banking initiatives in focus for 2013
DESCRIPTION
SOFA 2013TRANSCRIPT
SWIFT Operations Forum Americas
Banking Initiatives in focus for 2013
March 5, 2013
Agenda
• Introductions
• Industry initiatives
– Fed Perspective
– PMPG Viewpoint
• SWIFT update – RMB tracker
– SWIFTRef
– EBAM
– Trade/BPO
• Q&A
1
Introductions
• Roy DeCicco, Managing Director, Corporate and Investment
Bank, Industry Issues Executive, J.P. Morgan
• Richard Dzina, Senior Vice President, Wholesale Product
Office, Federal Reserve Bank of New York
• Sean Rodriguez, Senior Vice President, Financial Services
Industry Relations, Federal Reserve System
• Stacy Rosenthal, Senior Business Manager, SWIFT
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Federal Reserve Financial Services – Strategic Direction
SWIFT Operations Forum – Americas 2013
March 2013
Federal Reserve Financial Services Strategic Direction
• Continuity with the past – Maintain our longstanding financial services mission: to foster integrity,
efficiency and accessibility of the U.S. payments system
– Continue to act as a major service provider to the interbank market
– Continue to collaborate with industry and emphasize innovations in electronic payments systems
• Shift in emphasis for the future – Additional focus on improving the efficiency and effectiveness of
payments system for end users (businesses and individuals)
– Seek opportunities to speed clearing, improve transparency of payment information and enhance security of payments from end-to-end
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Federal Reserve Financial Services New Areas of End-to-End Focus
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• Maintain and enhance FRB network security
• Enhance understanding of end-to-end security
• Collaborate and promote industry best practices
Safety and Security
• Develop solutions to enhance payment speed
• Understand market demand for faster payments
• Continue migration of paper to electronic Speed
• Develop solutions to promote efficiency
• Understand needs for and barriers to efficiency
• Promote standards to improve efficiency Efficiency
Federal Reserve Financial Services Industry Collaboration
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Payments users
select the most
effective and
efficient payment
method based on
their needs.
The Federal Reserve
Banks develop
services that align with
industry initiatives and
end-to-end needs.
Payments industry
stakeholders work
collaboratively to
develop
innovative and
reliable solutions.
Federal Reserve Financial Services Initial Industry Response
• Strong agreement that assessing and improving the effectiveness of payments should explicitly include the end user experience. Call for collaborative and inclusive approach and strong Fed leadership to help define and achieve the future vision.
• Improvements in interoperability, affordability and transparency of payments will lead to improved speed and efficiency.
• Interest in strategies to bridge the U.S. payments system from today's reality to tomorrow's vision (e.g., electronic payment orders (EPO) and directories).
• Smaller financial institutions value Fed leadership to ensure broad accessibility and benefits for participants of all sizes and capabilities.
• Larger banks and organizations supportive of strategy as well, with strong interest in collaboration on emerging payments and security issues.
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Banking Issues in Focus for 2013
Wholesale Service Perspectives
SWIFT Operations Forum – Americas 2013
March 2013
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Fedwire Modernization Overview
• Strategic decision to move
toward distributed
computing – Legacy applications developed in
the 1980s
– Lack of flexibility/long lead times
for changes
– Difficult to provide new
services/functionality that integrate
well with internet interfaces
– Support for legacy systems and
environment becoming more
challenging
• Fedwire Modernization consists
of 4 inter-related programs
– Custom development led by FRBNY
Funds Modernization
(2014)
Ancillary Systems &
Decommission (2015)
Infrastructure Projects (2013)
Securities Modernization
(2015)
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Prospective Fedwire Funds Service
Enhancements and Initiatives
• Evaluate opportunities to optimize the efficient use of liquidity
by Fedwire Funds participants
• Enhance the Fedwire Funds service as a platform for
conducting cross border transactions
• Consider opportunities to expand the use of net settlement
capabilities
• Drive adoption of recently introduced payment notification and
extended remittance information features
• Enhance information services to Fedwire Funds participants as
complement to transaction services
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• Evaluate opportunities to optimize the efficient use of
collateral by Fedwire Securities participants
• Expanded operating hours?
• Enhanced receiver controls?
• DVD as supplement to DVP functionality?
• Enhance capacity of issuers to market new instruments and
products
• Enhance account structure and sub-account structure
features to provide Fedwire Securities participants greater
flexibility in management of activity
• Enhance information services to Fedwire Securities
participants as complement to transaction services
Prospective Fedwire Securities
Service Enhancements and Initiatives
SWIFT Operations Forum – Americas 2013
March 2013
Roy DeCicco
Managing Director
J.P.Morgan
Global Market Infrastructures
Payments Market Practice Group – Co-chair
B A N K I N G I N I T I A T I V E S I N F O C U S F O R 2 0 1 3
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English_General
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Agenda
DFA 1073
HVP ISO 20022 Variant
Non-Latin Character Sets
ERI/Payment Notification
RMB Globalization
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DFA 1073
PMPG, in partnership with TCH Association, published a white
paper in October 2012 – www.swift.com/pmpg
Market Practice Guidance paper is still being finalized – missed
8th February deadline to retain the CCT codeword in the
Standards Release Guide 2013
Implications -
Reference to CCT code in field 26T deleted from updated SRG
User Hand Book will not reference the code or the MPG
26T allows for any 3 character code, with bilateral agreement
Market feedback – interest in using field 72 for this code
A baseline MPG paper will be published before the 1073 rules
are effective. Actual cross-border payment issues/practices,
where not addressed, will be included in updates to the paper.
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HVP ISO 20022 Variant – as markets develop roadmaps for 20022 implementation
PMPG and SWIFT Standards joint sponsorship –
payments ecosystem gap analysis
Focus on global interoperability – guidelines for HVP
with a cross-border leg
Use the like-for-like principle – to map an ISO formatted
payment message into a MT 103
Europe – T2 and EBA/EURO1 - are now debating the
variant message as a practical solution for 2017
U.S. should follow this debate and the outcome – what
will the format for incoming payment instructions from
Europe be after Big Bang in 2017?
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Non-Latin Character Sets
PMPG published a white paper in June 2010 –
proposed a 5 step process -
Agree on the characters and tags/fields to be used
Must be able to screen these characters
Must transport characters to next party electronically
Or - develop guidelines for translation or transliteration
Consistent definition across business domains
SWIFT DP in December 2012 did not receive
support from the industry
Opportunity for the broader SWIFT community to
work together on a way forward 4 S
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ERI/Payment Notification
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PMPG has solicited global industry interest in
both a remittance data repository and a
payment notification service
Enough interest to keep it on our radar
screen
In 2013, the PMPG will work with the CAG
and markets that have developed solutions –
e.g. U.S. for payment notification – to
determine what cross-border practices are
feasible and should be put forward for further
discussion
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RMB Globalization
China International Payments System (CIPS) -
opportunity for the PMPG to work with local market
participants – HK and potentially China - in making
recommendations for efficient cross-border payment
practices
Offshore CNY Cash and Trade Working Group paper
includes PMPG comments and will be submitted to
PBoC officials
Offer to the PBoC for the HK WG and the PMPG to
provide additional input as message standards are
developed for CIPS
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The U.S. Representatives to the Payments Market Practice Group
Roy DeCicco – JPMorgan
George Doolittle – Wells Fargo
Michael Knorr - Citibank
We welcome your input –
USNG/C&T Sub-committee
FRBNY Wholesale Customer Advisory Group
TCH CHIPS Business Committee
BAFT-IFSA Payments Committee
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SWIFT Banking Initiatives Update
RMB Tracker
What is it?
Monthly reporting and
statistics on renminbi
(RMB) progress
towards becoming an
international currency.
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RMB Tracker
January
• Chinese RMB payments fail to take
off in the United States
• In December, 95.5% of the
payments value between the United
States and China/Hong Kong was
still performed in USD, with only
0.3% in RMB
• RMB remains world currency #14
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Who’s the USD-
correspondent
of Afriland Bank Is this BIC
still active?
Reference data
Your needs..
Which BIC
belongs to
this IBAN?
What is the
national
clearing
code of
Bank of
Taiwan ?
Is Stuttgart
Bank SEPA-
ready ? Which IBAN and
BIC correspond
to my suppliers’
local account? What is the
BIC of
Banco
Real?
What do i
need to
build a Bank
master file?
Is this IBAN
valid?
24
SWIFTRef Utility
Background
Beneficary’s BIC
Beneficiary’s acc.nb
Intermediary BIC
Intermed. acc. nb
Intermed. bank code
Payment system X
FIN service Y .......
ISO
SSI
SSI
sort
c.
SWIF
T
BA
EPC EBA
SSI
Beneficary’s BIC
Beneficiary’s acc.nb
Intermediary BIC
Intermed. acc. nb
Intermed. bank code
Payment system X
FIN service Y .......
ISO
SSI sort
c.
EBA
SSI
SSI SWIF
T
EPC
BA
Today
You maintain the data
Tomorrow
SWIFTRef Utility
• Yesterday
• you needed to worry about maintaining
payments reference data from different
sources.
• Today,
• with SWIFTRef utility,
• get consolidated data
• through a single channel
• At your choice:
• the delivery method fully automated or
manual
• the frequency
25
Distribution channels
5 channels available
26
data feeds
(daily
updates)
web services
(daily
updates)
internet
internet
File download
(monthly updates)
internet
SWIFTNet
FileAct
File delivery
(monthly
updates)
internet
manual query
tools
(daily updates)
SWIFTRe
f
utility
EBAM – Electronic bank account management
Current status
ISO Messages live and in production over FileAct & proprietary
channels
Adoption is still at early stages
Focus is on industry operational readiness
Vendor consolidation occurring
Corporate and FI demand to implement
for efficiency gains and to support compliance
requirements
Digital signing (3Skey) and account report are
main features of interest
27
3SKey usage scenarios
Multi-banked Corporates
A single 3SKey personal
token to reach multiple banks
over SWIFTNet, proprietary
or domestic channels
Use of 3SKey to
strengthen security in
internal and external
approval workflows
(e.g. EBAM)
Approvals
Strong 2-factor 3SKey
authentication in on-line
services
User Authentication
Replace or enhance
proprietary solution
with the 3SKey PKI
service
Proprietary Security
3SKey as a standard
and shared market
solution amongst banks
Communities
Use of 3SKey
for individual approvals and/or
signatures on SWIFTNet or
proprietary channels
Market Infrastructures
3SKey
Roll-out status
65 countries (**)
32 subscribers
+2,000 corporates (*)
15,000 treasurers
27,000 tokens
50 vendors
(*) Estimated based on # of user groups (**) Source: SWIFT for Corporates Bank Readiness Certification Programme
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SWIFT’s expanding supply chain portfolio
Increased risk for
the buyer
Financing
instruments
SWIFT
portfolio
Increased risk for
the seller Seller
Buyer Seller
BPO
XML
BPO
MT101 Corporate
to bank
Bank
to bank TSU
XML
Open
Account Advance
Payment
Collections
FileAct
Collections
L/C
MT798
L/C
Guarantees
80%
New
New
New
L/C
MT7xx
Collections
MT4xx
30
The Bank Payment Obligation (BPO) A new alternative instrument for trade settlement
A BPO is an irrevocable
undertaking given by one
bank to another bank that
payment will be made on a
specified date after a
successful electronic
matching of data according to
an industry-wide set of rules.
New ICC Uniform Rules for BPO
Target adoption: April 2013
Designed to complement and not
to replace existing solutions
31
ICC Uniform Rules for
Bank Payment
Obligations
Rules and tools: past, present & future
Rules
Inter-bank
Infrastructure
Standards
ICC Uniform Rules for
Bank Payment
Obligations
Trade Services Utility 2.0
Service
Description
AVAILABLE NOW Q2 2013
FIN
MT700
TSU
TSMT TSMT
ICC UCP 600 SWIFT TSU BPO ICC UR BPO
TSU
Q&A
?
Thank you!
34