What does 'atomic settlement' refer to in the context of the Bank of England's projects?

'Atomic settlement' refers to a mechanism in payment systems where transactions are settled in a manner that ensures that related asset transfers occur simultaneously and irreversibly. This means that when a payment is made, it directly triggers the transfer of associated assets, ensuring that both the payment and the asset transfer are executed at the same time, thus reducing the risk of settlement failure.

This concept is particularly important in financial systems where the integrity and security of transactions are critical. It promotes efficiency by guaranteeing that the payment and the corresponding exchange of assets take place in concert, preventing situations where one party might fulfill their obligation while the other does not.

In the context of the Bank of England's initiatives, atomic settlement helps to enhance trust and reliability in payment systems, facilitating smoother operations in financial markets. By synchronizing payment settlements with asset transfers, this approach aligns with the goals of fostering innovation and improving the overall efficiency of payment processes in the banking sector.