant shall be deemed to be effective

(the "Withdrawal Time") shall be determined as follows:

(a) in the event that the withdrawing DCS Participant gives 130 or more Working Days’

notice of withdrawal (excluding the day on which such notice is received), the time

and date specified in the notice of withdrawal;

(b) in the event that the withdrawing DCS Participant gives less than 130 Working Days’

notice of withdrawal (excluding the day on which such notice is received (and the

P a y . U K B o a r d must notify the DCS Participant of the date of receipt)) the earliest

Working Day and time on which the Pay.UK Board determines (having consulted with the

Bank of England) that withdrawal of the withdrawing DCS Participant can be

accommodated by the Company and all the other Participants from a technical

perspective without thereby prejudicing the integrity of the System, and shall in any case

not be more than 130 Working Days after receipt of the DCS Participant's notice; or

(c) in the event that the withdrawing DCS Participant fails to give an effective and/or

complete withdrawal notice (specifying time and date), a time set by the Company on

the Working Day following the expiry of 130 Working Days (excluding the day on which

such notice is received) after the date of receipt of the notice by the Pay.UK Board (and

the Pay.UK Board must notify the DCS Participant of the date of receipt and of such a

Withdrawal Time set by the Company).

Provided always that in the case of (a), (b) or (c) above the P a y . U K B o a r d in

i t s reasonable discretion shall always have the right to notify the DCS Participant of an

alternative Withdrawal Time if it is necessary to preserve the integrity of the System, and

such date shall not be less than 20 nor more than 130 Working Days from the date the

notice is given by the Pay.UK Board.

of 109

9.1.4 Once a notice of withdrawal has been received by the Company, the withdrawing DCS

Participant shall only be entitled to revoke such notice with the prior written approval of the

Pay.UK Board, which is not to be unreasonably withheld or delayed.

9.1.5 The P a y . U K B o a r d shall notify the Bank of England and each other Participant in writing

without delay after it receives a withdrawal notice (or a revocation/ retraction of such

withdrawal notice), and shall include in that notice (or as soon afterwards as it is

determined) the Withdrawal Time in respect of the withdrawing DCS Participant.

9.1.6 Notwithstanding any withdrawal, a withdrawing DCS Participant shall be fully liable for:

(a) the due performance of all its obligations, as determined by the Company, under the FPS

Rules incurred prior to the Withdrawal Time;

(b) its Single Undertaking(s) determined by the System on the Withdrawal Time; and

(c) any additional direct costs arising from the withdrawal incurred by the Company, and/or

any other Participant in accommodating the withdrawal of the withdrawing DCS

Participant provided such costs are non-discriminatory and objectively justifiable.

9.2 Suspension of a DCS Participant

9.2.1 The Pay.UK Board or, in a case of urgency (as determined by the Admissions Decision Maker,

acting reasonably and in good faith) where it is not reasonably practicable for a quorate Pay.UK

Board to be convened, the Admissions Decision Maker, may suspend a DCS Participant’s

participation in FPS with immediate effect (or with effect from such time and date as the

Admissions Decision Maker or the Pay.UK Board as appropriate may specify) in the following

circumstances, each of which constitutes a “Suspension Event”:

(a) where, in the reasonable and good faith opinion of the P a y . U K Board or, in a

case of urgency, the A d m i s s i o n s D e c i s i o n M a k e r , the DCS Participant is in

material breach of any provision of the FPS Rules or ceases to satisfy the DCS

Participation Criteria applicable to it;

(b) the DCS Participant has failed to pay its Single Undertaking (whether this be by way of

a DCS Participant’s Settlement Account or its Pre-Funding Account) when due;

of 109

(c) if, in the reasonable and good faith opinion of the Pay.UK Board or, in a case of urgency,

the Admissions Decision Maker circumstances have arisen in relation to the DCS

Participant which could be materially prejudicial to the System or could represent a

threat to the security, integrity or reputation of the System;

(d) a Default Event occurs in respect of that DCS Participant; or

(e) at the written request of the DCS Participant concerned.

9.2.2 Each DCS Participant undertakes to the Company to notify the Pay.UK Board or Admissions

Decision Maker immediately upon becoming aware of the occurrence of any of the following

events, each of which constitutes a "Default Event" subject to paragraph 9.2.3 below:

(a) the presentation of any petition for the liquidation or winding-up of the DCS Participant

or for the appointment of a liquidator or an administrator in relation to the DCS

Participant unless, in the case of a petition which would be considered, on reasonable

grounds, to be frivolous or vexatious, the petition is withdrawn within 21 days;

(b) the appointment or purported appointment of a liquidator, administrator, receiver,

administrative receiver, manager, trustee or similar person in respect of the DCS

Participant or any substantial part of the property or assets of the DCS Participant;

(c) the dissolution of the DCS Participant or the publication in the Gazette of a notice

of prospective striking off pursuant to Sections 1000 and 1001 of the Companies Act

2006 (or the making of an application by the DCS Participant for its striking off

pursuant to Section 1003 of the Companies Act 2006);

(d) the occurrence under the laws of any applicable jurisdiction of anything analogous to

or having a substantially similar effect to any of the events described in Rules 9.2.2(a)

to 9.2.2(c) inclusive in relation to the DCS Participant;

(e) the suspension of the DCS Participant under Rule 9.2.1 and the relevant Suspension

Event has remained unremedied (other than under Rule 9.2.1(e)) for a continuous

period of 50 Working Days;

(f) the DCS Participant ceasing to satisfy the DCS Participation Criteria applicable to it; and

(g) the DCS Participant having any authorisation required by it to provide payment or other

banking services in the United Kingdom suspended or withdrawn, and not immediately

of 109

issued or replaced.

9.2.3 Notwithstanding any other provision of these Rules, a Default Event shall be deemed NOT to

have occurred in respect of a DCS Participant where such DCS Participant (or any Group

Company) is subject to any crisis management measures, crisis prevention measures or

recognised third-country resolution actions under Part 1 of the Banking Act 2009 provided the

substantive obligations of the DCS Participant under the FPS Rules (including payment and

delivery obligations and the provision of collateral) continue to be performed.

9.2.4 The Pay.UK Board or Admissions Decision Maker shall notify the Company's chair (or, if he

or she is unavailable, , any other director of the Company), Participants and the Bank of

England of any suspension made pursuant to Rule 9.2.1 as soon as possible. Any suspension

pursuant to Rule 9.2.1 which is still in force at 16:00 on the first Working Day on which such

suspension has been invoked shall be reviewed by the Pay.UK Board as soon as practicable but

in any event within two Working Days. The Pay.UK Board shall then take such further action as

is considered appropriate.

9.2.5 Where a DCS Participant is suspended by the Company from FPS pursuant to Rule 9.2.1, such

suspended DCS Participant shall remain fully liable for the due performance of all its obligations

(including any Single Undertaking determined after the effective time and date of its

suspension) under the FPS Rules incurred prior to the effective time and date of its

suspension from FPS, being the time and date determined by the Pay.UK Board or Admissions

Decision Maker in their absolute discretion having regard to the need to preserve the integrity

of the System (the "Suspension Time").

9.2.6 A suspended DCS Participant will, as determined by, and at the discretion of, the Company,

pay to the Company any direct costs incurred by the Company and/or any other DCS Participant

arising from the suspended DCS Participant's suspension, other than (in respect of other DCS

Participants' direct costs only) where suspended pursuant to Rule 9.2.1(c) due to no fault of

the DCS Participant.

9.2.7 Without limiting the generality of Rule 9.2.6, a suspended DCS Participant shall make payment

of any other costs, fees and expenses payable by the suspended DCS Participant as may be

determined by the Appeal Panel pursuant to Rule 11.8.

9.2.8 The Pay.UK Board or, in a case of urgency (as determined by the Admissions Decision

Maker, acting reasonably and in good faith) where it is not reasonably practicable for a

of 109

quorate Pay.UK Board to be convened, the Admissions Decision Maker, may require a Bank DCS

Participant to, and the Bank DCS Participant shall, temporarily or indefinitely suspend, as

appropriate, from FPS particular Relevant Third Parties which that Bank DCS Participant

sponsors where in the reasonable and good faith opinion of the Pay.UK Board, or in the case of

urgency, the Admissions Decision Maker: (i) the Relevant Third Party no longer satisfies the

Relevant Third Party Participation Criteria or (ii) circumstances have arisen in relation to the

Relevant Third Party which could be materially prejudicial to the System or represent a threat

to the security, integrity or reputation of the System.

9.2.9 Any suspension pursuant to Rule 9.2.8 which is still in force at 16:00 on the first Working Day

on which such suspension has been invoked shall be reviewed by the Pay.UK Board as soon

as practicable but in any event within two Working Days. The Pay.UK Board shall then take

such further action as is considered appropriate.

9.3 Exclusion of a DCS Participant

9.3.1 The Pay.UK Board may exclude a DCS Participant with immediate effect (or with effect from

such time and date as the Pay.UK Board as appropriate may specify) in respect of FPS in the

following circumstances, each of which constitutes an "Exclusion Event":

(a) where, in the reasonable opinion of the Pay.UK Board acting in good faith, the DCS

Participant is in material breach of any provision of the FPS Rules or ceases to satisfy the

DCS Participation Criteria applicable to it;

(b) if, in the reasonable opinion of the Pay.UK Board acting in good faith, circumstances

have arisen in relation to the DCS Participant which could be materially prejudicial to the

System or represent a threat to the security, integrity or reputation of the System; or

(c) if a Default Event occurs in respect of that DCS Participant.

9.3.2 The Pay.UK Board or Admissions Decision Maker shall notify the remaining Participants,

the Bank of England and the Company without delay of any exclusion made pursuant to Rule

9.3.1.

9.3.3 Where a DCS Participant is excluded by the Company from FPS pursuant to the FPS Rules,

such excluded DCS Participant shall remain fully liable for the due performance of all its

obligations (including any Single Undertaking determined after the effective time and date of

its exclusion) under the FPS Rules incurred prior to the effective time and date of its exclusion

of 109

from FPS, being the time and date determined by the Pay.UK Board or Admissions Decision

Maker in their absolute discretion having regard to the need to preserve the integrity of the

System (the "Exclusion Time").

9.3.4 An excluded DCS Participant will, as determined by, and at the discretion of, the Company,

pay to the Company any direct costs incurred by the Company and/or any other Participant

arising from its exclusion, provided such costs are non-discriminatory and objectively

justifiable.

9.3.5 Without limiting the generality of Rule 9.3.4 above, an excluded DCS Participant shall make

payment of any other costs, fees and expenses payable by the excluded DCS Participant as

may be determined by the Appeal Panel pursuant to Rule 11.8.

9.4 Rights and Obligations of a DCS Participant in relation to Single Amount

9.4.1 Any decision of the P a y . U K Board shall be without prejudice to the rights and obligations

of each DCS Participant with respect to each Single Amount existing at the moment a DCS

Participant is suspended or excluded in accordance with this Rule 9 or determined at any time

thereafter.

9.5 Consequences of Rule 9 for Participants

9.5.1 If any Bank DCS Participant shall withdraw, be suspended or excluded in accordance with this

Rule 9 or any relevant Participation Agreement and any Relevant Third Party sponsored by that

Bank DCS Participant is no longer able to settle obligations using that sponsoring Bank DCS

Participant's Settlement Account at the Bank of England, the Relevant Third Party sponsored by

that Bank DCS Participant shall be required to withdraw or shall be suspended or excluded from

FPS as a Relevant Third Party until such time as that Relevant Third Party is able to settle

obligations using a Settlement Account at the Bank of England of another sponsoring Bank DCS

Participant.

9.5.2 The basis on which any Participant may withdraw or be suspended or excluded by the Company

from FPS shall be governed by the FPS Rules and the terms of a relevant Participation

Agreement which shall be applied by the Pay.UK Board or Admissions Decision Makers on behalf

of the Company in accordance with the FPS Rules and the terms of a relevant Participation

Agreement, as the case may be.

9.5.3 The Pay.UK Board or, in a case of urgency (as determined by the Admissions Decision

of 109

Maker, acting reasonably and in good faith) where it is not reasonably practicable for a

quorate Pay.UK Board to be convened, the Admissions Decision Maker, may temporarily or

indefinitely suspend a DCNSP from FPS where in the reasonable and good faith opinion of the

Pay.UK Board, or in the case of urgency, the Admissions Decision Maker: (i) the DCNSP no

longer satisfies the DCNSP Criteria or (ii) circumstances have arisen in relation to the DCNSP

which could be materially prejudicial to the System or represent a threat to the security,

integrity or reputation of the System. The Admissions Decision Maker shall notify the

Company's chair (or, if he or she is unavailable, , any other director of the Company), other

Participants and the Bank of England of any suspension made pursuant to this Rule 9.5.3. A

suspended DCNSP will, as determined by, and at the discretion of, the Company, pay to the

Company any direct costs incurred by the Company and/or any other Participant arising from

the suspended DCNSP's suspension provided such costs are non-discriminatory and

objectively justifiable.

9.5.4 The Pay.UK Board or, in a case of urgency (as determined by the Admissions Decision Maker,

acting reasonably and in good faith) where it is not reasonably practicable for a quorate Pay.UK

Board to be convened, the Admissions Decision Maker, may suspend any Participant's (apart

from a DCS Participant or DCNSP as this is otherwise accommodated in the FPS Rules)

participation in FPS with immediate effect (or with effect from such time and date as the

Admissions Decision Maker or the Pay.UK Board as appropriate may specify) in the following

circumstances:

(a) where, in the reasonable and good faith opinion of the P a y . U K Board or, in a

case of urgency, the Admissions Decision Maker, the Participant is in material breach

of any provision of the FPS Rules;

(b) if, in the reasonable and good faith opinion of the Pay.UK Board or, in a case of urgency,

the Admissions Decision Maker, circumstances have arisen in relation to that Participant

which could be materially prejudicial to the System or could represent a threat to the

security, integrity or reputation of the System;

(c) a Default Event occurs in respect of that Participant; or

(d) at the written request of the Participant concerned.

9.5.5 The Admissions Decision Maker shall notify the Company's chair,(or, if he or she is unavailable,

any other director of the Company), other Participants and the Bank of England of any

of 109

suspension or exclusion of a Participant made pursuant to the FPS Rules or Participation

Agreement.

9.5.6 A suspended or excluded Participant (other than a DCS Participant or DCNSP) will, as determined

by, and at the discretion of, the Company, pay to the Company any direct costs incurred by the

Company and/or any other Participant arising from the suspended Participant's suspension

provided such costs are non-discriminatory and objectively justifiable.

9.5.7 Each Participant undertakes to the Company to notify the Admissions Decision Maker

immediately upon becoming aware of the occurrence of any event which comprises a Default

Event in respect of that Participant.

9.5.8 If a Participant is suspended or excluded in accordance with this Rule 9 or pursuant to a relevant

Participation Agreement the Company shall not be liable (whether in contract, tort (including

negligence) or otherwise for any liability, damage, loss, cost, claim or expense of any kind

suffered or incurred by that Participant or by any other Participant as a result of such suspension

or exclusion. This rule does not affect the Company's liability for fraud or for death or personal

injury arising from its negligence or that of its employees, agents or sub-contractors.

of 109

10. AMENDMENTS TO THE FPS RULES

10.1 Any Participant, the Company or the Pay.UK Board may propose changes to the FPS Rules by

submitting proposals in writing to the Pay.UK Board.

10.2 After consulting as appropriate with all relevant Participants and other external

stakeholders, as well as the appropriate Board Committee(s), the Pay.UK Board shall then

decide in its absolute discretion whether and when those consequent changes shall become

effective.

10.3 The Pay.UK Board shall ensure that any changes to the FPS Rules shall be consistent with

the requirements of the Legal Documents, the Reference Documents and the Pre-Funding

Documents.

of 109

11. APPEALS PROCESS

11.1 The Pay.UK Board or the Admissions Decision Maker (as the case may be), shall provide within

14 calendar days of the date of a Relevant Decision to each DCS Participant, Prospective DCS

Participant, DCNSP, Prospective DCNSP or Prospective Direct Agency concerned written reasons

for such Relevant Decision.

11.2 Each such DCS Participant, Prospective DCS Participant, DCNSP, Prospective DCNSP or

Prospective Direct Agency shall be entitled to invoke the Appeals Process in respect of a

Relevant Decision by giving written notice to the Pay.UK Board and the Pay.UK Senior

Independent Non-Executive Director of its wish to appeal against the Relevant Decision within

30 calendar days after the Pay.UK Board, , or the Admissions Decision Maker (as the case may

be) has provided the DCS Participant, Prospective DCS Participant, DCNSP, Prospective DCNSP

or Prospective Direct Agency with written reasons for its decision under Rule 11.1.

11.3 Should the DCS Participant, Prospective DCS Participant, DCNSP, Prospective DCNSP or

Prospective Direct Agency invoke the Appeals Process in respect of a Relevant Decision the

Pay.UK Board, or the Admissions Decision Maker (as the case may be) shall co-operate in a

timely fashion with the Appeal Panel in relation to such Relevant Decision.

11.4 Within 7 Working Days following the receipt of the notice referred to in Rule 11.2, the Pay.UK

Senior Independent Non-Executive Director shall constitute an Appeal Panel to hear and

determine the Appeal.

11.5 The Appeal Panel shall consist of a minimum of three individuals, and may comprise:

(a) Pay.UK Board directors other than those who sat on any Pay.UK Board whose decision is

the subject of the Appeal; and

(b) any members of the Pay.UK senior management team or General Counsel team, provided

that they have not been directly involved in the decision which is the subject of the Appeal;

and

(c) to the extent required, any independent person designated by the Pay.UK Senior

Independent Non-Executive Director who is considered acceptable by the Appellant, and

who in the opinion of the Pay.UK Senior Independent Non-Executive Director is a

members of/or professional advisers to the banking and/or financial services community

to which the DCS Participants collectively belong, of appropriate qualification and

experience, and independent of the Appellant, any DCS Participant and the Company.

of 109

The P a y . U K S e n i o r I n d e p e n d e n t N o n - E x e c u t i v e D i r e c t o r may, but shall not be

obliged to consult the Appellant and the Company before making his / her nominations.

11.6 Within 5 Working Days following their nomination and confirmation of their willingness to

serve, the members of the Appeal Panel shall appoint one of their number to preside over the

Appeal.

11.7 The Appeal shall be a re-hearing of the original determination of the Pay.UK Board, or the

A d m i s s i o n s Decision Maker (as the case may be), and shall be conducted in accordance

with such process as the person appointed under Rule 11.6 shall consider appropriate. The

Appellant and the Company shall have the right to make representations to the Appeal

Panel.

11.8 The Appeal Panel shall arrive at its decision by a majority vote. The Appeal Panel’s

decision shall be final and binding on the Appellant and the Company and shall include a ruling

as to how the costs of the appeal (including the remuneration of members of the Appeal Panel)

shall be borne as between the Appellant and the Company.

11.9 Any decision by the Appeal Panel shall be without prejudice to the rights and obligations of

each DCS Participant with respect to each Single Amount existing at the moment a DCS

Participant is suspended or excluded in accordance with Rule 9 or determined at any time

thereafter.

11.10 Pending an Appeal Panel decision, the Relevant Decision concerned continues to stand.

11.11 The Company expects a Bank DCS Participant to, and the Bank DCS Participant shall:

(a) invoke the Appeals Process under this Rule 11 if a Relevant Third Party sponsored by that

Bank DCS Participant wishes the Bank DCS Participant to do so in respect of a Relevant

Decision and is prepared to fund its and the Bank DCS Participant's costs associated with

the Appeals Process, and inform any of its Relevant Third Parties affected by a Relevant

Decision of the Bank DCS Participant's obligation to invoke the Appeals Process in such

circumstances; and

(b) have due regard and give due weight to the interests and concerns of the Relevant Third

Party in its representations to the Appeal Panel in relation to the Appeals Process

invoked under Rule 11.11(a) above and when determining the conduct of any appeal

of 109

including, for the avoidance of doubt, bringing to the attention of the Appeal Panel any

conflict between the views of the Relevant Third Party and the views of the Bank DCS

Participant.

11.12 The Bank DCS Participant shall have no further obligation under Rule 11.11 at any time

after the Bank DCS Participant terminates its contractual relationship, or does not otherwise

have such relationship, with the Relevant Third Party in respect of the Faster Payments Service.

11.13 Without prejudice to Rule 10, the Company may from time to time revise the Appeals Process

upon giving the DCS Participants not less than 28 calendar days’ prior notice of such

revisions. Such revisions shall have no effect on any appeals proceedings which have

already been commenced at the time such revisions are published, unless the parties involved

in the proceedings otherwise agree. Subject to any such agreement, any such procedures

shall continue to be conducted pursuant to the Appeals Process in force at the time those

proceedings were commenced.

of 109

12. ASSURANCE PROCESS TO FACILITATE THE COMPANY’S ROLE AS SYSTEMIC RISK MANAGER

12.1 Each Participant shall keep at its principal place of business detailed records of all activities

carried out in connection with its participation in FPS including but not limited to any such

records as may be expressly requested by the Company to be kept by the Participant for the

purposes of the Reference Documents. Such records as described shall be kept for at least 6

years on a rolling basis and as may be necessary in accordance with applicable laws and

regulations or good practice concerning the destruction of documents and for at least 6 years

after the termination of the relevant Participation Agreement.

12.2 Each Participant shall respond, without delay, and provide appropriate answers to any annual

or other self-certification or other questionnaire and/or other documents provided to it by the

Company for response for the purposes of the Company's risk assessment and review process

concerning:

(a) the participation of that Participant in FPS;

(b) that Participant's security arrangements in connection with FPS;

(c) any matter concerning that Participant which may be materially prejudicial to FPS or

represent a threat to the security, integrity or reputation of FPS; and

(d) compliance by that Participant with the terms of the relevant Participation Agreement,

the Reference Documents and the FPS Rules.

12.3 Each Participant shall be required to confirm, represent and warrant to the Company that all

answers and responses provided to the Company for these purposes will be true and accurate in

all material respects and not misleading in any material respect including as to assurance with

respect to its existing and continuing compliance with the relevant Participation Agreement, the

Reference Documents and the FPS Rules.

12.4 Each Participant shall grant to the Company in its capacity as systemic risk manager and to any

internal auditors, assurance and risk assessors appointed by the Company, and its authorised

agents the right of access to any of its premises, its appropriate personnel and (and, if

necessary, the right to copy) service records as the Company may reasonably require in order to:

(a) conduct a risk assessment and review of the systems and processes of that Participant in

relation to its participation in FPS including as regards any matter which may be

of 109

materially prejudicial to FPS or represent a threat to the security, integrity or reputation of

FPS;

(b) verify that that Participant is complying with the terms of the relevant Participation

Agreement, the FPS Rules and the other Reference Documents;

(c) verify that that Participant is complying with all applicable laws, statutes, bye-laws,

regulations, orders, regulatory policies (including any requirement or notice of any

regulatory body) applicable to its participation in FPS;

(d) verify that that Participant is complying with the technical and operational requirements of

FPS as set out in the FPS Rules and the Reference Documents;

(e) identify suspected fraud or material accounting mistakes;

(f) fulfil any request by a regulator in the course of carrying out its regulatory functions;

(g) conduct internal and statutory audits including preparing any other reports required by

any internal auditor or external auditor or regulator;

(h) inspect any assets in that Participant's possession or control; and

(i) inspect the integrity, confidentiality and security of systems and operations of that

Participant applied for the purposes in relation to its participation in FPS.

12.5 The Company in its capacity as systemic risk manager and any internal auditors or other

authorised agents of the Company may discuss any matter with any personnel of a Participant

as the Company may reasonably require, and the Company will be under no obligation to

inform that Participant of the objective of its investigations or such discussions.

12.6 The Company may provide to and discuss with a Participant the results of and details relating to

its investigations, questionnaires, audits, verification exercises and other inspections conducted

by or on behalf of the Company in respect of:

of 109

(a) in the case of any Bank DCS Participant, those Relevant Third Parties sponsored by that

Bank DCS Participant and any Aggregator providing services to such Bank DCS Participant;

(b) in the case of any other Participant, the relevant sponsoring Bank DCS Participant and any

Aggregator providing services to such Participant; and

(c) in the case of any Aggregator, the Participants to which it provides the services of an

Aggregator,

and inform them of any risks, non-compliance or other concerns in respect of such Participant

as the Company may have identified.

12.7 If any audit or other inspection by or on behalf of the Company demonstrates any non-

compliance by a Participant of its obligations pursuant to the relevant Participation Agreement,

the FPS Rules or the Reference Documents that Participant shall, without prejudice to any other

rights and remedies the Company may have:

(a) remedy the cause of such non-compliance as soon as reasonably practicable; and

(b) in the circumstances of a material non-compliance, refund the Company all costs and

expenses relating to such audit or inspection (including those of its advisers).

of 109

13. FINANCIAL OBLIGATIONS

13.1 FPS Costs

13.1.1 Before the start of the Financial Year, the Pay.UK Board shall determine:

(a) Company costs for operating FPS other than payments to the Supplier under the Supplier

Agreement; and

(b) Any shortfall in the Company Reserve; and

(c) any other costs properly determined or incurred by the Company relating to or in

connection with FPS or the Company.

Together the ‘FPS Costs’

The Pay.UK Board shall determine, and notify each DCS Participant of the FPS Costs (which

may normally be expressed as a fee per FPS Payment) before the start of a relevant Financial

Year. The fee per FPS Payment will normally be based upon the total FPS Costs divided by

the total expected FPS Payments.

The proportion of the FPS Costs payable by an individual DCS Participant shall be based

upon their individual FPS Payments as a proportion of total expected FPS Payments.

The FPS Costs, the proportions payable by the DCS Participants and the structure of

payments shall be determined by the Pay.UK Board and any changes required to this

methodology shall be implemented by the Pay.UK Board, acting reasonably and upon

reasonable consultation with the DCS Participants.

A DCS Participant will pay its share of the FPS Costs monthly in arrears (or as otherwise

determined and notified in advance by the Company acting reasonably) by direct debit

within 20 Working Days of the date of the invoice. The Company may review the FPS Costs

annually (or such intervals as are deemed necessary by the Company) in order to ensure

correct determination of the FPS Costs and any amendments shall be communicated in

advance to the DCS Participants and adjustments made to the FPS Costs as appropriate. The

DCS Participants shall pay any such revised FPS Costs in a manner as determined by the

Company in its reasonable discretion.

of 109

.

In the event a DCS Participant withdraws or is suspended or excluded from the FPS, the DCS

Participant will not be entitled to a refund of FPS Costs paid in advance.

Regulator Fees/Fines

Any fees or fines levied on the Company by a regulator shall be payable by the DCS Participants.

In the absence of the Payment Systems Regulator or other relevant regulator determining in

what proportions its fees/fines are to be paid by the DCS Participants, its fees/fines shall be paid

by the DCS Participants in the proportions shown in Rule 13.1.1 unless agreed otherwise.

13.1.2 DCS Participants shall pay the Company for any Pay.UK Board approved costs to the

Supplier not covered under Rule 13.2. Approved costs shall be payable by DCS Participants

in the proportions shown in Rule 13.1.1 unless agreed otherwise.

13.2 Supplier Costs

13.2.1 DCS Participants and, in respect of the Monthly Fee the relevant DCS Participant, DCNSP,

Aggregator, Third Party Beneficiary or Direct Agency, will pay the Supplier costs incurred by the

Company as set out in Schedule 1. The Company has appointed the Supplier as its agent in

respect of the invoicing of those costs, and the DCS Participants will pay those costs to the

Supplier or any other invoicing agent that the Company may appoint for that purpose. Such

payment to the Supplier or such other invoicing agent shall satisfy the obligation of the DCS

Participants to pay the Company for those costs.

13.2.2 Each DCS Participant's obligation under Rule 13.2.1 extends for the period of time for which

they are a DCS Participant and, in respect of the Monthly Fee, for the period of time the

Monthly Fee is incurred by such DCS Participant, DCNSP, Aggregator, Third Party Beneficiary or

Direct Agency.

13.2.3 Each DCS Participant shall indemnify the Company on demand against any Losses which the

Company may suffer, incur or sustain as a result of that DCS Participant's failure to pay the

costs in accordance with Rule 13.2.1.

13.3 Share of Costs for Acceding DCS Participants

An Acceding DCS Participant’s contribution to FPS Costs

13.3.1 An Acceding DCS Participant will pay its share of the FPS Costs determined in accordance with

of 109

Rule 13.1. Such Acceding DCS Participant shall pay its share of the FPS Costs from the date of its

accession until the end of the month in which it ceases to be a DCS Participant.

An Acceding DCS Participant’s contribution to Supplier Costs

13.3.2 An Acceding DCS Participant will pay its share of the Supplier costs set out in Schedule 1 from

the date of its accession and for the period of time for which they are a DCS Participant and/or,

in respect of the Monthly Fee, for the period of time the Monthly Fee is incurred by such

Acceding DCS Participant.

13.4 Direct Debit

13.4.1 Each Participant shall set up a direct debit in favour of the Company and/or the Supplier in

respect of payments duly invoiced in accordance with the Supplier Agreement and the FPS

Rules. Any late payment of invoices shall incur interest at 8% per annum above the Bank of

England’s base rate from time to time in force.

of 109

14. GOVERNING LAW AND JURISDICTION

14.1 The FPS Rules shall be governed by and construed in accordance with the laws of

England.

14.2 Any disputes in connection with the FPS Rules other than disputes to be resolved by the

Appeals Process ("Disputes") shall be resolved in accordance with Rules 14.3 to 14.5.

14.3 This Rule 14.3 is for the benefit of each Participant and the Company. Subject as provided in

Rule 14.4 below, each Participant and the Company agree that the courts of England have

exclusive jurisdiction to settle any Disputes, submit to the exclusive jurisdiction of the courts of

England in connection with the FPS Rules, and waive any objection to the English courts

on grounds that they are an inconvenient or inappropriate forum to settle any such Dispute.

14.4 Nothing in the FPS Rules will limit the right of any DCS Participant or the Company to bring

proceedings in connection with any Disputes against any Participant which is not incorporated

in the United Kingdom (a) in the courts of any other Relevant Jurisdiction or (b) concurrently in

the courts of England and/or in the courts of one or more Relevant Jurisdictions. For the

purposes of this Rule 14.4, "Relevant Jurisdiction" means the country or territory where such

DCS Participant or other Participant is incorporated or in any other country or territory where

the court has jurisdiction.

14.5 Each P a r t i c i p a n t agrees not to bring or join the Company in any proceedings in any court

other than the courts of England, or if the Company is incorporated in any other country or

territory, in the courts of that country or territory.

of 109

15. MISCELLANEOUS

15.1 Contracts (Rights of Third Parties) Act 1999

15.1.1 Except to the extent otherwise expressly provided for in Rule 8 and Schedule 1 paragraph 5

of the FPS Rules, no person other than a DCS Participant, a DCNSP or the Company shall have

any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term (express or

implied) of the FPS Rules but this is without prejudice to any right or remedy of the third party

which may exist or be available apart from that Act.

15.2 Confidentiality

15.2.1 Each Participant agrees to treat as confidential any information which comes into its

possession as a result of its participation in FPS (including, for the avoidance of doubt, any

information which comes into its possession as a result of its shareholding in the Company)

where such information is by its nature confidential or where the Participant knows or should

reasonably know it to be confidential. This Rule 15.2.1 does not apply to information which:

(a) is already in the public domain when received; or

(b) is subsequently brought into the public domain otherwise than by such Participant; or

(c) was already known to the Participant at the time of receipt and was not acquired by

the Participant under any obligation of confidence; or

(d) was independently developed by the Participant without any use of confidential

information provided by the Company.

A Participant may disclose such confidential information to its accountants, auditors, legal or

other professional advisers. A Participant may disclose such confidential information if and to

the extent required by applicable law or regulation in any jurisdiction. A Participant may

disclose such confidential information if and to the extent required or requested by any court,

competent regulatory or governmental authority, tax authority or securities exchange in any

jurisdiction whether or not the requirement or request has the force of law and any other

persons to whom a Participant is required by court order or by statutory or regulatory rule to

disclose such information, and to other persons approved by the Company for disclosure of the

type of confidential information concerned, provided that it takes reasonable steps to

procure that any such person maintains the confidentiality of that information.

of 109

15.2.2 The Company agrees to treat as confidential any information which comes into its possession

as a result of its operation of FPS where such information is by its nature confidential or where

the Company knows or should reasonably know it to be confidential. This Rule 15.2.2 does not

apply to information which:

(a) is already in the public domain when received; or

(b) is subsequently brought into the public domain otherwise than by the Company; or

(c) was already known to the Company at the time of receipt and was not acquired by the

Company under any obligation of confidence; or

(d) was independently developed by the Company without any use of confidential

information provided by a Participant.

The Company may disclose such confidential information to the Company's accountants,

auditors, legal or other professional advisers. The Company may disclose such confidential

information if and to the extent required by applicable law or regulation in any jurisdiction. The

Company may disclose such confidential information if and to the extent required or requested

by any court, competent regulatory or governmental authority, tax authority or securities

exchange in any jurisdiction whether or not the requirement or request has the force of law and

any other persons to whom the Company is required by court order or statutory or regulatory

rule to disclose or is permitted by the FPS Rules to disclose such information, and (in relation

to a Participant) to other persons approved by that Participant or permitted by the FPS Rules

for disclosure of the type of confidential information concerned, provided that the Company

takes reasonable steps to procure that any such person maintains the confidentiality of that

information.

15.3 Freedom of Information Act 2000 ("FOIA") or Freedom of Information (Scotland) Act 2002

("FOI(S)A")

15.3.1 Where information is requested from a Public Authority DCS Participant under FOIA or FOI(S)A

which:

(a) was obtained by that Public Authority DCS Participant by virtue of its being a DCS

Participant; and

(b) may include information held by that Public Authority DCS Participant

which:

of 109

(i) is subject to the confidentiality obligation in Rule 15.2.1;

(ii) comprises Personal Data of officials of the Company or employees or customers of

other DCS Participants; or

(iii) is information whose disclosure would be prejudicial to the commercial interests of

the Company or another DCS Participant,

(such information being ‘Information’), and the Public Authority DCS Participant shall

use all reasonable endeavours to seek the views of the Company, regarding whether the

Information is Exempt Information, prior to disclosure of it.

15.3.2 The Company shall use all reasonable endeavours to consult with any affected DCS

Participant(s) and respond to any such consultation within the time specified by the

Public Authority DCS Participant. The Company's response shall not affect the right of any

affected DCS Participant to make its own representations to the Public Authority DCS

Participant. The Public Authority DCS Participant shall give proper consideration to whether the

Information is Exempt Information. The Public Authority DCS Participant shall notify the

Company and any affected DCS Participant which has made representations before disclosing

any Information as a result of a FOIA or FOI(S)A request. For the avoidance of doubt, DCS

Participants fully accept that the final decision as to whether to make a disclosure will be the

Public Authority DCS Participant’s alone.

15.4 Notices

15.4.1 Where formal communication is required in the FPS Rules, the notices procedures in the DCS

Participation Agreement or other Participation Agreement shall apply.

of 109

SCHEDULE 1

DCS PARTICIPANT COMMITMENT TO THE SUPPLIER

AGREEMENT

This is an extract from the Agreement between the Company and Vocalink. In this Schedule 1

(including Annex A and Annex B) the term ‘Scheme Operator’ should be taken to mean the Company (and for the purposes of the FPS Rules all rights and obligations on the part of the Scheme Operator set out in this Schedule 1 (including Annex A and Annex B) shall be deemed to be rights and

obligations of the Company), the term ‘Vocalink’ should be taken to mean the Supplier, the term

‘Agency’ should be taken to mean Direct Agency (and for the purposes of the FPS Rules all rights and

obligations on the part of an Agency set out in this Schedule 1 (including Annex A and Annex B) shall be deemed to be rights and obligations of a Direct Agency) and the term ‘Member’ should be taken to mean DCS Participant and for the purposes of the FPS Rules all rights and obligations on the part of a Member or the Members set out in this Schedule 1 (including Annex A and Annex B) shall be

deemed to be rights and obligations of a DCS Participant and the DCS Participants respectively.

1. Under the terms of the Vocalink Agreement the System Operator has undertaken various

legally binding commitments for the Initial Term. In particular:

(a) the System Operator has undertaken to pay (or procure payment of) the Charges to

Vocalink (set out in Schedule 3 of the Vocalink Agreement) for provision of the Managed

Services, including:

(i) the relevant fee for on-boarding services for each New Member or New

Participant;

(ii) a Monthly Fee for each Member, Third Party Beneficiary and Direct Agency that

connects directly to the Central Infrastructure1;

(iii) Volume Fees to cover the Anticipated Annual Volume;

(iv) any Additional Volume Fees: and

(v) additional costs in relation to use of the DCA or FIM facility;

(b) Vocalink may recover costs that it reasonably and properly incurs as a result of any

Relief Events;

(c) Vocalink is entitled to require payment of the Early Termination Fee if the System

1 Note: any reference to a Member in Schedule 1 means a DCS Participant for the purposes of the FPS Rules

of 109

Operator chooses to terminate the Vocalink Agreement early for convenience during the

Initial Term; and

(d) the System Operator has appointed Vocalink as its invoicing agent which will invoice

each Member directly for its proportion of the relevant Charges that are properly due

under the Vocalink Agreement.

2. Each Member1 shall irrevocably pay the System Operator in full (without set-off, deduction or

withholding) the following Charges and other sums that are properly due and payable in

accordance with the provisions of the Vocalink Agreement (except to the extent that, in good

faith, the Member has notified the System Operator and Vocalink that it disputes any of those

Charges or other sums):

(a) the relevant fee for on boarding services as set out in Schedule 3 of the Vocalink

Agreement for each New Member or New Participant;

(b) the Monthly Fees applicable to the Member, as set out in, Schedule 3 of the Vocalink

Agreement for the Member, each Responding Third Party Beneficiary each Agency and

each Non-Responding Third Party Beneficiary that connects directly to the Central

Infrastructure whom the Member sponsors;

(c) the proportion of the applicable Volume Fee for each Year of the Term, asset out in

Annex A of this Schedule, which shall be payable by the Member irrespective of the

number of Chargeable Transactions that the Member actually makes (or does not make)

during each Year;

(d) to the extent that the Anticipated Annual Volumes are, in aggregate, exceeded by the

Members in each Year, any Additional Volume Fees attributable to the Member (which

shall not (subject to any inflationary increases referred to in paragraph 2(b) above)

exceed the maximum amount per Chargeable Transaction in Schedule 3 of the Vocalink

Agreement) in relation to Chargeable Transactions submitted in that Year by the

Member, or by Agencies, FIM-only agencies or corporates whom the Member sponsors,

and the amount of the Additional Volume Fees attributable to the Member shall be

calculated using the formula set out in Annex B of this Schedule;

(e) in addition to the Volume Fees and any Additional Volume Fees applicable to the

Member, any Charges in relation to submissions made through DCA or FIM facilities by

of 109

FIM-only agencies or corporates whom the Member sponsors as set out in Schedule 3 of

the Vocalink Agreement;

(f) the proportion of any Early Termination Fee or of any other payment made on

termination or expiry, including as a result of a Force Majeure Event or Exit Migration (as defined

in the Vocalink Agreement), that is the same as the proportion of Monthly Fees and Volume

Fees that was paid and/or payable by the Member2 for the Year preceding the Year in which

notice of early termination of the Vocalink Agreement is served (where the Vocalink Agreement

expires, the relevant reference Year in this regard shall be the final Year of the Initial Term);

(g) interest paid on any late payment of sums due from the Member under the Vocalink

Agreement (including incorrectly disputed Charges);

(h) an amount equivalent to all costs properly incurred by the System Operator under and in

accordance with the Vocalink Agreement as a result of a Relief Event to the extent that

the Relief Event arises as a result of the Member's acts or omissions;

(i) the proportion of all other costs properly incurred by the System Operator under and in

accordance with the Vocalink Agreement, that is the same as the proportion of Monthly

Fees and Volume Fees paid and/or payable by the Member in the Year prior to the Year

that such costs were incurred by the System Operator, or as otherwise agreed in good

faith between Members and the System Operator, including as a result of Changes

agreed between the System Operator and Vocalink; and

(j) an amount equivalent to any VAT that is or becomes properly chargeable on the sums

referred to in the sub-paragraphs 2(a) to 2(i) above.

3. Unless otherwise agreed in writing with the System Operator, this Schedule 1 does not guarantee

payment by the Member of, and no Member shall be liable for, payment of any amounts due to

the System Operator by any other Member, and the Member's share of liability to the System

Operator under this Schedule 1 will not increase if any other Member defaults on its payment

obligations to the System Operator in relation to this Schedule 1 or the Vocalink Agreement.

Each Member's maximum liability to the System Operator under this Schedule 1 shall not exceed

the sum of the amounts referred to in paragraph 2 above in respect of that Member.

2 Where an Aggregator directly connects to the CI, the Aggregator will be charged the Monthly Fee

of 109

4. The System Operator shall promptly pay or return to the Member the relevant share of any

overpayment of Charges, damages or other sums that the System Operator obtains or recovers

from Vocalink under the Vocalink Agreement and which may be due to Members from time to

time in relation to the Faster Payments Service.

5. This Schedule 1 does not confer any rights on any third parties under the Contracts (Rights of

Third Parties) Act 1999, except that Vocalink shall have the benefit of the System Operator's rights

under:

(a) paragraph 2 of this Schedule 1, solely to procure payment to the System Operator of all

undisputed Charges that have not been paid by a Member to the System Operator (or to

Vocalink on the System Operator’s behalf). However, Vocalink may not bring any action to

enforce this paragraph 6 unless:

(i) undisputed Charges that are due and payable by that Member remain outstanding

for more than 60 days from the date on which payment was due and payable;

(ii) Vocalink has served written notice on that Member (copied to the System

Operator) of non-payment of Charges explaining that undisputed Charges due and

payable by that Member remain outstanding and that Vocalink intends to seek

recovery of the payment of those Charges (on behalf of the System Operator)

unless that Member makes full payment of those Charges to the System Operator

within 10 days of that Member's receipt of the notice of non-payment; and

(iii) that Member has not made payment of those undisputed and unpaid Charges

within 10 days of receiving such notice of non-payment.

of 109

Annex A

Proportion Of Volume Fees

The total Volume Fees are set out in Schedule 3 of the Vocalink Agreement.

This Annex A sets out the method of calculating the Volume Fees payable by each Member3 in respect of

Chargeable Transactions made by that Member in a Year, where the aggregate Chargeable Transactions

processed in that Year are equal to or less than the Anticipated Annual Volume for that Year.

If the aggregate number of Chargeable Transactions processed in a Year is greater than the Anticipated

Annual Volume for that Year, each Member shall pay its Volume Fees together with any Additional Volume

Fees (as set out in Annex B).

A Member's Volume Fees for any Year are calculated as being the total Volume Fees for the relevant Year

multiplied by the Member's Base Proportion;

Where:

A Member's Base Proportion is the number of Faster Payments which that Member sent and received

through Faster Payments in the preceding year ending 31 May expressed as a percentage of the total

number of Faster Payments transactions sent and received by all Members in the preceding year ending

31 May;

Chargeable Transaction has the meaning given to it in the Vocalink Agreement

3

of 109

Annex B

Proportion of Additional Volume Fee

Where the total number of Chargeable Transactions processed in a Year is greater than the Anticipated

Annual Volume for that Year, additional Volume Fees are payable to Vocalink (Additional Volume Fees).

The proportion of the Additional Volume Fees (if any) payable by each Member4 shall be calculated in

accordance with the following formula:

X multiplied by £Z

Y

Where:

X is the number of Chargeable Transactions sent by a Member in a Year in excess of the figure reached by

multiplying that Member's Base Proportion by the Anticipated Annual Volume in that Year;

Y is the aggregate number of Chargeable Transactions sent by all Members in that Year in excess of the

Anticipated Annual Volume; and

£Z is the Additional Volume Fees for that Year.

4 Note: any reference to a Member in Annexures A and B means a DCS Participant for the purposes of the FPS Rules

of 109

SCHEDULE 2

REFERENCE DOCUMENTS

These FPS Rules, together with:

Aggregator Admission Criteria

Bank Reference Data for FPS Functional Specification (PN7723) Bank Reference Data - Member's

Guide (PN5005)

Completion Funds Account Agreement Data Protection Audit Procedure

DCS Participation Agreement

Deed of Charge

External Interface Specification

Faster Payments Member, Agency and Scheme Guide (IPL00115)

FPS Accounts Agreement

FPS Customer Reference Data Functional Specification (IPL00471) FPS EISCD Technical

Specification (PN7677) FPS Participant Risk Assurance Policy

FPS Procedures

FPS Reference data manual - Member and scheme agency guide (IPL00114) FPS Security Policy

Functional Specification

Industry Sorting Code Directory Procedures Manual

Security Code of Conduct

Settlement Service Provider Agreement

Settlement Trust Deed

Validating account numbers UK modulus checking (PN6111)

The Company may require a prospective Participant to sign a Non-Disclosure Agreement (NDA)

with the Company before being provided with the documents above in this Schedule. This is

required to protect the security and intellectual property of the Faster Payments Service.

of 109

SCHEDULE 3

PRO FORMA SETTLEMENT TRUST DEED

of 109

SETTLEMENT TRUST DEED

of 109

THIS DEED POLL (this Deed) is made on 201[ ]

BY [INSERT NAME OF NON-BANK PSP (CF) PARTICIPANT] whose registered office is at [•] and

whose registered number is [•] (the Institution) in favour of the Beneficiaries.

WHEREAS:

(A) In connection with its Relevant Payment Business, the Institution wishes to be admitted as a Non-

Bank PSP (CF) Participant to one or more of the Relevant Payment Systems. As a condition to such

admission, the Institution is required to execute this Deed in favour of the Beneficiaries.

(B) Each of the Relevant Payment Systems is a designated system (as defined in regulation 2(1) of the

Financial Markets and Insolvency (Settlement Finality) Regulations 1999). This Deed operates as

part of the respective default arrangements of each of the Relevant Payment Systems to limit the

systemic and other types of risk which would arise in the event of the Institution (as a Non-Bank

PSP (CF) Participant) appearing to be unable, or likely to become unable, to meet its obligations in

respect of Payment Transfer Orders that have entered the Relevant Payment System.

(C) The intention and effect of this Deed, consistent with the Safeguarding Provisions, is to create

respective beneficial interests in, or in relation to, the Settlement Trust Fund in favour of:

(i) the Bank of England (as Settlement Trust Beneficiary) to ensure the availability of

funds to complete the settlement of Payment Transfer Orders that have entered a DNS

System in accordance with the rules and default arrangements of the DNS System;

and

(ii) each Customer so as to insulate the Customer's funds from the claims of creditors of

the Institution.

(D) This Deed has effect solely with respect to the Specified Accounts. If, for regulatory or other

reasons, the Institution (in its capacity as a Non-Bank PSP (CF) Participant) is required to hold a

Settlement Account and Completion Funds Accounts which are different from the Specified

Accounts, it will be required to execute a separate deed poll on materially identical terms to this

Deed (save as to the definition of "Relevant Payment Business") with respect to the different

Settlement Account and Completion Funds Accounts.

NOW IT IS WITNESSED AND DECLARED as follows:

Part I: Interpretation

1. This Deed shall be interpreted in accordance with the provisions of Appendix 1.

Part II: Declaration of trust

2. The Institution hereby declares and confirms that it holds as bare trustee, and will so hold, the

Settlement Trust Fund for the benefit of:

2.1 the Customers, as tenants in common; and

of 109

2.2 the Settlement Trust Beneficiary, in respect of any STB Entitlement,

(together, the Beneficiaries and each a Beneficiary) on and subject to the terms of this Deed, and

that each of the Beneficiaries is entitled to rights in relation to, or in, the Settlement Trust Fund

accordingly.

3. Except to the extent expressly provided for in this Deed, the Institution does not assume any

relationship of trust for, or with, a Beneficiary or any other person. Section 1 of the Trustee Act

2000 shall not apply to the duties of the Institution in relation to the trusts constituted by this

Deed. Where there are any inconsistencies between the Trustee Acts 1925 and 2000 and the

provisions of this Deed, the provisions of this Deed shall, to the extent allowed by law, prevail and,

in the case of any such inconsistency with the Trustee Act 2000 the provisions of this Deed shall

constitute a restriction or exclusion for the purpose of that Act.

4. Nothing in this Deed is intended to, or shall, create a charge or other security interest in, or in

relation to, the Settlement Trust Fund in favour of a Beneficiary or any other person.

5. The Institution confirms that no interest shall be earned on the Settlement Trust Fund.

Part III: Beneficiaries' Entitlements

6. A Customer shall at any time have a Customer Entitlement in relation to the Settlement Trust Fund

equal to the product of (A/B) x (C – D), where:

A is the amount of the Relevant Funds held at that time in the Specified Accounts by the Institution

for the account of the Customer;

B is the aggregate amount of all Relevant Funds held at that time in the Specified Accounts by the

Institution for the account of its Customers;

C is the Settlement Trust Fund at that time; and

D is the Aggregate DNS Position at that time.

7. The Settlement Trust Beneficiary shall at any time have an STB Entitlement in or in relation to the

Settlement Trust Fund equal to the product of (E/F) x F, where:

E is the Aggregate DNS Positon at that time; and

F is the Settlement Trust Fund at that time.

8. Any Customer Entitlement that vests in a Customer shall entitle that Customer to be paid from the

Settlement Trust Fund, or to direct the payment from the Settlement Trust Fund of, a sum equal to

the amount of the Customer Entitlement as determined in accordance with clause 6, in or towards:

8.1 execution of a payment transaction on behalf of the Customer;

8.2 (where the Specified Accounts support the carrying on of E-Money Business by the

Institution) redemption of the monetary value of Relevant Electronic Money (in whole or in

part) held by that Customer; or

of 109

8.3 where an Insolvency Event has occurred in respect of the Institution, payment of any claim

of the Customer on the Institution relating to any payment transaction that remains

unexecuted from the Settlement Trust Fund or, as the case may be and where the Specified

Accounts support the carrying on of E-Money Business by the Institution, any monetary

value of Relevant Electronic Money that remains unredeemed from the Settlement Trust

Fund.

9. The Settlement Trust Beneficiary's STB Entitlement shall be held and realised solely for the

purpose of:

9.1 completing the settlement of Payment Transfer Orders that have entered the BACS System

in accordance with Appendix 2; or

9.2 completing the settlement of Payment Transfer Orders that have entered FPS in accordance

with Appendix 3.

10. The Institution represents and warrants to each Beneficiary that, subject to clause 14, it has the

right to, and shall, confer each STB Entitlement or, as the case may be, Customer Entitlement in

favour of such Beneficiary in accordance with the provisions of this Deed free and clear of any

proprietary, equitable or other similar interest or right of any other person.

Part IV: General

11. If at any time any provision of this Deed is or becomes illegal, invalid or unenforceable in any

respect under the law of any jurisdiction, that shall not affect or impair the legality, validity or

enforceability under the law of any other jurisdiction of that or any other provision of this Deed.

12. No Beneficiary may assign, grant or permit to subsist (or purport to assign, grant or permit to

subsist) any interest over, or otherwise dispose of all or any part of:

12.1 its entitlement in relation to the Settlement Trust Fund or its other rights or interests under

or arising from this Deed; or

12.2 the Settlement Trust Fund (or any part of the Settlement Trust Fund).

13. Subject to clause 14 and, in each case, the terms of the contract between the Bank of England or

the Settlement Service Provider and the Institution governing the Specified Accounts:

13.1 a Beneficiary's right, title and interest in or in relation to the Settlement Trust Fund shall be

solely as constituted by or pursuant to, and subject to the terms of, this Deed;

13.2 the Settlement Trust Fund shall be administered and applied by the Institution only in

accordance with the provisions of this Deed; and

13.3 no Beneficiary shall be entitled to transfer or receive (or instruct the transfer or receipt of),

and the Institution shall have no obligation to transfer or pay, any amount from the

Settlement Trust Fund otherwise than in accordance with the provisions of Part III of this

Deed.

of 109

14. Notwithstanding clause 10 or 13 or any other provision herein, nothing in this Deed is

intended to, or shall, prejudice or otherwise affect the rights of a Customer, and the

obligations of the Institution, under or pursuant to the Safeguarding Provisions.

Part V: Termination of this Deed

15. This Deed shall terminate upon the later of:

15.1 the termination of the participation of the Institution as a Non-Bank PSP (CF)

Participant as relating to its Relevant Payment Business in each of the Relevant

Payment Systems; and

15.2 the realisation in full of any STB Entitlement and each Customer Entitlement that

subsists in, or in relation to, the Settlement Trust Fund in accordance with the terms

of this Deed and/or the Safeguarding Provisions.

Part VI: Original and copies of this Deed

16. The Institution shall keep the original of this Deed as executed by it in a safe and secure

place. The Institution shall not destroy, or permit the destruction of, this Deed and shall

not (without the prior written consent of the BACS System Operator, the FPS System

Operator and the Bank of England) amend (or purport to amend) any provision of this

Deed. Any purported amendment of this Deed without such consent from the BACS

System Operator, the FPS System Operator and the Bank of England shall be of no effect.

Each Beneficiary shall be entitled to one copy of this Deed free of charge upon written

request made to the Institution.

Part VII: Notices

17. Any notice to be given to the Institution under or in connection with this Deed shall be in

writing and signed by or on behalf of the person giving it. Except in the case of personal

service, any such notice shall be sent or delivered to the Institution at the address set out

above and marked for the attention of [•].

18. Service of a notice must be effected by one of the following methods:

18.1 personally on a director or the secretary of the Institution and shall be treated as

served at the time of such service;

18.2 by prepaid first class post (or by airmail if from one country to another) and shall be

treated as served on the second (or, if by airmail, the fourth) Business Day after the

date of posting. In proving service it shall be sufficient to prove that the envelope

containing the notice was correctly addressed, postage paid and posted; or

18.3 by delivery of the notice through the letterbox of the Institution and shall be treated

as served on the first Business Day after the date of such delivery.

Part VIII: Governing law and jurisdiction

of 109

19. The Institution irrevocably agrees that the courts of England and Wales shall have

exclusive jurisdiction to settle any disputes arising out of or in connection with this Deed

(including, without limitation, any non-contractual obligations) and the parties

accordingly submit to the exclusive jurisdiction of the courts of England and Wales.

20. The Institution irrevocably:

20.1 waives objection to the courts of England and Wales on grounds of inconvenient

forum or otherwise as regards proceedings arising out of or in connection with this

Deed; and

20.2 agrees that a judgment or order of a court of England and Wales in connection with

this Deed is conclusive and binding on it and may be enforced against it in the

courts of any other jurisdiction.

21. This Deed and all rights and obligations (including, without limitation, any non-

contractual obligations) arising under or in connection with this Deed (including, without

limitation, any disputes relating to non-contractual obligations) are governed by the laws

of England and Wales.

IN WITNESS WHEREOF this document has been duly executed as a deed poll but not delivered until

the day and year first above written.

EXECUTED as a DEED by )

[Insert name of Institution] )

acting by a director and its secretary or

)

two directors …………………………………………….

Director

…………………………………………….

Director/Secretary

of 109

APPENDIX 1

DEFINITIONS AND

INTERPRETATION

1. In this Deed, the following expressions shall have the following meanings:

Aggregate DNS Position means, in relation to the Institution at any time,

the aggregate of:

(a) the Institution's BACS DNS Position at that

time; and

(b) the Institution's FPS DNS Position at that time.

BACS CFA means a Completion Funds Account held by a

Non- Bank PSP (DNS) Participant with respect to

its participation in the BACS System.

BACS DNS Position means, in relation to the Institution at any time,

its settlement risk exposure in the BACS System at

that time as determined in accordance with

Appendix 2.

BACS Settlement Agreement means the agreement entitled the "Amended and

Restated BACS Settlement Agreement" entered

into between the BACS System Operator, the

Settlement Service Provider, the Bank of England

(as security trustee), the Settlement Trust

Beneficiary and the BACS participants.

BACS Single Amount has the meaning given to it in Appendix 2.

BACS System has the meaning given to it in the BACS

Settlement Agreement, namely the payment

clearing system managed by the BACS System

Operator and including any technology systems

used by third party suppliers to the BACS System

Operator for the automated processing and

clearing of payments with respect to such system.

BACS System Operator means BACS Payment Schemes Limited, whose

registered office is at 2 Thomas More Square,

London, E1W 1YN and whose registered number is

04961302, and includes any person who may

succeed or replace BACS Payment Schemes Limited

as operator or manager of the BACS System.

of 109

Bank of England means the Governor and Company of the Bank of

England, of Threadneedle Street, London

EC2R 8AH.

Beneficiary or Beneficiaries has the meaning given to those terms in clause 2

of this Deed.

Business Day shall mean any day other than a Saturday or

Sunday on which the RTGS System is

operational. CHAPS means the Sterling same-day system operated by

the Bank of England which is used to settle real-

time, gross high-value wholesale electronic

payments as well as time-critical, lower value

electronic payments.

Completion Funds Account means, in relation to a DNS System, a separately

designated Sterling account which is, or was, held

at the Settlement Service Provider in the name of

a Non-Bank PSP (DNS) Participant for the purpose

of settling the Non-Bank PSP (DNS) Participant's

payment obligations under or in connection with

its participation in the DNS System to the extent

they are not settled from its Settlement Account.

Customer means:

(a) a person who uses the Institution to execute a

payment transaction in the capacity of payer,

payee or both; and/or

(b) (where the Specified Accounts support the

carrying on of E-Money Business by the

Institution) a person who is entitled to request

the redemption of the monetary value of

Relevant Electronic Money (in whole or in

part) as an electronic money holder.

Customer Entitlement means a beneficial interest that arises from time

to time in favour of a Customer under, and in

accordance with, Parts II and III of this Deed.

DNS Systems means either or both of:

(a) the BACS System; and

(b) FPS.

of 109

E-Money Business means the issuance of electronic money in

accordance with the EMRs 2011 and the provision

of payment services which are related to such

issuance.

EMRs 2011 means the Electronic Money Regulations 2011.

FPS means the Sterling deferred net settlement

system operated by the FPS System Operator

which is used to settle near real-time electronic

payments as well as standing orders.

FPS CFA means a Completion Funds Account held by a

Non- Bank PSP (DNS) Participant with respect to

its participation in FPS.

FPS DNS Position means, in relation to the Institution at any time,

its settlement risk exposure in FPS at that time as

determined in accordance with Appendix 3.

FPS Instruction means:

(a) in relation to the FPS System Operator, an

instruction sent by an authorised

representative of the FPS System Operator;

and

(b) in relation to the Institution in its capacity as a

Non-Bank PSP (DNS) Participant in FPS, an

instruction sent by an authorised

representative of the Institution.

FPS Rules means the rules issued from time to time by the

FPS System Operator (in the document entitled

"FPS Rules") which govern the participation of

(inter alia) Non-Bank PSP (DNS) Participants in

FPS. FPS Settlement Period has the meaning given to it in Appendix 3.

FPS Single Amount has the meaning given to it in Appendix 3.

FPS System Operator means Faster Payments Scheme Limited, whose

registered office is at 2 Thomas More Square,

London, E1W 1YN and whose registered number

is 07751778, and includes any person who may

succeed or replace Faster Payments Scheme

Limited as operator or manager of FPS.

of 109

Insolvency Event means, in respect of the Institution:

(a) any insolvency event as defined in regulation

23(18) of the PSRs 2017 or, as the case may be,

regulation 22(3) of the EMRs 2011; or

(b) the occurrence under the laws of any

applicable jurisdiction of anything analogous

to, or having a substantially similar effect to,

any insolvency event contemplated by

paragraph (a) above.

Net Credit Balance means, in relation to the credit balance on the

Specified Settlement Account at any time and for

the purpose of paragraph 2.14 of this Appendix 1,

the net sum that is produced after deducting from

the amount equal to the credit balance in the

Specified Settlement Account at that time:

(a) the aggregate value of all Payment Transfer

Orders by the Institution that have entered

CHAPS and that require settlement at that

time in accordance with the rules, procedures

and other requirements of CHAPS; and

(b) (in the case of completion of settlement in the

BACS System) the FPS Single Amount (if any)

which is at that time due and payable by the

Institution; or

(c) (in the case of completion of settlement in

FPS) the BACS Single Amount (if any) which is

at that time due and payable by the

Institution,

and if the net sum so produced is zero or

negative, then there shall be no Net Credit

Balance at the relevant time for the purpose of

paragraph 2.14 of this Appendix 1. Non-Bank PSP means an authorised electronic money institution

(as defined in the EMRs 2011) or an authorised

payment institution (as defined in the PSRs 2017).

Non-Bank PSP (CF) Participant means a Non-Bank PSP:

(a) acting in its capacity as a participant in any or

all of the Relevant Payment Systems;

(b) that uses its clients' funds to settle transactions

of 109

under or in connection with each such

participation.

Non-Bank PSP (DNS) Participant means a Non-Bank PSP (CF) Participant in its

capacity as a participant in either or both of the

DNS Systems.

Payment Transfer Order means an instruction by a participant in a

Relevant Payment System to place at the disposal

of a recipient an amount of money by means of a

book entry on the accounts of a bank, a central

bank or a settlement agent and which:

(a) is entered into the Relevant Payment

System; and

(b) complies with the relevant rules, procedures

and other requirements of the Relevant

Payment System for the acceptance and

settlement of such an instruction.

PSRs 2017 means the Payment Services Regulations 2017.

Relevant Electronic Money means electronic money issued by the Institution.

Relevant Funds means:

(a) sums received from, or for the benefit of, a

payment service user for the execution of a

payment transaction;

(b) sums received from a payment service

provider for the execution of a payment

transaction on behalf of a payment service

user; or

(c) (where the Specified Accounts support the

carrying on of E-Money Business by the

Institution) funds received in exchange for

electronic money that has been issued.

Relevant Payment Business means the relevant payment business carried on

by the Institution which is, or was, supported by

the Institution's holding of the Specified Accounts,

being:

[Note: please select which option below

appropriately describes the nature of the

Institution's payment business for which

the

of 109

Specified Accounts are held and then delete from

the executed version of this Settlement Trust

Deed the option which is not an appropriate

description]

[the provision of payment services which are

unrelated to the issuance of electronic money.]

[E-Money Business.]

Relevant Payment Systems means any or all of:

(a) the BACS System;

(b) CHAPS; and

(c) FPS.

RTGS System means the settlement system owned and

operated by the Bank of England in which

processing and settlement of Sterling-

denominated payments take place on a

transaction-by-transaction basis in real time,

offering finality of settlement in central bank

money. Safeguarding Provisions means the safeguarding provisions of:

(a) regulation 23 of the PSRs 2017; or

(b) regulations 20, 21 and 24 of the EMRs 2011.

Settlement Account means a separately designated Sterling account

which is, or was, held at the Bank of England in

the name of a Non-Bank PSP (CF) Participant for

the purpose of settling the Non-Bank PSP (CF)

Participant's payment obligations under or in

connection with its respective participations in

the Relevant Payment Systems.

Settlement Service Provider means the Bank of England as provider of

settlement services to either or both of:

(a) the BACS System under contract with the

BACS System Operator; and

(b) FPS under contract with the FPS System

Operator.

Settlement Trust Beneficiary means the Bank of England as holder of an STB

Entitlement and when performing the functions

of 109

relating to such holding that are described in this

Deed.

Settlement Trust Fund means the aggregate of the credit balances at any

time on the Specified Accounts.

Specified Accounts means any or all of:

(a) the Specified Settlement Account; and

(b) the Specified Completion Funds Accounts.

Specified Completion

Funds Accounts

means either or both of:

(a) the BACS CFA which is, or was, held by the

Institution at the Settlement Service

Provider with respect to its participation as a

Non-Bank PSP (DNS) Participant in the BACS

System (the Specified BACS CFA); and

(b) the FPS CFA which is, or was, held by the

Institution at the Settlement Service

Provider with respect to its participation as a

Non-Bank PSP (DNS) Participant in FPS (the

Specified FPS CFA),

in each such case as relating to the Institution's

Relevant Payment Business.

Specified BACS CFA has the meaning given to it in paragraph (a) of the

definition of "Specified Completion Funds

Accounts".

Specified FPS CFA has the meaning given to it in paragraph (b) of the

definition of "Specified Completion Funds

Accounts".

Specified Settlement Account means the Settlement Account which is, or was,

held by the Institution at the Bank of England with

respect to its participation as a Non-Bank PSP (CF)

Participant in any or all of the Relevant Payment

Systems and as relating to the Institution's

Relevant Payment Business.

STB Entitlement means a beneficial interest that arises from time

to time in favour of the Settlement Trust

Beneficiary under, and in accordance with, Parts II

and III of this Deed to support the completion of

settlement of Payment Transfer Orders that

have entered

of 109

either or both of the DNS Systems.

Sterling means the lawful currency of the United Kingdom.

2. In this Deed, unless otherwise specified:

2.1 references to this Deed include the Appendices to this Deed;

2.2 references to Parts, clauses and Appendices are to Parts and clauses of, and to

Appendices to, this Deed;

2.3 headings to Parts are for convenience only and do not affect the interpretation of this

Deed;

2.4 references to a person includes any individual, company, corporation, unincorporated

association or body of persons (including a partnership, joint venture or consortium),

government, state, agency, international organisation or other entity, and includes a

person's successors and transferees;

2.5 references to any statute or statutory instrument or any provision thereof shall be

construed as a reference to the same as it may have been, or may from time to time be,

amended, modified or re-enacted;

2.6 the Institution shall be taken to amend this Deed if it amends, varies, waives,

supplements, novates or replaces (or purports to amend, vary, waive, supplement,

novate or replace) this Deed or any provision of this Deed;

2.7 general words whether or not introduced by the word “other” shall not be given a

restrictive meaning by reason of the fact that they are preceded by words indicating a

particular class of acts, matters or things and general words shall not be given a

restrictive meaning by reason of the fact that they are followed by particular examples

intended to be embraced by the general words;

2.8 words importing one gender shall (where appropriate) include any other gender and

words importing the singular shall (where appropriate) include the plural and vice versa;

2.9 references to payee, payer, payment service provider, payment service user and

payment transaction have the same meanings as in the PSRs 2017 or, as the case may be

and as applicable to the execution of payment transactions that are related to the

issuance of Relevant Electronic Money (where the Specified Accounts support the

carrying on of E- Money Business by the Institution), the EMRs 2011;

2.10 (where the Specified Accounts support the carrying on of E-Money Business by the

Institution) references to a payment service user include a holder of Relevant Electronic

Money when making use of a payment service related to the issuance of the Relevant

Electronic Money;

2.11 references to electronic money have the same meaning as in the EMRs 2011;

of 109

2.12 a person shall be considered a Customer of the Institution irrespective of whether it has a

contractual relationship with the Institution governing the execution of the Customer's

payment transaction or, as the case may be and where the Specified Accounts support

the carrying on of E-Money Business by the Institution, the redemption by the Customer

of the monetary value of Relevant Electronic Money;

2.13 Relevant Funds shall be held by the Institution in the Specified Accounts for the account

of a Customer if the Relevant Funds are received into the Specified Accounts:

(a) by the Institution from, or for the benefit of, the Customer (as a payment

service user) for the execution of a payment transaction which remains

unexecuted from the Settlement Trust Fund;

(b) by the Institution from a payment service provider for the execution of a

payment transaction on behalf of the Customer (as a payment service user)

which remains unexecuted from the Settlement Trust Fund; or

(c) (where the Specified Accounts support the carrying on of E-Money Business

by the Institution) the Relevant Funds are received into the Specified

Accounts for the redemption of the monetary value of Relevant Electronic

Money (in whole or in part) held by the Customer which remains

unredeemed from the Settlement Trust Fund;

2.14 a credit balance in the Specified Settlement Account shall be available for DNS Systems

settlement at any time in connection with the realisation of an STB Entitlement to

complete settlement in the BACS System (in accordance with clause 9.1 and Appendix 2)

or, as the case may be, to complete settlement in FPS (in accordance with clause 9.2 and

Appendix 3), if (but only if) there is a Net Credit Balance at that time and that Net Credit

Balance is equal to or greater than:

(a) (in the case of the completion of settlement in the BACS System in

accordance with clause 9.1 and paragraph 3 of Appendix 2) the BACS Single

Amount which is at that time due and payable by the Institution; or

(b) (in the case of the completion of settlement in FPS in accordance with clause

9.2 and paragraph 3 of Appendix 3) the FPS Single Amount which is at that

time due and payable by the Institution;

2.15 references to any rules, procedures, requirements, agreement or document (including

this Deed) shall be construed as a reference to the such rules, procedures, requirements,

agreement or document as the same may from time to time be amended, varied,

supplemented, novated or replaced and shall include any document which is

supplemental to, or is expressed to be collateral to, or is entered into pursuant to or in

accordance with such rules, procedures, requirements, agreement or document; and

2.16 unless otherwise stated, nothing in this Deed is intended to confer a benefit on any

of 109

third party. No term in this Deed will, therefore, be enforceable pursuant to the Contracts

(Rights of Third Parties) Act 1999 by any party; and the respective rights of the Settlement

Trust Beneficiary and the Customers shall be enforceable as identified

beneficiaries (or an identified class of beneficiaries) under a deed poll.

of 109

APPENDIX

2 BACS:

CALCULATION OF BACS DNS POSITION AND REALISATION OF STB ENTITLEMENT IN SUPPORT OF

BACS SETTLEMENT


1. In this Appendix 2, the following expressions shall have the following meanings.

BACS Cycle has the meaning given to it in the BACS

Settlement Agreement.

BACS Single Amount means the amount determined in

accordance with clause 6 (Single

Amount) of the BACS Settlement

Agreement. BACS Single Undertaking means the amount determined in

accordance with clause 7 (Settlement) of

the BACS Settlement Agreement.

Part II: Calculation of BACS DNS Position

2. For the purposes of calculating the Institution's BACS DNS Position, the Institution's settlement

risk exposure in the BACS System shall be at any time the aggregate of:

2.1 its BACS Single Undertakings that have been determined by the BACS System Operator; and

2.2 the net sum of the amounts set out in all of the Payment Transfer Orders received and not

rejected by the BACS System Operator in connection with the Institution's Relevant Payment

Business since the last determination of its BACS Single Amount,

in each case, which remain undischarged by the Institution (whether or not they are due and

payable) at that time.

Part III: Realisation of STB Entitlement in support of BACS settlement

3. In connection with completing the settlement of Payment Transfer Orders that have entered the

BACS System, the Settlement Trust Beneficiary’s STB Entitlement shall be realised as follows:

3.1 if the credit balance in the Specified Settlement Account at the point of settlement in

respect of a particular BACS Cycle is available for DNS Systems settlement, then the STB

Entitlement shall be realised by the Settlement Service Provider debiting an amount equal

to the Institution’s BACS Single Undertaking then due from the Specified Settlement

Account and settling the BACS Single Amount then payable by the Institution in accordance

with clauses 2.1 (Settlement Service Provider), 7.1 (Due Date) and 7.2 (Settlement) of the

BACS Settlement Agreement;

of 109

3.2 if the credit balance in the Specified Settlement Account at the point of settlement in

respect of a particular BACS Cycle is not available for DNS Systems settlement, then the

STB Entitlement shall be realised by the Settlement Service Provider debiting an amount

equal to the BACS Single Amount then due and payable by the Institution from the

Specified BACS CFA in accordance with clause 7.3(a)(iii) and (iv) (Non-Paying Participant

Shortfall) of the BACS Settlement Agreement; and

3.3 in any event, in accordance with either or both of:

(a) an instruction contemplated by the agreement(s) between the Institution and

the Settlement Service Provider governing the relevant Specified Accounts; and

(b) an instruction from the Institution given in accordance with clause 7.3 (Non-

Paying Participant Shortfall) of the BACS Settlement Agreement.

of 109

APPENDIX

3 FPS:

CALCULATION OF FPS DNS POSITION AND REALISATION OF STB ENTITLEMENT IN SUPPORT

OF FPS SETTLEMENT


1. In this Appendix 3, the following expressions shall have the following meanings.

DCS Participant means a person which, in accordance with the

FPS Rules, is responsible for the settlement of

any Payment Transfer Order that has entered

FPS in which it is expressed to be the

Submitting Participant (as defined in the FPS

Rules) and/or the Receiving Participant (as

defined in the FPS Rules).

FPS Cycle means the period between the cut-off times

for payments being settled for one settlement

and the next settlement in or in respect of

FPS. FPS Net Sender Cap means, in respect of a DCS Participant, the

maximum permitted FPS Settlement Risk

Position determined in accordance with the

FPS Procedures.

FPS Procedures means the operational and procedural

documents relating to FPS as approved and

amended by the FPS System Operator from

time to time in consultation with the Bank of

England.

FPS Settlement Cut-Off means, for an FPS Cycle, the time at which

the FPS Cycle ends and the FPS Single

Amount payable by or to a DCS Participant in

respect of the FPS Cycle is fixed for

settlement purposes. FPS Settlement Period means, in relation to an FPS Cycle, the period

commencing with the FPS Settlement Cut-Off

for the FPS Cycle and ending upon the final

settlement of all of the Payment Transfer

Orders accepted in the FPS Cycle in

accordance with the FPS Rules.

FPS Settlement Risk Position means a DCS Participant's current negative

net position in FPS calculated for settlement

risk

of 109

purposes, and limited by the FPS Net Sender

Cap.

FPS Single Amount means the amount payable by or to a DCS

Participant in respect of an FPS Cycle as

determined in accordance with FPS Rule 7.1.1

(Single Amount).

Part II: Calculation of FPS DNS Position

2. For the purposes of calculating the Institution's FPS DNS Position, the Institution's settlement risk

exposure in FPS shall be:

2.1 (subject to paragraph 2.3 below) at any time during an FPS Cycle, the absolute value of

the Institution's FPS Settlement Risk Position at that time;

2.2 (subject to paragraph 2.3 below) at any time during the FPS Settlement Period in relation

to an FPS Cycle, the FPS Single Amount payable by the Institution as determined at the

FPS Settlement Cut-Off for the FPS Cycle in accordance with FPS Rule 7.1.1 (Single

Amount);

2.3 notwithstanding paragraphs 2.1 and 2.2 above, where the FPS Settlement Period in

relation to an FPS Cycle is running concurrently with the immediately following FPS

Cycle, at any time during that concurrent period whichever is the greater of the amounts

under paragraph 2.1 and paragraph 2.2 above at that time (where they are not the same);

and

2.4 at all other times, zero.

Part III: Realisation of STB Entitlement in support of FPS settlement

3. In connection with completing the settlement of Payment Transfer Orders that have entered FPS,

the Settlement Trust Beneficiary's STB Entitlement shall be realised as follows:

3.1 if the credit balance in the Specified Settlement Account at any time during an FPS

Settlement Period is available for DNS Systems settlement, then the STB Entitlement

shall be realised by the Settlement Service Provider debiting an amount equal to the FPS

Single Amount then due and payable by the Institution from the Specified Settlement

Account and settling that FPS Single Amount in accordance with FPS Rule 7 (Settlement

Arrangements);

3.2 if the credit balance in the Specified Settlement Account during an FPS Settlement Period

is not available for DNS Systems settlement, then the STB Entitlement shall be realised by

the Settlement Service Provider debiting an amount equal to the FPS Single Amount then

due and payable by the Institution from the Specified FPS CFA and settling that FPS

Single Amount in accordance with FPS Rule 7 (Settlement Arrangements); and

3.3 in any event, in accordance with either or both of:

of 109

(a) an FPS Instruction from the FPS System Operator as contemplated by the

agreement(s) between the Institution and the Settlement Service Provider

governing the relevant Specified Accounts; and

(b) an FPS Instruction from the Institution given in accordance with clause

5(a)(ii) (Non-Paying DCS Participant Shortfall) of the FPS Accounts Agreement.

of 109

SCHEDULE 3A

EXPLANATORY GUIDANCE TO THE PRO FORMA SETTLEMENT TRUST DEED

of 109

FASTER PAYMENTS SERVICE

SETTLEMENT TRUST DEED: GUIDANCE

NOTE

A. Introduction

1. This Note provides guidance5 on, and should be read in conjunction with, the pro forma

Settlement Trust Deed that is set out in Schedule 3 to the FPS Rules. It gives DCS

Participants and other relevant stakeholders information to assist a clear understanding

as to the intended purpose and effect of the Settlement Trust Deed to be executed by DCS

(RF) Participants as a condition to their admission to FPS.

2. Capitalised or other terms used in this Note, but not defined in it, have the meaning given

to them in the FPS Rules, the Settlement Trust Deed and the Appendix.

3. The Settlement Trust Deed has been prepared for use by an authorised payment

institution (an API) or an authorised electronic money institution (an EMI), which uses

client funds to settle payment transactions, in connection with its participation in one or

more "Relevant Payment Systems" (comprising FPS, BACS and CHAPS) and as relating to

its "Relevant Payment Business"6

4. While the Settlement Trust Deed operates to support the settlement activities of an API or

an EMI in any one or more of the Relevant Payment Systems, this Note focuses on the

operation of the Settlement Trust Deed as it relates to the participation of an API or EMI as

a DCS (RF) Participant in FPS7. A DCS (RF) Participant is a category of DCS Participant. As

such, it is responsible as principal for the settlement of those Payment Requests accepted

5 This Note has been prepared for guidance and information purposes only. The information in it is intended to be of a general nature and is not a substitute for detailed legal advice. The FPS System Operator accepts no duty of care or other responsibility to any person for the accuracy or correctness of any view, opinion or analysis contained in this Note.

6 In executing its Settlement Trust Deed, the API or EMI will have to elect the definition of "Relevant Payment Business" (as provided in Appendix 1 to the Settlement Trust Deed) which properly describes the payment activities to which its participation in the Relevant Payment Systems relates, i.e. e-money business or a payments business which is unrelated to the issuance of e-money. As explained in paragraph 5 of this Note, the relevant statutory safeguarding requirements prohibit an EMI from co-mingling funds held for the account of clients of its e-money business with funds held for the account of clients of its unrelated payments business. If an EMI wishes, therefore, to participate in a Relevant Payment System, such as FPS, to support the processing and settlement of payment transactions in these different business lines, it will be required to execute a separate Settlement Trust Deed to support each type of Relevant Payment Business. Each Settlement Trust Deed will relate to the separate group of accounts held by the EMI at the Bank of England (the Bank) to support the relevant business line described as its "Relevant Payment Business" in the relevant Settlement Trust Deed.

7 It is also possible for an API or an EMI to apply for admission to FPS as a DCS (OF) Participant. However, such participation is only

permitted if the institution will exclusively use its own funds, and not Relevant Funds, to settle its FPS payment obligations. As a condition to admission as a DCS (OF) Participant, such an institution will be required to enter into those documents that are specified for that category of DCS Participant in FPS Rule 2.1. While a DCS (OF) Participant is not required to enter into a Settlement Trust Deed, this Note will still be relevant to its participation. The Note explains how the Settlement Trust Deed operates to mitigate, amongst other things, settlement risk as between DCS Participants (where a Single Amount is payable by a DCS (RF) Participant at the end of a Settlement Cycle in accordance with FPS Rule 7.1.1).

of 109

in a Settlement Cycle in which the DCS (RF) Participant is expressed to be the Submitting

Participant and/or Receiving Participant.

B. Statutory safeguarding requirements

5. In its capacity as an API or EMI, a DCS (RF) Participant is subject to certain statutory

safeguarding requirements8 in relation to Relevant Funds that it receives in connection

with its participation in FPS. These requirements ensure that such Relevant Funds are

segregated from any other funds that the API or EMI holds9 and are applied solely for the

purpose for which they have been received by the API or EMI. This purpose is either to

execute a payment transaction for on behalf of a payment service user10; or to redeem the

monetary value of electronic money at the request of the electronic money holder. If the

Relevant Funds are incapable of being applied for this purpose, as a result of the

occurrence of an Insolvency Event in respect of the API or EMI, the claim of the payment

service user or the electronic money holder is to be paid from the Relevant Funds in

priority to the claims of all other creditors. The priority accorded to such a claim is

achieved through a "statutory trust" provided for by the safeguarding provisions of the

PSRs 2017 or, as the case may be, the EMRs 2011.

6. Where the relevant payment transaction or redemption is or is to be executed in FPS11, the

statutory provisions permit an interest or right to be created in favour of the Bank over the

funds held by the DCS (RF) Participant (as an API or EMI) in the relevant segregated

accounts maintained with the Bank "in order to ensure the availability of funds to complete

the settlement of transfer orders12 in accordance with the rules or default arrangements of

the designated system"13.

8 The safeguarding requirements relevant to the Settlement Trust Deed are set out in regulation 23 of the PSRs 2017 and regulations 20, 21

and 24 of the EMRs 2011.

9 Such funds must be segregated in a separately designated account held by the API or EMI with an authorised credit institution or the

Bank. In connection with its participation in FPS, the relevant segregated accounts for this purpose will be the DCS (RF) Participant's Settlement Account and Specified FPS CFA (the Specified Accounts) held at the Bank (as Settlement Service Provider). The Specified Accounts are used by a DCS (RF) Participant to complete the settlement of Payment Requests entered into FPS and accepted in a Settlement Cycle. If an EMI is using FPS (as a DCS Participant) to execute both payment transactions that are related to the issuance of electronic money and payment transactions that are not so related, it will need to maintain separate participations in FPS for each type of payment activity. Separate Specified Accounts will be associated with each participation (maintained by the EMI as a DCS (RF) Participant) to ensure that Relevant Funds held by the EMI for the execution of payment transactions related to the issuance of electronic money are not co-mingled with, and remain segregated from, Relevant Funds held by the EMI for the execution of payment transactions that are not related to such issuance. In this case, the EMI would be required to execute a Settlement Trust Deed for each participation in respect of each set of Specified Accounts that are used to settle Payment Requests linked to the relevant participation.

10

In relation to electronic money issued by an EMI, the electronic money holder will also be a payment service user when using the

electronic money for the execution of a payment transaction

11

FPS is a "designated system" under the Financial Markets and Insolvency (Settlement Finality) Regulations 1999 (as amended, the

SFRs).

12

A Payment Request that enters FPS is a "transfer order" for this purpose and for the purpose of the SFRs. The FPS Rules and default

arrangements that govern the completion of the settlement of Payment Requests (accepted during a Settlement Cycle) are set out, or otherwise described, in FPS Rule 7.

13 See regulation 23(9)(b) of the PSRs 2017 and regulation 21(4A)(b) of the EMRs 2011.

of 109

(1) Reflecting and implementing this statutory framework, it is a condition to a DCS (RF)

Participant's admission to FPS that: the Specified Accounts that it uses to complete

the settlement of Payment Requests may only hold either or both of: (a) Relevant

Funds; and (b) own funds that are the subject of an STB Entitlement10 ;14and

(2) it executes a Settlement Trust Deed in respect of those Specified Accounts.

C. The purpose and effect of the Settlement Trust Deed: key aspects

7. The Settlement Trust Deed performs a number of important functions in protecting the

integrity of FPS settlement and insulating funds of payment service users or electronic

money holders received by a DCS (RF) Participant (in connection with FPS settlement)

from the claims of creditors of the DCS (RF) Participant.

8. Under the Settlement Trust Deed, the DCS (RF) Participant declares a trust over the

aggregate credit balances standing from time to time in the Settlement Trust Fund. In

accordance with its separate regulatory obligations as an API or EMI, the DCS (RF)

Participant must ensure that no payment transaction is executed, or monetary value

redeemed, for a Customer in FPS unless Relevant Funds in an amount equal to the

payment transaction or redemption are held by it in the Settlement Trust Fund for the

account of the relevant Customer.

9. The trust device is used, under English law, to create proprietary beneficial interests in the

trust assets in favour of identified beneficiaries. The creation of such a proprietary interest

is intended to prevent the funds, the subject of the beneficial interest, from falling into the

insolvent estate (or from being attached by a creditor) of the trustee (i.e. the DCS (RF)

Participant11). The beneficiaries should be absolutely entitled to the trust assets in priority

to any creditor (or the general body of creditors) of the trustee.

10. The Settlement Trust Deed creates two types of beneficial interest in or in relation to the

Settlement Trust Fund at any time: a Customer Entitlement and an STB Entitlement.

Customer Entitlement

11. A Customer Entitlement is a beneficial interest in relation to the Settlement Trust Fund

that arises in favour of each relevant payment service user or electronic money holder in

the amount of the Relevant Funds that are held by the API or EMI in the Specified Accounts

(and other accounts included in the Settlement Trust Fund) for the relevant

Customer's

10 The STB Entitlement is the interest in favour of the Bank (as Settlement Trust Beneficiary) which is contemplated by regulation 23(9)(b) of the PSRs 2017 and regulation 21(4A)(b) of the EMRs 2011. It is created in favour of the Bank (as Settlement Trust Beneficiary) in accordance with the terms of the Settlement Trust Deed (see further Section C of this Note).

of 109

Account12.15 Each such Customer Entitlement is intended to ensure that the Relevant

Funds will only be used (outside insolvency) for the purpose for which they were

received by the API or EMI into the Settlement Trust Fund – namely, to execute a

payment transaction for or on behalf of the Customer or to redeem the monetary value

of electronic money held by the Customer.

12. In the event that the funds the subject of a Customer Entitlement cannot be used for

the purpose for which they were received (i.e. upon the occurrence of an Insolvency

Event in respect of the API or EMI), then the beneficial interest vested in the Customer

should entitle him to payment of the funds to meet his claim on the API or EMI in

priority to the claims of the creditors of the PSP.

13. In this way, each Customer Entitlement seeks to give further assurance to payment

service users and electronic money holders, in conjunction with the statutory trust,

that any Relevant Funds held for their account in the Specified Accounts (and other

accounts included in the Settlement Trust Fund) will only be applied to fulfil the

purpose for which they were received or, upon the failure of that purpose, will be

returned in full to them.

14. The Customer Entitlement subsists until it is realised - either upon execution of the

relevant payment transaction or redemption of the Relevant Electronic Money, or

payment in full to the Customer in the event of the PSP's insolvency. As an absolute

beneficial interest not operating by way of charge or other security interest, it is

incapable of being extinguished by payment from any funds that are not the subject of

the Customer Entitlement.

16. A Customer Entitlement will be realised by execution of a payment transaction or

redemption of the Relevant Electronic Money in FPS at the moment at which the

Payment Request (for the payment transaction or redemption) is accepted in

accordance with the FPS Rules and its amount debited to the DCS (RF) Participant's

Multilateral Net Settlement Position (the MNSP1613). It is at this point that the payer's

payment transaction or redemption is considered executed. The payee's payment

service provider is regarded as having received the funds the subject of the payment

transaction (between the underlying payer and payee) because the amount credited to

its MNSP enables it to make the corresponding value available to the payee in

12 See paragraph 2.13 of Annex 1 to the Settlement Trust Deed for an explanation as to when Relevant Funds are considered to be held by a DCS (RF) Participant in the Specified Accounts (and other accounts included in the Settlement Trust Fund) for the account of a Customer.

13 In this transaction, the DCS (RF) Participant is acting as the payer's payment service provider. The MNSP is a digital record maintained in FPS by the FPS System Operator for each DCS Participant. It records at any point during a Settlement Cycle the net position of all Payment Requests accepted up to that point in which the DCS Participant is expressed to be the Submitting Participant and/or the Receiving Participant. The amount of an accepted Payment Request in which the DCS Participant is a Submitting Participant is recorded in its MNSP with a negative value; and the amount of an accepted Payment Request in which the DCS Participant is a Receiving Participant is recorded in its MNSP with a positive value.

of 109

accordance with the FPS Rules and FPS Procedures14 .17

17. If, at the point immediately before such debit to the DCS (RF) Participant's MNSP, the

balance on the MNSP was:

(1) zero, then (after debit of the amount of the Payment Request to the MNSP) an STB

Entitlement will arise in favour of the Bank (as Settlement Trust Beneficiary) in the

amount of the debit;

(2) negative, then an STB Entitlement (after debit of the amount of the Payment

Request to the MNSP) will arise in favour of the Bank (as Settlement Trust

Beneficiary) in the new negative balance on the MNSP;

(3) positive and the resulting balance (after debit of the amount of the Payment

Request to the MNSP) is negative, then:

(a) an STB Entitlement will arise in favour of the Bank (as Settlement Trust

Beneficiary) in the amount of the negative balance on the MNSP;

(b) the amount of the previous positive MNSP balance is treated as being

received into the Settlement Trust Fund as Relevant Funds for the account of

those other relevant Customers of the API or EMI whose payment

transactions remain unexecuted in FPS or other Relevant Payment System15

;18 and

(4) positive and the resulting balance (after debit of the amount of the Payment

Request to the MNSP) is zero or remains positive, then the amount of the executed

transaction/redemption is treated as being received into the Settlement Trust

Fund as Relevant Funds for the account of those other relevant Customers of the

API or EMI whose payment transactions remain unexecuted in FPS or other

14 It follows that it is also at this point that the payee's payment service provider must ensure that the amount of the executed payment transaction is at the payee's immediate disposal in accordance with regulation 89(3) of the PSRs 2017.

15 The relevant Customers for this purpose will be those payment service users who, during the same Settlement Cycle, have received (as payee) execution of a payment transaction in FPS (by credit to the MNSP of the Customer's DCS (RF) Participant for their account), but who have not used in full the funds representing the value of such payment transaction by execution of a further separate payment transaction (whether in or outside FPS). Such a further payment transaction might be a withdrawal or transfer of the funds by the relevant Customer. Until such further payment transaction is executed, a relevant Customer will have a Customer Entitlement in relation to the Settlement Trust Fund in the amount of the unexecuted further payment transaction. In this scenario, funds that would have been received into the DCS (RF) Participant's Settlement Account at the end of the FPS Settlement Period for the Settlement Cycle had its MNSP remained positive (representing the Single Amount payable to the DCS (RF) Participant in respect of the Settlement Cycle), will (by virtue of the resulting negative balance on its MNSP effected in execution of a payer's payment transaction) no longer be received into the Settlement Account (assuming no further payment transactions are executed for payees of the DCS (RF) Participant in the same Settlement Cycle). The Relevant Funds that were placed by or for the payer in the Specified Accounts for execution of the payment transaction that caused the negative balance on the MNSP will, as a result of the execution of his payment transaction, no longer be held for the account of the payer. Instead, those funds will (to the extent they are not the subject of the STB Entitlement that arises on execution of the payer's payment transaction) be held by the DCS (RF) Participant for the account of its relevant Customers subject to a Customer Entitlement that immediately arises in their favour in the amount of their respective unexecuted further payment transactions. Such funds (which are held in the DCS (RF) Participant's Specified Accounts) are treated at that point as being received as Relevant Funds for the account of the relevant Customer for the execution of their further payment transactions.

of 109

Relevant Payment System.

STB Entitlement

18. An STB Entitlement is a beneficial interest that vests in the Bank (as Settlement Trust

Beneficiary). An STB Entitlement is vested in the Bank at any time during a Settlement

Cycle at which the DCS (RF) Participant has a Settlement Risk Position1619 or an

unsettled Single

Amount remains payable by it. At the end of each Settlement Cycle (at the time of the

Settlement Cut-Off for the Settlement Cycle), the DCS (RF) Participant's Settlement

Risk Position (if any) at that time will become the Single Amount payable by it in

accordance with FPS Rule 7.1.1.

19. Each such STB Entitlement gives comfort, therefore, that:

(1) during the Settlement Cycle, funds in an amount equal to the DCS (RF)

Participant's Settlement Risk Position (or, if greater, any unsettled Single Amount

that remains payable by it) that are held in the Specified Accounts are subject to

an STB Entitlement and, as such, should not at any time during the Settlement

Cycle be attached by any other creditor of the DCS (RF) Participant; and

(2) at the end of the Settlement Cycle, funds held in the Specified Accounts (equal in

value to the Single Amount payable by the DCS (RF) Participant) should be

available to the Bank to settle the Single Amount payable by the DCS (RF)

Participant in respect of that Settlement Cycle in response to a relevant FPS

Instruction by or on behalf of the System Operator or the DCS (RF) Participant

given in accordance with the FPS Rules17.20

The creation of an STB Entitlement results in the pro tanto termination or reduction of

a Customer Entitlement in relation to the funds held in the Settlement Trust Fund. This

means that, at any one time, funds held in the Specified Accounts that are the subject

16 A Settlement Risk Position arises for a DCS Participant at any point during a Settlement Cycle when there is a negative balance on its MNSP or an unsettled Single Amount payable by it. At any such time, an STB Entitlement (in the absolute value of the Settlement Risk Position or, if greater, the unsettled Single Amount payable by it) is vested in the Bank (as Settlement Trust Beneficiary). A DCS (RF) Participant's Settlement Risk Position will never be allowed to breach its Net Sender Cap. The Net Sender Cap is set at an amount that is equal to or less that the minimum balance of funds that a DCS (RF) Participant will have in its Specified FPS CFA. An STB Entitlement may arise, increase, decrease or terminate at any time during a Settlement Cycle depending upon, amongst other things, the balance at that time on the DCS (RF) Participant's MNSP as each new Payment Request is accepted (in which the DCS (RF) Participant is the Submitting Participant and/or the Receiving Participant) and its amount debited or credited to the MNSP; and provided always, that the value of an STB Entitlement can never fall below any unsettled Single Amount payable by the DCS (RF) Participant.

17 The settlement of the Single Amount payable by the DCS (RF) Participant will occur at the same time as the settlement of all other Single Amounts payable by or to each other DCS Participant in respect of the Settlement Cycle. The debit and credit of such Single Amounts to and from the relevant accounts of the DCS Participants maintained with the Bank (as Settlement Service Provider) effects final settlement, in accordance with FPS Rule 7.1.3, of all Payment Requests accepted in the Settlement Cycle. In this way, the operation of the provisions of the Settlement Trust Deed relating to the realisation of an STB Entitlement (in whole or in part), by settlement of the relevant Single Amount payable by a DCS (RF) Participant, completes the settlement of all relevant Payment Requests (transfer orders) in the manner contemplated by regulation 23(9)(b) of the PSRs 2017 and regulation 21(4A)(b) of the EMRs 2011.

of 109

of an STB Entitlement will be subject only to that beneficial interest and not any

Customer Entitlement (and vice versa).

20. The Bank (as Settlement Trust Beneficiary) will realise its STB Entitlement solely for

the settlement purposes permitted by clause 9 of the Settlement Trust Deed, which

include completing settlement in the manner contemplated by paragraph 19(2) above.

Each STB Entitlement will, therefore, subsist until it is realised (in whole or in part) by

way of final settlement of all Payment Requests that have been accepted in the

Settlement Cycle in accordance with FPS Rule 718.21As an absolute beneficial interest

not operating by way of

charge or other security interest, at the time at which the Single Amount becomes

payable by the DCS (RF) Participant in respect of a Settlement Cycle19,22 the STB

Entitlement is incapable of being extinguished (in whole or in part) by payment from

any funds other than those credited to the Specified Accounts or other accounts

included in the Settlement Trust Fund (and which are, under the Settlement Trust

Deed, subject to such STB Entitlement).

21. The result of the arrangements outlined in this Section C is that, at any time, the

totality of the Settlement Trust Fund should be subject to either or both of a Customer

Entitlement and an STB Entitlement. There should, therefore, be no funds in the

Specified Accounts (or other accounts included in the Settlement Trust Fund) that are

available for attachment by, or for distribution to, any creditor or body of general

creditors of the relevant API or EMI.

D. The Settlement Trust Deed as part of the FPS default arrangements

22. FPS Rule 7.4 provides a non-exhaustive description of those arrangements that form

part of the FPS "default arrangements". As operator of a designated system, the SFRs

require the FPS System Operator to put in place default arrangements that are

appropriate for the system. Default arrangements are those arrangements:

"put in place by a designated system… to limit systemic and other types

18 The creation, subsistence and realisation of an STB Entitlement (when coupled with the other arrangements described in Section D of this Note) appropriately safeguard funds that have been received by a payee in FPS (by credit to the MNSP of the payee's payment service provider), until such time as the funds are actually credited to the Settlement Account of the payee's payment service provider in final settlement at the end of the FPS Settlement Period for the Settlement Cycle in accordance with FPS Rule 7. This is how the Settlement Trust Deed, operating as part of the FPS default arrangements described in FPS Rule 7.4, is intended to "adequately insulate" the funds of such a payee from the claims of creditors of the paying DCS (RF) Participant in compliance with regulations 23(9)(c) and (10) of the PSRs 2017 and regulations 21(4A)(c) and (4B) of the EMRs 2011. 19 In accordance with FPS Rules 7.1 to 7.3, in respect of any Settlement Cycle, no amount becomes due or payable between DCS (RF) Participants in relation to the processing of Payment Requests during the Settlement Cycle until the Single Amount for each DCS Participant is fixed at the Settlement Cut-Off for, and at the end of, the Settlement Cycle. This means that any termination or reduction of an STB Entitlement that occurs during the Settlement Cycle, as Payment Requests (in which the DCS (RF) Participant is expressed to be the Receiving Participant) are credited to its MNSP, should not be characterised as the extinguishment or reduction of the STB Entitlement by payment of an obligation or liability secured by the STB Entitlement. There should, therefore, be no "equity of redemption" in the DCS (RF) Participant which would require the re-characterisation of the STB Entitlement as being granted by way of equitable charge or other security interest. The STB Entitlement is not created by the DCS (RF) Participant for the purpose of securing an obligation or liability and in security only. It is created solely for the settlement purposes permitted by clause 9 of the Settlement Trust Deed, which include completing the settlement of Payment Requests that are accepted in a Settlement Cycle in accordance with the FPS Rules and default arrangements.

of 109

of risk which arise in the event of a participant … appearing to be unable,

or likely to become unable, to meet its obligations in respect of a transfer

order…"20.23

23. The arrangements described in FPS Rule 7.4, which include the Settlement

Trust Deed and the operation of its provisions, perform the risk mitigation functions of

default arrangements. They do so by seeking to ensure that at all times (including in

the event of the opening of insolvency proceedings in respect of a DCS (RF)

Participant) funds should be available, and related processes should operate, so that

final settlement of all Payment Requests in which the DCS (RF) Participant is

expressed to be the Submitting and/or the Receiving Participant should occur in

accordance with FPS Rule 7.1.3. In consequence, the settlement and other risks

associated with the default of a DCS (RF) Participant are mitigated by these

arrangements by supporting final settlement of all Payment Requests relating to the

DCS (RF) Participant without requiring any further reference to, or action by, the

DCS (RF) Participant (or its insolvency office-holder)21.24

24. In legal terms, the completion of settlement is supported primarily by regulations 14(1)

and

(2) of the SFRs22.25 These provisions:

(1) prevent a successful challenge to the default arrangements of a designated

system on the basis of any rule of law relating to the distribution of the assets of a

participant on bankruptcy, winding-up or administration;

(2) prohibit the exercise by an insolvency office-holder appointed to a participant of

any of his powers under applicable insolvency law so as to prevent or interfere

with any action taken under the default arrangements of a designated system; and

(3) prohibit the exercise by a court of any of its powers under applicable insolvency

law so as to prevent or interfere with any action taken under the default

arrangements of a designated system.

20 See the definition of "default arrangements" in regulation 2(1) of the SFRs.

21 Such Payment Requests will generally need to have entered the FPS and become irrevocable (in accordance with FPS Rule 6.2.1) before the moment of the opening of insolvency proceedings in respect of the defaulting DCS (RF) Participant, in order to receive the protections afforded by the SFRs: see SFRs, regulations 20 and 22. In practice, this condition should be satisfied because new Payment Requests in which the DCS (RF) Participant is expressed to be the Submitting and/or Receiving Participant should not be accepted in the System at or after the moment at which such insolvency proceedings have been opened against it. This is likely to be effected by the FPS System Operator's exercise of its powers of suspension or exclusion under the FPS Rules in respect of the DCS (RF) Participant, before or at the moment of the opening of such insolvency proceedings. The FPS System Operator's powers of suspension and exclusion are themselves identified as forming part of the FPS default arrangements in Rule 7.4.1.

22 There are other relevant provisions of the SFRs which provide further assurance that the Specified Accounts should be available for use by the Bank (as Settlement Service Provider or Settlement Trust Beneficiary) to complete settlement (in response to a relevant FPS Instruction by or on behalf of the FPS System Operator or the DCS (RF) Participant) and, as a result, support the insulation of a payee's funds from the claims of creditors of a defaulting (paying) DCS (RF) Participant. These provisions include regulations 16, 17, 24 and 25 of the SFRs.

of 109

25. In consequence, the identification of the Settlement Trust Deed as forming part of the

FPS default arrangements is intended to limit the risk that the creation, subsistence or

realisation of any Customer Entitlement or STB Entitlement in accordance with the

Settlement Trust Deed (and other parts of the FPS contractual framework identified in

FPS Rule 7.4) might be successfully challenged under applicable insolvency law. In

practice, it should not be possible for a DCS (RF) Participant, its insolvency office-

holder, a court or any other third party to prevent or interfere with the realisation or

application of a Customer Entitlement or an STB Entitlement (in completion of FPS

settlement), vested in or in relation to the Settlement Trust Fund, in accordance with

the terms of the Settlement Trust Deed.

E. Worked examples of the operation of the Settlement Trust Deed

26. We set out in the Annexes to this Note some worked diagrammatic examples of how

the Settlement Trust Deed is intended to operate in practice in relation to FPS during and

at the end of a Settlement Cycle. For the purposes of the Annexes and for ease of

exposition, we have assumed that there is no other settlement activity or execution of

payment transactions in the other Relevant Payment Systems supported by the

Settlement Trust Deed.

of 109

SSA 7

SCFA 3

SSA 7

SCFA 3

ANNEX 1

SETTLEMENT CYCLE

BEGINS

(i) At the beginning of the Settlement Cycle:

(a) Institution A is holding Relevant Funds of +10 in its Specified Accounts for the account of its

Customers A, B, C, D and E collectively;

(b) Institution B is holding Relevant Funds of +10 in its Specified Accounts for the account of its

Customers W, X, Y and Z collectively; and

(c) each Institution's NSC is set at -3. (ii) The Customer Entitlements table in the diagrams below for each Institution represents each of the

respective Customer Entitlements in relation to the relevant Settlement Trust Fund at this point,

calculated in accordance with clause 6 of the relevant Institution's Settlement Trust Deed.

(iii) No payment transactions have been executed at this point in the Settlement Cycle and, therefore,

each Institution's MNSP and SRP balances are 0. No STB Entitlement has arisen in favour of the Bank

(as STB).

INSTITUTION A

Customer Entitlements Credit balances on Specified Accounts

MNSP 0

NSC -3

SRP

0

STB Entitlement

0

INSTITUTION B


MNSP 0

NSC -3

SRP

0

STB Entitlement 0

Customer Customer Entitlement

A 3

B 1

C 2

D 2

E 2


W 3

X 3

Y 3

Z 1

of 109

SSA

7

SCFA 3

SSA 7

SCFA 3

ANNEX 2

FIRST TRANSACTION IS EFFECTED IN THE SETTLEMENT CYCLE

(i) Customer A (as payer) instructs Institution A (his PSP) to pay 3 to Customer Z (as payee). (ii) Institution A (as Submitting Participant on behalf of Customer A) submits a Payment Request to

transfer 3 to Institution B (as Receiving Participant on behalf of Customer Z) in FPS.

(iii) The payment transaction is executed in FPS when the Payment Request of 3 is accepted in


INSTITUTION A


MNSP -3

NSC -3

SRP -

3

STB Entitlement +3

Upon execution of the payment transaction in FPS, Customer A's Customer Entitlement of +3 is realised.

Institution A therefore no longer holds +3 of Relevant Funds in its Specified Accounts for the account of Customer

A. Customer A's Customer Entitlement therefore reduces to 0. Institution A's MNSP is debited with 3

(resulting in a SRP of -3). A corresponding STB Entitlement of +3 immediately arises in favour of the Bank (as

STB).

INSTITUTION B


MNSP +3

NSC -3

SRP 0

STB Entitlement 0

Upon execution of the payment transaction in FPS, Institution B's MNSP balance is credited by 3. As

Institution B's MNSP balance is positive, Institution B's SRP balance is 0 (there is no settlement risk on


A 0

B 1

C 2

D 2

E 2


W 3

X 3

Y 3

Z 1

of 109

Institution B) and no STB Entitlement arises in favour of the Bank (as STB) in or in relation to Institution B's

Specified Accounts. Customer Z's Customer Entitlement will not, at this point, increase by 3 as there are no

free funds in Institution B's Specified Accounts which are available for such an increase (but see Annexes 3

and 5 which explain how Customer Z's funds remain insulated from the claims of creditors of Institution A

and Institution B).

of 109

SSA 7

SCFA

3

SCFA 3

ANNEX 3

SECOND TRANSACTION IS EFFECTED IN THE SETTLEMENT CYCLE

(i) Customer Y (as payer) instructs Institution B (his PSP) to pay 1 to Customer F (as payee). (ii) Institution B (as Submitting Participant on behalf of Customer Y) submits a Payment Request to

transfer 1 to Institution A (as Receiving Participant on behalf of Customer F) in FPS.

(iii) The payment transaction is executed in FPS when the Payment Request of 1 is accepted in


INSTITUTION A

Customer Entitlements

Credit balances

on Specified

Accounts

MNSP -2

NSC -3

SRP -

2

STB Entitlement

+2

Upon execution of the payment transaction, Institution A's MNSP is credited with 1 (resulting in an MNSP

balance of -2 and a SRP of -2). The corresponding STB Entitlement in favour of the Bank (as STB) is reduced

by 1 to +2. A Customer Entitlement of 1 immediately arises in favour of Customer F in relation to the

Specified Accounts. The reduction in the STB Entitlement (by 1) makes funds available (in the amount of 1)

to be held by Institution A for the account of Customer F in respect of the payment transaction executed in

its favour (as payee). Relevant Funds of 1 are treated as being received into the Specified Accounts by

Institution A for the account of Customer F.

INSTITUTION B


MNSP +2 NSC -3

SRP

0

STB Entitlement

0

Upon execution of the payment transaction in FPS, Customer Y's Customer Entitlement is reduced by 1 to + 2

SSA 7


A 0

B 1

C 2

D 2

E 2

F 1


W 3

X 3

Y 2

Z 2

of 109

as its payment transaction is executed in the amount of 1. As Customer Y's Customer Entitlement is reduced

by 1 and as the STB Entitlement is zero, Relevant Funds of 1 are treated as being received into the Specified

Accounts by Institution B for the account of Customer Z (in respect of the sum received in FPS for the benefit

of Customer Z upon execution of the first transaction in Annex 2). As a result, Customer Z's Customer

Entitlement is increased by 1 to +2 for the execution of further payment transactions on his behalf.

of 109

SSA 7

SCFA 3

SSA 7

SCFA 3

ANNEX 4

SETTLEMENT CUT-

OFF

(i) At the Settlement Cut-Off, the FPS Settlement Period for the Settlement Cycle commences.

(ii) The Single Amount for each of Institution A and Institution B is determined by the Central

Infrastructure (on behalf of the FPS System Operator) in accordance with FPS Rule 7.1.1.

(iii) The Central Infrastructure (on behalf of the FPS System Operator) will notify Institution A and

Institution B of their respective Single Amounts, in accordance with the Functional Specification and

other Reference Documents.

INSTITUTION A


MNSP -2

NSC -3

SRP -

2

STB Entitlement

+2

Single Amount -2

The Single Amount calculated for

Institution A is negative and

therefore gives rise to a Single

Amount payable by Institution A.

INSTITUTION B


MNSP +2

NSC -3

SRP

0

STB Entitlement

0 Single Amount

+2

The Single Amount calculated for

Institution B is positive and

therefore gives rise to a Single

Amount payable to Institution B.


A 0

B 1

C 2

D 2

E 2

F 1


W 3

X 3

Y 2

Z 2

of 109

SSA 5

SCFA 3

SSA 9

SCFA

3

ANNEX 5

END OF FPS SETTLEMENT

PERIOD

(i) At the end of the FPS Settlement Period:

(a) the STB Entitlement in relation to the Settlement Trust Fund held by Institution A in favour of

the Bank (as STB) is realised in accordance with clause 9.2 of Institution A's Settlement Trust

Deed; and

(b) the Single Amount for each of Institution A and Institution B is settled in accordance with FPS

Rule 7.

(ii) The FPS Settlement Period ends upon the final settlement of all of the Payment Requests accepted in

the Settlement Cycle in accordance with the FPS Rules.

INSTITUTION A


MNSP 0

NSC -3

SRP

0

STB Entitlement

0

The credit balance on Institution A's SSA is reduced to +5 as a result of the debit of the Single Amount of 2 payable by Institution A from the SSA.

INSTITUTION B


MNSP 0

NSC -3

SRP

0

STB Entitlement

0

The credit balance on Institution B's SSA is increased to +9 as a result of the credit of the Single Amount


A 0

B 1

C 2

D 2

E 2

F 1


W 3

X 3

Y 2

Z 4

of 109

payable to Institution B. Customer Z's Customer Entitlement will increase from +2 to +4 as the credit of

the Single Amount of 2 payable to Institution B is received into the SSA as Relevant Funds for the account

of Customer Z (in respect of the sum received in FPS for the benefit of Customer Z upon execution of the

first transaction in Annex 2). Customer Z now has +4 held for his account in the Specified Accounts for the

execution of further payment transactions on his behalf.

of 109

APPENDIX

ABBREVIATIONS USED IN ANNEXES 1 TO 5

ABBREVIATIONS KEY

Institution A DCS (RF) Participant

MNSP Multilateral Net Settlement Position

NSC FPS Net Sender Cap

PSP Payment Service Provider

SCFA Specified FPS CFA

SRP FPS Settlement Risk Position

SSA Specified Settlement Account

STB Settlement Trust Beneficiary