New Message Format for the Fedwire® Funds Service, 31391-31396 [2018-14351]
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Federal Register / Vol. 83, No. 129 / Thursday, July 5, 2018 / Notices
Board of Governors of the Federal Reserve
System, June 29, 2018.
Yao-Chin Chao,
Assistant Secretary of the Board.
[FR Doc. 2018–14431 Filed 7–3–18; 8:45 am]
BILLING CODE P
FEDERAL RESERVE SYSTEM
[Docket Number OP–1613]
New Message Format for the Fedwire®
Funds Service
Board of Governors of the
Federal Reserve System.
ACTION: Notice of proposed service
enhancement; request for comment.
AGENCY:
The Board of Governors of the
Federal Reserve System (Board) is
requesting comment on a proposal to
adopt the ISO® 20022 message format
for the Fedwire® Funds Service. ISO
20022 is an international standard that
would replace the Fedwire Funds
Service’s current, proprietary message
format. The migration to ISO 20022
would take place in three phases
beginning in 2020 and ending in 2023.
DATES: Comment due date: September 4,
2018.
ADDRESSES: You may submit comments,
identified by Docket No. OP–1613, by
any of the following methods:
• Agency Website: https://
www.federalreserve.gov. Follow the
instructions for submitting comments at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm.
• Email: regs.comments@
federalreserve.gov. Include the docket
number in the subject line of the
message.
• Fax: (202) 452–3819 or (202) 452–
3102.
• Mail: Address to Ann E. Misback,
Secretary, Board of Governors of the
Federal Reserve System, 20th Street and
Constitution Avenue NW, Washington,
DC 20551.
All public comments will be made
available on the Board’s website at
https://www.federalreserve.gov/
generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical
SUMMARY:
reasons or to remove personal
information at the commenter’s request.
Accordingly, comments will not be
edited to remove any identifying or
contact information. Public comments
may also be viewed electronically or in
paper in Room 3515, 1801 K Street NW
(between 18th and 19th Streets NW),
between 9:00 a.m. and 5:00 p.m. on
weekdays.
FOR FURTHER INFORMATION CONTACT:
Evan Winerman, Counsel (202–872–
7578), Legal Division; or Melissa Leistra,
Manager (202–530–6285), Renuka
Lakshmanan, Senior Financial Services
Analyst (202–475–6633), Division of
Reserve Bank Operations and Payment
Systems. For users of
Telecommunications Device for the Deaf
(TDD) only, contact (202–263–4869).
SUPPLEMENTARY INFORMATION:
I. Background
The Fedwire Funds Service is a realtime gross settlement system owned and
operated by the Federal Reserve Banks
(Reserve Banks) that enables
participants to make final payments
using their balances held at Reserve
Banks or intraday credit provided by the
Reserve Banks. The Fedwire Funds
Service and the CHIPS® funds-transfer
system, which is owned and operated
by The Clearing House Payments
Company, L.L.C. (TCH), are the main
large-value payment systems in the
United States.1
A. Current Fedwire Funds Service
Message Format
The Fedwire Funds Service uses a
proprietary message format that
supports multiple types of
communications. Specifically, Fedwire
Funds Service participants can send
‘‘value’’ messages that order the
movement of funds and ‘‘nonvalue’’
messages that do not result in the
movement of funds but rather
communicate information or requests to
other participants.2 The Fedwire Funds
Service also includes messages that
enable Fedwire participants to request
account balance information and the
processing status of payment orders.
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Although the Fedwire Funds Service
message format is proprietary, it can be
mapped to—and is interoperable with—
the CHIPS message format and the
message type (MT) format of the
SWIFT® messaging network.3 As a
result, multi-step domestic and
international funds transfers can involve
payment orders sent over the Fedwire
Funds Service, CHIPS, and the SWIFT
Financial Message Service network.
B. ISO 20022
The International Organization for
Standardization (ISO) is an
independent, non-governmental
organization comprised of 161 national
standards bodies. ISO ‘‘brings together
experts to share knowledge and develop
voluntary, consensus-based, market
relevant International Standards that
support innovation and provide
solutions to global challenges.’’ 4 ISO
publishes standards for a broad range of
industries.
The ISO 20022 standard includes a
suite of messages for the financial
industry, including messages for
payments, securities, trade services,
cards, and foreign exchange. ISO 20022
messages use extensible markup
language (XML) syntax and have a
common data dictionary that can
support end-to-end payment message
flow, including payment initiation (i.e.,
customer to bank messages), interbank
settlement (i.e., bank to bank messages),
and cash management (i.e., bank to
customer messages).
ISO 20022 messages include
structured data elements that provide
for potentially richer payment message
data than the current Fedwire Funds
Service message format. For example,
ISO 20022 messages contain fields for
three intermediary financial institutions
while the current Fedwire Funds
message format contains a field for only
one intermediary financial institution.
Similarly, ISO 20022 messages can
include more structured and detailed
information than the current Fedwire
Funds message format (see example in
Table 1).
TABLE 1
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Current Fedwire Funds Service format
ISO 20022 format
Free-text lines for address information:
Discrete fields for specific address information:
1 In 2017, the Fedwire Funds Service processed
152,649,633 payments with a total value of
approximately $740 trillion and CHIPS processed
112,597,088 payments with a total value of
approximately $393 trillion.
2 Value messages can be used for multiple types
of funds transfers, e.g., ‘‘bank transfers’’ in which
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the originator and beneficiary are both banks and
‘‘customer transfers’’ in which the originator and/
or beneficiary is not a bank. Nonvalue messages
include, e.g., ‘‘requests for reversal’’ in which a
Fedwire participant requests that another Fedwire
participant send a funds transfer that would return
the amount of a previously accepted payment order.
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3 SWIFT is a member-owned cooperative
headquartered in Belgium that provides its users
(including banking and securities organizations,
market infrastructures, and corporate customers) a
global service for financial messages, such as
payments and securities transactions.
4 See https://www.iso.org/about-us.html.
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Federal Register / Vol. 83, No. 129 / Thursday, July 5, 2018 / Notices
TABLE 1—Continued
Current Fedwire Funds Service format
ISO 20022 format
Address Line 1 (up to 35 characters)
Address Line 2 (up to 35 characters)
Address Line 3 (up to 35 characters)
Postal Address <PstlAdr>.
<AdrTp> (4 characters).
<Dept> (up to 70 characters).
<SubDept> (up to 70 characters).
<StrtNm> (up to 70 characters).
<BldgNb> (up to 16 characters).
<PstCd> (up to 16 characters).
<TwnNm> (up to 35 characters).
<CtrySubDvsn> (up to 35 characters).
<Ctry> (2 characters).
Table 2 shows how ISO 20022
messages correspond to messages in the
current Fedwire Funds Service message
format. The full catalogue of ISO 20022
messages is available on the ISO 200022
website.5
TABLE 2
Category
Description
Business application header ..........
Processing information placed at
the beginning of each message
(e.g., sender, receiver, input
message accountability data or
output message accountability
data).
Used by Fedwire Funds Service
participants to order the movement of funds.
Value messages ............................
Nonvalue messages ......................
System messages ..........................
Reporting messages ......................
Comparable message in current
fedwire funds service format
ISO 20022 Message
Used by Fedwire Funds Service
participants to request that a
funds transfer be made, to
refuse to honor those requests,
or to share free- format information.
Used to communicate about the
processing status of messages
submitted to the Fedwire Funds
Service, to report about Fedwire
Funds Service operations, or to
request copies of current or
prior-day messages.
Used to request or report on
transaction activity or account
balance information.
BusinessApplicationHeaderV01_
head.001.001.01.
This information is contained in
various data elements of the
current format.
Financial Institution To Financial
Institution
Customer
Credit
Transfer (pacs.008.001.0x).
Financial Institution Credit Transfer (pacs.009.001.0x).
Payment
Return
(pacs.004.001.0x).
Customer Credit Transfer Initiation (pain.001.001.09).
FIToFI Payment Cancellation Request (camt.056.001.07).
FIToFI Payment Status Report
(pacs.002.001.09).
Note: This message will also be
used for a Return Refusal, but
there is currently no comparable message.
Proprietary Format Investigation
(camt.035.001.04).
FIToFI Payment Status Report
(pacs.002.001.09).
Message
Reject
(admi.002.001.01).
Customer transfers.
System
Event
Notification
(admi.004.001.02).
Resend
Request
(admi.006.001.01).
Account
Reporting
Request
(camt.060.001.03).
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Bank To Customer Account Report (camt.052.001.07).
Bank transfers.
Returns.
Drawdown request.
Return request.
Drawdown refusal.
Service message.
Acknowledgment and reject notification.
Error response to an account report request or retrieval request.
Broadcast messages (i.e., open,
close, extensions).
Retrievals (current day or prior
two business days).
The following requests:
D Account balance.
D Endpoint totals.
D Detailed summary.
The following reports:
D Account balance.
D Endpoint totals.
D Detailed summary.
D Reconciliation gap report.
D Funds subsidiary statement.
5 See https://www.iso20022.org/full_
catalogue.page.
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Federal Register / Vol. 83, No. 129 / Thursday, July 5, 2018 / Notices
II. Payments Industry Efforts Related to
ISO 20022
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In late 2012, the Federal Reserve Bank
of New York and other key entities
involved in the U.S. payments industry
formed a ‘‘Stakeholder Group’’ to assess
the merits of adopting the ISO 20022
standard in the U.S.6 The Stakeholder
Group engaged an independent external
consultant to evaluate the business case
for adopting ISO 20022. The consultant
identified certain strategic reasons to
consider adopting ISO 20022 in the U.S.
for cross-border wire and Automated
Clearing House (ACH) payments and
then, if appropriate, for domestic wire
and ACH payments. For example, the
consultant emphasized that adopting
ISO 20022 in lieu of proprietary
standards would improve
interoperability between domestic and
global payment systems.7 In accordance
with the findings of the Stakeholder
Group, the Federal Reserve
recommended in its 2015 Strategies for
Improving the Payment System paper
that the U.S. payments industry
‘‘[d]evelop an implementation strategy
for the application of the ISO 20022
standard to U.S. payment
transactions.’’ 8
Since 2015, the Reserve Banks have
worked with TCH on plans to adopt ISO
20022 for the Fedwire Funds Service
and CHIPS. While the Reserve Banks
and TCH decided independently to
pursue implementation of ISO 20022,
they intend to align ISO 20022
implementation for the Fedwire Funds
Service and CHIPS to the extent
possible.9 The Reserve Banks and TCH
have indicated that aligning ISO 20022
implementation for their respective wire
transfer systems would create
efficiencies that would benefit their
6 The other members of the Stakeholder Group are
the Federal Reserve Bank of Atlanta; TCH;
NACHA—The Electronic Payments Association,
which develops the rules that govern the
Automated Clearing House network; and
Accredited Standards Committee X9–Financial
Industry Standards, Inc., which has been accredited
by the U.S. national standards body (the American
National Standards Institute) to develop financial
standards.
7 See Appendix 7 of the Federal Reserve’s
Strategies for Improving the Payment System (Jan.
26, 2015), https://fedpaymentsimprovement.org/wpcontent/uploads/strategies-improving-us-paymentsystem.pdf, for a fuller discussion of the
consultant’s findings.
8 Id. at 19–20. Strategies for Improving the
Payment System made a number of other
recommendations intended to improve, inter alia,
the speed, efficiency, and security of payments.
9 See ‘‘Deep Dive into the ISO 20022
Implementation Strategy for U.S. High-Value
Payment Systems’’, Sibos Community Session (Oct.
18, 2017), slide 7 https://
fedpaymentsimprovement.org/wp-content/uploads/
101817-iso20022-deep-dive.pdf.
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common customers.10 The Reserve
Banks’ specific proposed timeline for
adopting ISO 20022 for the Fedwire
Funds Service is discussed in greater
detail below.
The Reserve Banks have also engaged
in extensive public outreach regarding
ISO 20022. For example, the Reserve
Banks and TCH conducted a survey in
2015 of over 2,300 Fedwire Funds
Service customers, Fedwire and CHIPS
advisory group banks, vendors, and
industry groups on the potential scope,
approach, and timing of ISO 20022
implementation.11 The Reserve Banks
have also presented at industry
conferences, published webinars, and
established websites to educate market
participants about ISO 20022 and to
solicit direct informal feedback on plans
to implement ISO 20022.12 Finally, the
Reserve Banks have established
advisory groups that include banks,
software vendors, and other
stakeholders to provide input on how to
implement ISO 20022 for the Fedwire
Funds Service.
SWIFT has initiated a study to
consider the migration of cross-border
traffic in its proprietary MT format to
ISO 20022.13 The SWIFT study includes
a community consultation to help
determine the timing and practicalities
of migration.14 SWIFT has indicated
that the ‘‘consultation will run until
early June, with results analysed over
the following months and a final report
produced before the end of 2018. The
report will draw on the feedback from
the consultation to propose a detailed
roadmap for’’ migrating cross-border MT
traffic to ISO 20022.15
Similarly, many foreign wire transfer
systems, including those for currencies
of key U.S. trading partners, have
adopted ISO 20022 (e.g., China, India,
Japan, Switzerland) or have announced
10 Id.
11 See https://fedpaymentsimprovement.org/wpcontent/uploads/iso20022_adoption_
considerations_survey.pdf.
12 See ‘‘Fedwire Funds Service ISO 20022
Implementation Center,’’ https://
www.frbservices.org/resources/financial-services/
wires/iso-20022-implementation-center.html, which
includes information on the Reserve Banks’
proposal to implement ISO 20022 for the Fedwire
Funds Service. See also ‘‘The Fed’s Resource Center
for Adoption of ISO 20022 Payment Messages,’’
https://fedpaymentsimprovement.org/paymentsefficiency/iso-20022/, which includes links to
presentations and webinars concerning plans to
adopt ISO 20022 for wire transfers and ACH
payments. The Reserve Banks will host additional
webinars and in-person workshops throughout the
first half of 2018. The Reserve Banks will also
continue to work with NACHA to educate ACH
participants about ISO 20022.
13 See https://www.swift.com/news-events/news/
iso-20022-migration_the-time-is-now.
14 Id.
15 Id.
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plans to adopt ISO 20022 (e.g., Canada,
European Union, Hong Kong, United
Kingdom).16
III. Potential Benefits of Adopting ISO
20022 for the Fedwire Funds Service
The Board believes that adopting ISO
20022 for the Fedwire Funds Service
could be beneficial for a number of
reasons. As described above, the ISO
20022 message format would allow
Fedwire Funds Service participants to
include richer and more structured data
in their messages—for example,
increased character lengths for name
data elements and discrete elements for
address information, including a
country code. This data could help
banks and other entities meet evolving
requirements to screen payments for
sanctions and anti-money laundering
purposes.
Adopting ISO 20022 messages could
also improve domestic and cross-border
interoperability between the Fedwire
Funds Service and other payment or
messaging systems. As noted above,
TCH has announced plans to adopt ISO
20022 messages for the CHIPS system
and SWIFT has initiated a study to
consider the migration of cross-border
MT traffic to ISO 20022. Similarly, as
noted above, many foreign wire transfer
systems, including those for currencies
of key U.S. trading partners, have
adopted or have announced plans to
adopt ISO 20022. Adopting ISO 20022
as a common, global standard could
reduce operating costs for banks and
their customers by reducing the need to
map payment information from one
message format to another. This could
improve the efficiency of end-to-end
processing of multi-leg domestic and
international funds transfers.
Relatedly, adopting ISO 20022 as a
common, global standard could allow
banks to provide useful services to their
customers. For example, ISO 20022
would support a structured format for
including extended remittance
information (ERI) in business-tobusiness payment messages.17 While the
current proprietary message formats for
the Fedwire Funds Service and CHIPS
support ERI, usage of ERI by depository
institutions and their customers has
been limited. Widespread adoption of
16 For further discussion of payment systems that
have adopted ISO 20022 or have announced plans
to adopt ISO 20022, see section 7.3 of SWIFT’s ISO
20022 consultation paper, https://www.swift.com/
resource/iso-20022-migration-study.
17 Extended remittance information generally
refers to details in the payment message regarding
the purpose of a business-to-business payment. For
example, a business that sends a payment to a
vendor could include details regarding the invoices
against which the vendor should apply the
payment.
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ISO 20022 would create a common,
global format for ERI that could
encourage depository institutions and
their customers to invest in the changes
needed to support the end-to-end flow
of ERI for business-to-business
payments.
IV. Proposed Timeline for Adopting
ISO 20022 for the Fedwire Funds
Service
The Reserve Banks would transition
from the current Fedwire Funds Service
message format to ISO 20022 in three
phases.
Phase 1: ISO 20022 Preparation (Target
Implementation Date of November 23,
2020)
In phase 1, the Reserve Banks would
make a number of changes to the current
Fedwire Funds Service message format
to address existing interoperability gaps
with SWIFT’s proprietary MT format.
The Reserve Banks would also eliminate
the free-text format option for the
originator and beneficiary fields in
customer transfer messages and instead
require Fedwire Funds Service
participants to use a structured format
for these fields; SWIFT is making a
similar change to its MT format in
November 2020.18
Although the Reserve Banks would
need to make most of the changes in
phase 1 even if the Reserve Banks were
not planning to adopt ISO 20022, all of
the changes in this phase would
simplify the Fedwire Funds Service’s
migration to ISO 20022 messages.
Phase 2: ISO 20022 ‘‘like-for-like’’
Implementation (Target Implementation
Period From March 2022 to August
2023)
In phase 2, the Reserve Banks would
migrate Fedwire Funds Service
participants in waves to send and
receive ISO 20022 messages that have
elements and character lengths that are
comparable to the current Fedwire
Funds Service message format. Table 2,
supra, shows how ISO 20022 messages
correspond to messages in the current
Fedwire Funds Service message format.
While the syntax for the phase 2 likefor-like ISO 20022 messages would be
XML, the content of the messages would
be limited to data elements and
character lengths comparable to those
that are supported in the current
Fedwire Funds Service message format.
For example, like-for-like ISO 20022
messages in phase 2 could include only
one field for an intermediary financial
institution (similar to the current
Fedwire Funds Service message format)
even though ISO 20022 messages can
generally accommodate up to three such
fields. Similarly, while ISO 20022
messages can support structured data
elements for address information (see
Table I, supra), like-for-like ISO 20022
messages in phase 2 would (similar to
the current Fedwire Funds Service
message format) be limited to three lines
of 35 characters each for free-text
address information.
Because the Reserve Banks would
transition Fedwire Funds Service
participants to ISO 20022 in waves, the
Fedwire Funds Service would translate
the current message format to ISO 20022
and vice versa when necessary to
accommodate Fedwire senders and
receivers that are not using the same
format. At the end of phase 2, the
Fedwire Funds Service would move
into a stability period lasting at least
three months (from August 2023 to
November 2023) in which all Fedwire
Funds participants would send and
receive ISO 20022 like-for-like
messages. During the stability period,
the Reserve Banks would retain the
current, proprietary Fedwire Funds
Service format as a fallback option in
case one or more participants encounter
issues and the Reserve Banks determine
that such participants need to revert
back to the proprietary format.
The Reserve Banks would also use
phase 2 to prepare for full
implementation of ISO 20022 in phase
3. Specifically, the Reserve Banks would
require Fedwire Funds Service
participants to test their ability to
receive full ISO 20022 messages.
Phase 3: ISO Enhancements (Target
Implementation Date of November
2023)
In phase 3, the Reserve Banks would
fully implement ISO 20022 by enabling
Fedwire Funds Service participants to
send ISO 20022 messages that contain
enhanced data as noted in Table 3.
Although it would be optional for
participants to send the enhanced data,
all participants would need to be
capable of receiving enhanced data.19
Participants would also need to
determine, consistent with any legal
obligations, how to handle enhanced
data that they receive—for example,
whether (and how) to provide enhanced
data to the next receiving bank in the
funds transfer or to the beneficiary (if
the Fedwire Funds Service participant
is the beneficiary’s bank).
TABLE 3
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ISO 20022 Enhancements
1. New data elements for additional persons or entities identified in payment messages: 20
D initiating party
D two additional previous instructing agents
D two additional intermediary agents
D ultimate debtor
D ultimate creditor
2. New purpose code data element to help explain the business purpose of the funds transfer.
3. New data element that participants can use to determine how they handle or process a message (e.g., SWIFT global payments innovation
service level).
4. New data element to provide information about a bilateral processing agreement.
5. Longer character lengths for certain fields (e.g., Name can be up to 140 characters).
6. Structured postal address data elements, including a country code.
7. Contact details for certain persons/entities in the funds transfer.
18 See https://www.swift.com/news-events/news/
payments-standards-changes-for-2020-and-whyyou-should-act-now.
19 As noted above, the Reserve Banks would
require Fedwire Funds Service participants to test
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their ability to receive full ISO 20022 messages
during phase 2.
20 ISO 20022 employs terminology that differs in
key respects from that used in U.S. funds-transfer
law, including subpart B of the Board’s Regulation
J (12 CFR 210), which governs funds transfers
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through the Fedwire Funds Service. The Board has
proposed an amendment to subpart B of Regulation
J that would clarify that terms used in financial
messaging standards, such as ISO 20022, do not
confer or connote legal status or responsibilities.
See 83 FR 11431 (Mar. 15, 2018).
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TABLE 3—Continued
8. New regulatory reporting data elements to provide regulatory information (e.g., OFAC license) related to customer transfers.
9. New tax component to provide remittance information related to tax payments.
The target implementation date for
phase 3 could be delayed if SWIFT has
not yet implemented a solution for its
network to support ISO 20022 messages
that contain enhanced data.
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V. Fedwire Funds Service Message
Format Documentation and Testing
The Reserve Banks are using a
restricted page on the MyStandards
web-based application as a tool to store
and share documentation related to the
ISO 20022 project with authorized
Fedwire Funds Service participants and
software vendors.21 In March 2018, the
Reserve Banks published the final
message format documents for phase 1,
which would provide the industry over
two years to prepare for the proposed
phase 1 target implementation date in
November 2020. The Reserve Banks also
published draft message format
documents for phases 2 and 3 in March
2018 and will publish the final
documents for these phases by the end
of June 2018; this would provide the
industry nearly four years to prepare for
the proposed phase 2 migration (which
is targeted to begin in March 2022) and
over five years to prepare for the
proposed phase 3 target implementation
date in November 2023.
The Reserve Banks plan to provide
nine months for testing the phase 1
changes in their Depository Institution
Testing (DIT) environment prior to the
proposed implementation date in
November 2020.22 Similarly, the
Reserve Banks plan to provide at least
one year for testing the phase 2 and
phase 3 changes in their DIT
environment. The Reserve Banks plan to
publish a final testing plan by the end
of 2018.
VI. Impact on Fedwire Funds Service
Participants and Service Providers
The Board believes that the impact of
ISO 20022 implementation on Fedwire
Funds Service participants would vary
depending on how each participant
accesses the Fedwire Funds Service.
Certain Fedwire Funds Service
participants or service providers
develop their own software (or rely on
software from vendors) to access the
Fedwire Funds Service. These
21 For more information on MyStandards, see
https://www.swift.com/our-solutions/complianceand-shared-services/mystandards.
22 For more information on the DIT environment,
see https://www.frbservices.org/financial-services/
wires/testing/di-testing.html.
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institutions include (1) Fedwire Funds
Service participants and service
providers that access the Fedwire Funds
Service via the FedLine Direct® solution
and (2) Fedwire Funds Service
participants that use the import/export
feature of FedPayments® ManagerFunds over the FedLine Advantage®
solution. FedLine Direct access to the
Fedwire Funds Service is an
unattended, IP-based computer
interface. It is typically used by
participants conducting larger volumes
of funds transfers. FedPayments
Manager is a web-based application that
midsize and smaller participants
typically use to create, send, and receive
payment orders and nonvalue messages.
The import functionality built into
FedPayments Manager enables
participants to upload payment files
from separate payment applications
(e.g., those that interface with customerfacing systems) so the participants do
not have to enter the messages one by
one into the application. Similarly, the
export functionality allows participants
to download files from FedPayments
Manager into other applications (e.g., so
payments can post to customer accounts
in their deposit systems). The Board
believes that participants and service
providers accessing the service through
FedLine Direct or using the import/
export feature of FedPayments Manager
would need to make significant changes
to their payment applications or
processes to be able to send and receive
messages (or import and export files) in
the revised proprietary format in phase
1 and in the new ISO 20022 format in
phases 2 and phase 3.
Other Fedwire Funds Service
participants access the Fedwire Funds
Service manually through FedPayments
Manager-Funds.23 These participants
would need to become familiar with the
terminology used in, and information
required by, the ISO 20022 format and
the updated appearance of the graphical
user interface in FedPayments Manager.
The Reserve Banks would make the
necessary changes to FedPayments
Manager, however, and would provide
training regarding the updates.
Finally, some Fedwire Funds Service
participants access the Fedwire Funds
Service through an offline, telephonethese Fedwire Funds Service
participants enter messages individually into
FedPayments Manager-Funds over the FedLine
Advantage solution through a graphical user
interface.
PO 00000
23 Specifically,
Frm 00037
Fmt 4703
Sfmt 4703
based service that requires a Reserve
Bank employee to enter payment order
information into a Reserve Bank
application. The Board does not believe
that these participants’ current
processes for submitting payment orders
would materially change, though the
participants would need to become
familiar with the terminology used in,
and information required by, the ISO
20022 format so they could provide it to
the Reserve Bank employees.
VII. Request for Comment
The Board requests comment on this
proposal to replace the current Fedwire
Funds Service message format with ISO
20022.
A. Potential Benefits and Drawbacks of
Adopting ISO 20022
1. Would adopting ISO 20022 for the
Fedwire Funds Service produce the
benefits discussed above?
2. Would adopting ISO 20022 for the
Fedwire Funds Service produce any
other benefits?
3. What drawbacks (if any) would
adopting ISO 20022 for the Fedwire
Funds Service entail and how might
they be addressed?
B. Proposed Timeline for Adopting ISO
20022
1. Is the timeline that the Reserve
Banks have proposed for adopting ISO
20022 for the Fedwire Funds Service
(including the proposed timeframes for
publishing final message format
documents and testing changes in the
Reserve Banks’ DIT environment)
reasonable? If not, how much time
would Fedwire Funds Service
participants and service providers
(including software vendors) need to
adjust their applications and processes
for each phase?
2. Should the Reserve Banks delay the
implementation date for phase 3 of the
proposal if SWIFT has not yet
implemented a solution on its network
to support ISO 20022 for cross-border
messages?
3. Would the proposal to migrate to
ISO 20022 in phases mitigate any risks
associated with implementing ISO
20022?
C. Impact on Fedwire Funds Service
Participants and Service Providers
1. How does your institution access
the Fedwire Funds Service? If your
institution accesses the Fedwire Funds
E:\FR\FM\05JYN1.SGM
05JYN1
31396
Federal Register / Vol. 83, No. 129 / Thursday, July 5, 2018 / Notices
Service via the FedLine Direct solution
or uses the import/export feature of
FedPayments Manager-Funds over the
FedLine Advantage solution, do you
develop your own software or rely on a
software vendor?
2. What costs would your institution
incur if the Reserve Banks adopt ISO
20022 for the Fedwire Funds Service? If
possible, please provide dollar estimates
or ranges.
3. Would the benefits of adopting ISO
20022 for the Fedwire Funds Service
outweigh any associated costs for your
institution?
VIII. Competitive Impact Analysis
The Board conducts a competitive
impact analysis when it considers a rule
or policy change that may have a
substantial effect on payment system
participants. Specifically, the Board
determines whether there would be a
direct or material adverse effect on the
ability of other service providers to
compete with the Federal Reserve due
to differing legal powers or due to the
Federal Reserve’s dominant market
position deriving from such legal
differences.24
The Board does not believe that the
proposal to adopt ISO 20022 for the
Fedwire Funds Service would have an
adverse impact on other service
providers. As described above, the
current, proprietary message format for
the Fedwire Funds Service is
interoperable with the proprietary
message format for the CHIPS system.
As further described above, the Reserve
Banks have worked with TCH on plans
to align ISO 20022 implementation for
the Fedwire Funds Service and CHIPS
where possible; the Reserve Banks and
TCH have indicated that such
coordination will benefit their common
customers. If the Reserve Banks and
TCH each adopt ISO 20022 for the
Fedwire Funds Service and CHIPS,
respectively, the message formats for the
two systems will remain interoperable.
By order of the Board of Governors of the
Federal Reserve System, June 28, 2018.
Michele Taylor Fennell,
Assistant Secretary of the Board.
amozie on DSK3GDR082PROD with NOTICES1
BILLING CODE P
The Federal Reserve in the Payments
System (issued 1984; revised 1990), Federal Reserve
Regulatory Service 9–1558, https://
www.federalreserve.gov/paymentsystems/pfs_
frpaysys.htm.
VerDate Sep<11>2014
16:43 Jul 03, 2018
Jkt 244001
DEPARTMENT OF DEFENSE
Formations of, Acquisitions by, and
Mergers of Bank Holding Companies
GENERAL SERVICES
ADMINISTRATION
The companies listed in this notice
have applied to the Board for approval,
pursuant to the Bank Holding Company
Act of 1956 (12 U.S.C. 1841 et seq.)
(BHC Act), Regulation Y (12 CFR part
225), and all other applicable statutes
and regulations to become a bank
holding company and/or to acquire the
assets or the ownership of, control of, or
the power to vote shares of a bank or
bank holding company and all of the
banks and nonbanking companies
owned by the bank holding company,
including the companies listed below.
The applications listed below, as well
as other related filings required by the
Board, are available for immediate
inspection at the Federal Reserve Bank
indicated. The applications will also be
available for inspection at the offices of
the Board of Governors. Interested
persons may express their views in
writing on the standards enumerated in
the BHC Act (12 U.S.C. 1842(c)). If the
proposal also involves the acquisition of
a nonbanking company, the review also
includes whether the acquisition of the
nonbanking company complies with the
standards in section 4 of the BHC Act
(12 U.S.C. 1843). Unless otherwise
noted, nonbanking activities will be
conducted throughout the United States.
Unless otherwise noted, comments
regarding each of these applications
must be received at the Reserve Bank
indicated or the offices of the Board of
Governors not later than July 26, 2018.
A. Federal Reserve Bank of Dallas
(Robert L. Triplett III, Senior Vice
President) 2200 North Pearl Street,
Dallas, Texas 75201–2272:
1. Independent Bank Group, Inc.,
McKinney, Texas; to acquire Guaranty
Bancorp, and thereby indirectly acquire
Guaranty Bank and Trust Company,
both of Denver, Colorado.
2. VBT Financial Corporation, San
Antonio, Texas; to become a bank
holding company by acquiring Vantage
Bank Texas, San Antonio, Texas.
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
Board of Governors of the Federal Reserve
System, June 29, 2018.
Yao-Chin Chao,
Assistant Secretary of the Board.
[FR Doc. 2018–14351 Filed 7–3–18; 8:45 am]
24 See
FEDERAL RESERVE SYSTEM
[FR Doc. 2018–14432 Filed 7–3–18; 8:45 am]
BILLING CODE P
PO 00000
Frm 00038
Fmt 4703
Sfmt 4703
[OMB Control No. 9000–0062; Docket No.
2018–0003; Sequence No. 5]
Submission for OMB Review; Material
and Workmanship
Department of Defense (DOD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Notice of request for public
comments regarding an extension to an
existing OMB clearance.
AGENCY:
Under the provisions of the
Paperwork Reduction Act, the
Regulatory Secretariat Division will be
submitting to the Office of Management
and Budget (OMB) a request to review
and approve an extension of a
previously approved information
collection requirement concerning
material and workmanship.
DATES: Submit comments on or before
August 6, 2018.
ADDRESSES: Submit comments regarding
this burden estimate or any other aspect
of this collection of information,
including suggestions for reducing this
burden to: Office of Information and
Regulatory Affairs of OMB, Attention:
Desk Officer for GSA, Room 10236,
NEOB, Washington, DC 20503.
Additionally submit a copy to GSA by
any of the following methods:
• Regulations.gov: https://
www.regulations.gov. Submit comments
via the Federal eRulemaking portal by
searching the OMB Control number
9000–0062. Select the link ‘‘Comment
Now’’ that corresponds with
‘‘Information Collection 9000–0062,
Material and Workmanship’’. Follow the
instructions provided on the screen.
Please include your name, company
name (if any), and ‘‘Information
Collection 9000–0062, Material and
Workmanship’’ on your attached
document.
• Mail: General Services
Administration, Regulatory Secretariat
Division (MVCB), 1800 F Street NW,
Washington, DC 20405. ATTN: Ms.
Mandell/IC 9000–0062, Material and
Workmanship.
Instructions: Please submit comments
only and cite Information Collection
9000–0062, Material and Workmanship,
in all correspondence related to this
collection. Comments received generally
will be posted without change to https://
www.regulations.gov, including any
SUMMARY:
E:\FR\FM\05JYN1.SGM
05JYN1
]]>Agencies
[Federal Register Volume 83, Number 129 (Thursday, July 5, 2018)]
[Notices]
[Pages 31391-31396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14351]
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
[Docket Number OP-1613]
New Message Format for the Fedwire[supreg] Funds Service
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice of proposed service enhancement; request for comment.
-----------------------------------------------------------------------
SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is requesting comment on a proposal to adopt the ISO[supreg] 20022
message format for the Fedwire[supreg] Funds Service. ISO 20022 is an
international standard that would replace the Fedwire Funds Service's
current, proprietary message format. The migration to ISO 20022 would
take place in three phases beginning in 2020 and ending in 2023.
DATES: Comment due date: September 4, 2018.
ADDRESSES: You may submit comments, identified by Docket No. OP-1613,
by any of the following methods:
Agency Website: https://www.federalreserve.gov. Follow the
instructions for submitting comments at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Email: [email protected]. Include the
docket number in the subject line of the message.
Fax: (202) 452-3819 or (202) 452-3102.
Mail: Address to Ann E. Misback, Secretary, Board of
Governors of the Federal Reserve System, 20th Street and Constitution
Avenue NW, Washington, DC 20551.
All public comments will be made available on the Board's website
at https://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as
submitted, unless modified for technical reasons or to remove personal
information at the commenter's request. Accordingly, comments will not
be edited to remove any identifying or contact information. Public
comments may also be viewed electronically or in paper in Room 3515,
1801 K Street NW (between 18th and 19th Streets NW), between 9:00 a.m.
and 5:00 p.m. on weekdays.
FOR FURTHER INFORMATION CONTACT: Evan Winerman, Counsel (202-872-7578),
Legal Division; or Melissa Leistra, Manager (202-530-6285), Renuka
Lakshmanan, Senior Financial Services Analyst (202-475-6633), Division
of Reserve Bank Operations and Payment Systems. For users of
Telecommunications Device for the Deaf (TDD) only, contact (202-263-
4869).
SUPPLEMENTARY INFORMATION:
I. Background
The Fedwire Funds Service is a real-time gross settlement system
owned and operated by the Federal Reserve Banks (Reserve Banks) that
enables participants to make final payments using their balances held
at Reserve Banks or intraday credit provided by the Reserve Banks. The
Fedwire Funds Service and the CHIPS[supreg] funds-transfer system,
which is owned and operated by The Clearing House Payments Company,
L.L.C. (TCH), are the main large-value payment systems in the United
States.\1\
---------------------------------------------------------------------------
\1\ In 2017, the Fedwire Funds Service processed 152,649,633
payments with a total value of approximately $740 trillion and CHIPS
processed 112,597,088 payments with a total value of approximately
$393 trillion.
---------------------------------------------------------------------------
A. Current Fedwire Funds Service Message Format
The Fedwire Funds Service uses a proprietary message format that
supports multiple types of communications. Specifically, Fedwire Funds
Service participants can send ``value'' messages that order the
movement of funds and ``nonvalue'' messages that do not result in the
movement of funds but rather communicate information or requests to
other participants.\2\ The Fedwire Funds Service also includes messages
that enable Fedwire participants to request account balance information
and the processing status of payment orders.
---------------------------------------------------------------------------
\2\ Value messages can be used for multiple types of funds
transfers, e.g., ``bank transfers'' in which the originator and
beneficiary are both banks and ``customer transfers'' in which the
originator and/or beneficiary is not a bank. Nonvalue messages
include, e.g., ``requests for reversal'' in which a Fedwire
participant requests that another Fedwire participant send a funds
transfer that would return the amount of a previously accepted
payment order.
---------------------------------------------------------------------------
Although the Fedwire Funds Service message format is proprietary,
it can be mapped to--and is interoperable with--the CHIPS message
format and the message type (MT) format of the SWIFT[supreg] messaging
network.\3\ As a result, multi-step domestic and international funds
transfers can involve payment orders sent over the Fedwire Funds
Service, CHIPS, and the SWIFT Financial Message Service network.
---------------------------------------------------------------------------
\3\ SWIFT is a member-owned cooperative headquartered in Belgium
that provides its users (including banking and securities
organizations, market infrastructures, and corporate customers) a
global service for financial messages, such as payments and
securities transactions.
---------------------------------------------------------------------------
B. ISO 20022
The International Organization for Standardization (ISO) is an
independent, non-governmental organization comprised of 161 national
standards bodies. ISO ``brings together experts to share knowledge and
develop voluntary, consensus-based, market relevant International
Standards that support innovation and provide solutions to global
challenges.'' \4\ ISO publishes standards for a broad range of
industries.
---------------------------------------------------------------------------
\4\ See https://www.iso.org/about-us.html.
---------------------------------------------------------------------------
The ISO 20022 standard includes a suite of messages for the
financial industry, including messages for payments, securities, trade
services, cards, and foreign exchange. ISO 20022 messages use
extensible markup language (XML) syntax and have a common data
dictionary that can support end-to-end payment message flow, including
payment initiation (i.e., customer to bank messages), interbank
settlement (i.e., bank to bank messages), and cash management (i.e.,
bank to customer messages).
ISO 20022 messages include structured data elements that provide
for potentially richer payment message data than the current Fedwire
Funds Service message format. For example, ISO 20022 messages contain
fields for three intermediary financial institutions while the current
Fedwire Funds message format contains a field for only one intermediary
financial institution. Similarly, ISO 20022 messages can include more
structured and detailed information than the current Fedwire Funds
message format (see example in Table 1).
Table 1
------------------------------------------------------------------------
Current Fedwire Funds Service format ISO 20022 format
------------------------------------------------------------------------
Free-text lines for address Discrete fields for specific
information: address information:
[[Page 31392]]
Address Line 1 (up to 35 Postal Address .
characters) (4 characters).
Address Line 2 (up to 35 (up to 70 characters).
characters). (up to 70
Address Line 3 (up to 35 characters).
characters). (up to 70 characters).
(up to 16 characters).
(up to 16 characters).
(up to 35 characters).
(up to 35
characters).
(2 characters).
------------------------------------------------------------------------
Table 2 shows how ISO 20022 messages correspond to messages in the
current Fedwire Funds Service message format. The full catalogue of ISO
20022 messages is available on the ISO 200022 website.\5\
---------------------------------------------------------------------------
\5\ See https://www.iso20022.org/full_catalogue.page.
Table 2
----------------------------------------------------------------------------------------------------------------
Comparable message in
Category Description ISO 20022 Message current fedwire funds
service format
----------------------------------------------------------------------------------------------------------------
Business application header.......... Processing information BusinessApplicationHead This information is
placed at the erV01_head.001.001.01. contained in various
beginning of each data elements of the
message (e.g., sender, current format.
receiver, input
message accountability
data or output message
accountability data).
Value messages....................... Used by Fedwire Funds Financial Institution Customer transfers.
Service participants To Financial
to order the movement Institution Customer
of funds. Credit Transfer
(pacs.008.001.0x).
Financial Institution Bank transfers.
Credit Transfer
(pacs.009.001.0x).
Payment Return Returns.
(pacs.004.001.0x).
Nonvalue messages.................... Used by Fedwire Funds Customer Credit Drawdown request.
Service participants Transfer Initiation .......................
to request that a (pain.001.001.09). Return request.
funds transfer be FIToFI Payment .......................
made, to refuse to Cancellation Request Drawdown refusal.
honor those requests, (camt.056.001.07).
or to share free- FIToFI Payment Status
format information. Report
(pacs.002.001.09).
Note: This message will
also be used for a
Return Refusal, but
there is currently no
comparable message.
Proprietary Format Service message.
Investigation
(camt.035.001.04).
System messages...................... Used to communicate FIToFI Payment Status Acknowledgment and
about the processing Report reject notification.
status of messages (pacs.002.001.09). Error response to an
submitted to the Message Reject account report request
Fedwire Funds Service, (admi.002.001.01). or retrieval request.
to report about ....................... Broadcast messages
Fedwire Funds Service System Event (i.e., open, close,
operations, or to Notification extensions).
request copies of (admi.004.001.02). Retrievals (current day
current or prior-day Resend Request or prior two business
messages. (admi.006.001.01). days).
Reporting messages................... Used to request or Account Reporting The following requests:
report on transaction Request [ssquf] Account
activity or account (camt.060.001.03). balance.
balance information. [ssquf] Endpoint
totals.
[ssquf] Detailed
summary.
Bank To Customer The following reports:
Account Report [ssquf] Account
(camt.052.001.07). balance.
[ssquf] Endpoint
totals.
[ssquf] Detailed
summary.
[ssquf] Reconciliation
gap report.
[ssquf] Funds
subsidiary statement.
----------------------------------------------------------------------------------------------------------------
[[Page 31393]]
II. Payments Industry Efforts Related to ISO 20022
In late 2012, the Federal Reserve Bank of New York and other key
entities involved in the U.S. payments industry formed a ``Stakeholder
Group'' to assess the merits of adopting the ISO 20022 standard in the
U.S.\6\ The Stakeholder Group engaged an independent external
consultant to evaluate the business case for adopting ISO 20022. The
consultant identified certain strategic reasons to consider adopting
ISO 20022 in the U.S. for cross-border wire and Automated Clearing
House (ACH) payments and then, if appropriate, for domestic wire and
ACH payments. For example, the consultant emphasized that adopting ISO
20022 in lieu of proprietary standards would improve interoperability
between domestic and global payment systems.\7\ In accordance with the
findings of the Stakeholder Group, the Federal Reserve recommended in
its 2015 Strategies for Improving the Payment System paper that the
U.S. payments industry ``[d]evelop an implementation strategy for the
application of the ISO 20022 standard to U.S. payment transactions.''
\8\
---------------------------------------------------------------------------
\6\ The other members of the Stakeholder Group are the Federal
Reserve Bank of Atlanta; TCH; NACHA--The Electronic Payments
Association, which develops the rules that govern the Automated
Clearing House network; and Accredited Standards Committee X9-
Financial Industry Standards, Inc., which has been accredited by the
U.S. national standards body (the American National Standards
Institute) to develop financial standards.
\7\ See Appendix 7 of the Federal Reserve's Strategies for
Improving the Payment System (Jan. 26, 2015), https://fedpaymentsimprovement.org/wp-content/uploads/strategies-improving-us-payment-system.pdf, for a fuller discussion of the consultant's
findings.
\8\ Id. at 19-20. Strategies for Improving the Payment System
made a number of other recommendations intended to improve, inter
alia, the speed, efficiency, and security of payments.
---------------------------------------------------------------------------
Since 2015, the Reserve Banks have worked with TCH on plans to
adopt ISO 20022 for the Fedwire Funds Service and CHIPS. While the
Reserve Banks and TCH decided independently to pursue implementation of
ISO 20022, they intend to align ISO 20022 implementation for the
Fedwire Funds Service and CHIPS to the extent possible.\9\ The Reserve
Banks and TCH have indicated that aligning ISO 20022 implementation for
their respective wire transfer systems would create efficiencies that
would benefit their common customers.\10\ The Reserve Banks' specific
proposed timeline for adopting ISO 20022 for the Fedwire Funds Service
is discussed in greater detail below.
---------------------------------------------------------------------------
\9\ See ``Deep Dive into the ISO 20022 Implementation Strategy
for U.S. High-Value Payment Systems'', Sibos Community Session (Oct.
18, 2017), slide 7 https://fedpaymentsimprovement.org/wp-content/uploads/101817-iso20022-deep-dive.pdf.
\10\ Id.
---------------------------------------------------------------------------
The Reserve Banks have also engaged in extensive public outreach
regarding ISO 20022. For example, the Reserve Banks and TCH conducted a
survey in 2015 of over 2,300 Fedwire Funds Service customers, Fedwire
and CHIPS advisory group banks, vendors, and industry groups on the
potential scope, approach, and timing of ISO 20022 implementation.\11\
The Reserve Banks have also presented at industry conferences,
published webinars, and established websites to educate market
participants about ISO 20022 and to solicit direct informal feedback on
plans to implement ISO 20022.\12\ Finally, the Reserve Banks have
established advisory groups that include banks, software vendors, and
other stakeholders to provide input on how to implement ISO 20022 for
the Fedwire Funds Service.
---------------------------------------------------------------------------
\11\ See https://fedpaymentsimprovement.org/wp-content/uploads/iso20022_adoption_considerations_survey.pdf.
\12\ See ``Fedwire Funds Service ISO 20022 Implementation
Center,'' https://www.frbservices.org/resources/financial-services/wires/iso-20022-implementation-center.html, which includes
information on the Reserve Banks' proposal to implement ISO 20022
for the Fedwire Funds Service. See also ``The Fed's Resource Center
for Adoption of ISO 20022 Payment Messages,'' https://fedpaymentsimprovement.org/payments-efficiency/iso-20022/, which
includes links to presentations and webinars concerning plans to
adopt ISO 20022 for wire transfers and ACH payments. The Reserve
Banks will host additional webinars and in-person workshops
throughout the first half of 2018. The Reserve Banks will also
continue to work with NACHA to educate ACH participants about ISO
20022.
---------------------------------------------------------------------------
SWIFT has initiated a study to consider the migration of cross-
border traffic in its proprietary MT format to ISO 20022.\13\ The SWIFT
study includes a community consultation to help determine the timing
and practicalities of migration.\14\ SWIFT has indicated that the
``consultation will run until early June, with results analysed over
the following months and a final report produced before the end of
2018. The report will draw on the feedback from the consultation to
propose a detailed roadmap for'' migrating cross-border MT traffic to
ISO 20022.\15\
---------------------------------------------------------------------------
\13\ See https://www.swift.com/news-events/news/iso-20022-migration_the-time-is-now.
\14\ Id.
\15\ Id.
---------------------------------------------------------------------------
Similarly, many foreign wire transfer systems, including those for
currencies of key U.S. trading partners, have adopted ISO 20022 (e.g.,
China, India, Japan, Switzerland) or have announced plans to adopt ISO
20022 (e.g., Canada, European Union, Hong Kong, United Kingdom).\16\
---------------------------------------------------------------------------
\16\ For further discussion of payment systems that have adopted
ISO 20022 or have announced plans to adopt ISO 20022, see section
7.3 of SWIFT's ISO 20022 consultation paper, https://www.swift.com/resource/iso-20022-migration-study.
---------------------------------------------------------------------------
III. Potential Benefits of Adopting ISO 20022 for the Fedwire Funds
Service
The Board believes that adopting ISO 20022 for the Fedwire Funds
Service could be beneficial for a number of reasons. As described
above, the ISO 20022 message format would allow Fedwire Funds Service
participants to include richer and more structured data in their
messages--for example, increased character lengths for name data
elements and discrete elements for address information, including a
country code. This data could help banks and other entities meet
evolving requirements to screen payments for sanctions and anti-money
laundering purposes.
Adopting ISO 20022 messages could also improve domestic and cross-
border interoperability between the Fedwire Funds Service and other
payment or messaging systems. As noted above, TCH has announced plans
to adopt ISO 20022 messages for the CHIPS system and SWIFT has
initiated a study to consider the migration of cross-border MT traffic
to ISO 20022. Similarly, as noted above, many foreign wire transfer
systems, including those for currencies of key U.S. trading partners,
have adopted or have announced plans to adopt ISO 20022. Adopting ISO
20022 as a common, global standard could reduce operating costs for
banks and their customers by reducing the need to map payment
information from one message format to another. This could improve the
efficiency of end-to-end processing of multi-leg domestic and
international funds transfers.
Relatedly, adopting ISO 20022 as a common, global standard could
allow banks to provide useful services to their customers. For example,
ISO 20022 would support a structured format for including extended
remittance information (ERI) in business-to-business payment
messages.\17\ While the current proprietary message formats for the
Fedwire Funds Service and CHIPS support ERI, usage of ERI by depository
institutions and their customers has been limited. Widespread adoption
of
[[Page 31394]]
ISO 20022 would create a common, global format for ERI that could
encourage depository institutions and their customers to invest in the
changes needed to support the end-to-end flow of ERI for business-to-
business payments.
---------------------------------------------------------------------------
\17\ Extended remittance information generally refers to details
in the payment message regarding the purpose of a business-to-
business payment. For example, a business that sends a payment to a
vendor could include details regarding the invoices against which
the vendor should apply the payment.
---------------------------------------------------------------------------
IV. Proposed Timeline for Adopting ISO 20022 for the Fedwire Funds
Service
The Reserve Banks would transition from the current Fedwire Funds
Service message format to ISO 20022 in three phases.
Phase 1: ISO 20022 Preparation (Target Implementation Date of November
23, 2020)
In phase 1, the Reserve Banks would make a number of changes to the
current Fedwire Funds Service message format to address existing
interoperability gaps with SWIFT's proprietary MT format. The Reserve
Banks would also eliminate the free-text format option for the
originator and beneficiary fields in customer transfer messages and
instead require Fedwire Funds Service participants to use a structured
format for these fields; SWIFT is making a similar change to its MT
format in November 2020.\18\
---------------------------------------------------------------------------
\18\ See https://www.swift.com/news-events/news/payments-standards-changes-for-2020-and-why-you-should-act-now.
---------------------------------------------------------------------------
Although the Reserve Banks would need to make most of the changes
in phase 1 even if the Reserve Banks were not planning to adopt ISO
20022, all of the changes in this phase would simplify the Fedwire
Funds Service's migration to ISO 20022 messages.
Phase 2: ISO 20022 ``like-for-like'' Implementation (Target
Implementation Period From March 2022 to August 2023)
In phase 2, the Reserve Banks would migrate Fedwire Funds Service
participants in waves to send and receive ISO 20022 messages that have
elements and character lengths that are comparable to the current
Fedwire Funds Service message format. Table 2, supra, shows how ISO
20022 messages correspond to messages in the current Fedwire Funds
Service message format.
While the syntax for the phase 2 like-for-like ISO 20022 messages
would be XML, the content of the messages would be limited to data
elements and character lengths comparable to those that are supported
in the current Fedwire Funds Service message format. For example, like-
for-like ISO 20022 messages in phase 2 could include only one field for
an intermediary financial institution (similar to the current Fedwire
Funds Service message format) even though ISO 20022 messages can
generally accommodate up to three such fields. Similarly, while ISO
20022 messages can support structured data elements for address
information (see Table I, supra), like-for-like ISO 20022 messages in
phase 2 would (similar to the current Fedwire Funds Service message
format) be limited to three lines of 35 characters each for free-text
address information.
Because the Reserve Banks would transition Fedwire Funds Service
participants to ISO 20022 in waves, the Fedwire Funds Service would
translate the current message format to ISO 20022 and vice versa when
necessary to accommodate Fedwire senders and receivers that are not
using the same format. At the end of phase 2, the Fedwire Funds Service
would move into a stability period lasting at least three months (from
August 2023 to November 2023) in which all Fedwire Funds participants
would send and receive ISO 20022 like-for-like messages. During the
stability period, the Reserve Banks would retain the current,
proprietary Fedwire Funds Service format as a fallback option in case
one or more participants encounter issues and the Reserve Banks
determine that such participants need to revert back to the proprietary
format.
The Reserve Banks would also use phase 2 to prepare for full
implementation of ISO 20022 in phase 3. Specifically, the Reserve Banks
would require Fedwire Funds Service participants to test their ability
to receive full ISO 20022 messages.
Phase 3: ISO Enhancements (Target Implementation Date of November 2023)
In phase 3, the Reserve Banks would fully implement ISO 20022 by
enabling Fedwire Funds Service participants to send ISO 20022 messages
that contain enhanced data as noted in Table 3. Although it would be
optional for participants to send the enhanced data, all participants
would need to be capable of receiving enhanced data.\19\ Participants
would also need to determine, consistent with any legal obligations,
how to handle enhanced data that they receive--for example, whether
(and how) to provide enhanced data to the next receiving bank in the
funds transfer or to the beneficiary (if the Fedwire Funds Service
participant is the beneficiary's bank).
---------------------------------------------------------------------------
\19\ As noted above, the Reserve Banks would require Fedwire
Funds Service participants to test their ability to receive full ISO
20022 messages during phase 2.
\20\ ISO 20022 employs terminology that differs in key respects
from that used in U.S. funds-transfer law, including subpart B of
the Board's Regulation J (12 CFR 210), which governs funds transfers
through the Fedwire Funds Service. The Board has proposed an
amendment to subpart B of Regulation J that would clarify that terms
used in financial messaging standards, such as ISO 20022, do not
confer or connote legal status or responsibilities. See 83 FR 11431
(Mar. 15, 2018).
Table 3
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ISO 20022 Enhancements
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1. New data elements for additional persons or entities identified in
payment messages: \20\
[ssquf] initiating party
[ssquf] two additional previous instructing agents
[ssquf] two additional intermediary agents
[ssquf] ultimate debtor
[ssquf] ultimate creditor
2. New purpose code data element to help explain the business purpose of
the funds transfer.
3. New data element that participants can use to determine how they
handle or process a message (e.g., SWIFT global payments innovation
service level).
4. New data element to provide information about a bilateral processing
agreement.
5. Longer character lengths for certain fields (e.g., Name can be up to
140 characters).
6. Structured postal address data elements, including a country code.
7. Contact details for certain persons/entities in the funds transfer.
[[Page 31395]]
8. New regulatory reporting data elements to provide regulatory
information (e.g., OFAC license) related to customer transfers.
9. New tax component to provide remittance information related to tax
payments.
------------------------------------------------------------------------
The target implementation date for phase 3 could be delayed if
SWIFT has not yet implemented a solution for its network to support ISO
20022 messages that contain enhanced data.
V. Fedwire Funds Service Message Format Documentation and Testing
The Reserve Banks are using a restricted page on the MyStandards
web-based application as a tool to store and share documentation
related to the ISO 20022 project with authorized Fedwire Funds Service
participants and software vendors.\21\ In March 2018, the Reserve Banks
published the final message format documents for phase 1, which would
provide the industry over two years to prepare for the proposed phase 1
target implementation date in November 2020. The Reserve Banks also
published draft message format documents for phases 2 and 3 in March
2018 and will publish the final documents for these phases by the end
of June 2018; this would provide the industry nearly four years to
prepare for the proposed phase 2 migration (which is targeted to begin
in March 2022) and over five years to prepare for the proposed phase 3
target implementation date in November 2023.
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\21\ For more information on MyStandards, see https://www.swift.com/our-solutions/compliance-and-shared-services/mystandards.
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The Reserve Banks plan to provide nine months for testing the phase
1 changes in their Depository Institution Testing (DIT) environment
prior to the proposed implementation date in November 2020.\22\
Similarly, the Reserve Banks plan to provide at least one year for
testing the phase 2 and phase 3 changes in their DIT environment. The
Reserve Banks plan to publish a final testing plan by the end of 2018.
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\22\ For more information on the DIT environment, see https://www.frbservices.org/financial-services/wires/testing/di-testing.html.
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VI. Impact on Fedwire Funds Service Participants and Service Providers
The Board believes that the impact of ISO 20022 implementation on
Fedwire Funds Service participants would vary depending on how each
participant accesses the Fedwire Funds Service. Certain Fedwire Funds
Service participants or service providers develop their own software
(or rely on software from vendors) to access the Fedwire Funds Service.
These institutions include (1) Fedwire Funds Service participants and
service providers that access the Fedwire Funds Service via the FedLine
Direct[supreg] solution and (2) Fedwire Funds Service participants that
use the import/export feature of FedPayments[supreg] Manager-Funds over
the FedLine Advantage[supreg] solution. FedLine Direct access to the
Fedwire Funds Service is an unattended, IP-based computer interface. It
is typically used by participants conducting larger volumes of funds
transfers. FedPayments Manager is a web-based application that midsize
and smaller participants typically use to create, send, and receive
payment orders and nonvalue messages. The import functionality built
into FedPayments Manager enables participants to upload payment files
from separate payment applications (e.g., those that interface with
customer-facing systems) so the participants do not have to enter the
messages one by one into the application. Similarly, the export
functionality allows participants to download files from FedPayments
Manager into other applications (e.g., so payments can post to customer
accounts in their deposit systems). The Board believes that
participants and service providers accessing the service through
FedLine Direct or using the import/export feature of FedPayments
Manager would need to make significant changes to their payment
applications or processes to be able to send and receive messages (or
import and export files) in the revised proprietary format in phase 1
and in the new ISO 20022 format in phases 2 and phase 3.
Other Fedwire Funds Service participants access the Fedwire Funds
Service manually through FedPayments Manager-Funds.\23\ These
participants would need to become familiar with the terminology used
in, and information required by, the ISO 20022 format and the updated
appearance of the graphical user interface in FedPayments Manager. The
Reserve Banks would make the necessary changes to FedPayments Manager,
however, and would provide training regarding the updates.
---------------------------------------------------------------------------
\23\ Specifically, these Fedwire Funds Service participants
enter messages individually into FedPayments Manager-Funds over the
FedLine Advantage solution through a graphical user interface.
---------------------------------------------------------------------------
Finally, some Fedwire Funds Service participants access the Fedwire
Funds Service through an offline, telephone-based service that requires
a Reserve Bank employee to enter payment order information into a
Reserve Bank application. The Board does not believe that these
participants' current processes for submitting payment orders would
materially change, though the participants would need to become
familiar with the terminology used in, and information required by, the
ISO 20022 format so they could provide it to the Reserve Bank
employees.
VII. Request for Comment
The Board requests comment on this proposal to replace the current
Fedwire Funds Service message format with ISO 20022.
A. Potential Benefits and Drawbacks of Adopting ISO 20022
1. Would adopting ISO 20022 for the Fedwire Funds Service produce
the benefits discussed above?
2. Would adopting ISO 20022 for the Fedwire Funds Service produce
any other benefits?
3. What drawbacks (if any) would adopting ISO 20022 for the Fedwire
Funds Service entail and how might they be addressed?
B. Proposed Timeline for Adopting ISO 20022
1. Is the timeline that the Reserve Banks have proposed for
adopting ISO 20022 for the Fedwire Funds Service (including the
proposed timeframes for publishing final message format documents and
testing changes in the Reserve Banks' DIT environment) reasonable? If
not, how much time would Fedwire Funds Service participants and service
providers (including software vendors) need to adjust their
applications and processes for each phase?
2. Should the Reserve Banks delay the implementation date for phase
3 of the proposal if SWIFT has not yet implemented a solution on its
network to support ISO 20022 for cross-border messages?
3. Would the proposal to migrate to ISO 20022 in phases mitigate
any risks associated with implementing ISO 20022?
C. Impact on Fedwire Funds Service Participants and Service Providers
1. How does your institution access the Fedwire Funds Service? If
your institution accesses the Fedwire Funds
[[Page 31396]]
Service via the FedLine Direct solution or uses the import/export
feature of FedPayments Manager-Funds over the FedLine Advantage
solution, do you develop your own software or rely on a software
vendor?
2. What costs would your institution incur if the Reserve Banks
adopt ISO 20022 for the Fedwire Funds Service? If possible, please
provide dollar estimates or ranges.
3. Would the benefits of adopting ISO 20022 for the Fedwire Funds
Service outweigh any associated costs for your institution?
VIII. Competitive Impact Analysis
The Board conducts a competitive impact analysis when it considers
a rule or policy change that may have a substantial effect on payment
system participants. Specifically, the Board determines whether there
would be a direct or material adverse effect on the ability of other
service providers to compete with the Federal Reserve due to differing
legal powers or due to the Federal Reserve's dominant market position
deriving from such legal differences.\24\
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\24\ See The Federal Reserve in the Payments System (issued
1984; revised 1990), Federal Reserve Regulatory Service 9-1558,
https://www.federalreserve.gov/paymentsystems/pfs_frpaysys.htm.
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The Board does not believe that the proposal to adopt ISO 20022 for
the Fedwire Funds Service would have an adverse impact on other service
providers. As described above, the current, proprietary message format
for the Fedwire Funds Service is interoperable with the proprietary
message format for the CHIPS system. As further described above, the
Reserve Banks have worked with TCH on plans to align ISO 20022
implementation for the Fedwire Funds Service and CHIPS where possible;
the Reserve Banks and TCH have indicated that such coordination will
benefit their common customers. If the Reserve Banks and TCH each adopt
ISO 20022 for the Fedwire Funds Service and CHIPS, respectively, the
message formats for the two systems will remain interoperable.
By order of the Board of Governors of the Federal Reserve
System, June 28, 2018.
Michele Taylor Fennell,
Assistant Secretary of the Board.
[FR Doc. 2018-14351 Filed 7-3-18; 8:45 am]
BILLING CODE P
