New Message Format for the Fedwire® Funds Service, 64217-64223 [2022-23002]

Agencies

• FEDERAL RESERVE SYSTEM

[Federal Register Volume 87, Number 204 (Monday, October 24, 2022)]
[Notices]
[Pages 64217-64223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23002]


=======================================================================
-----------------------------------------------------------------------

FEDERAL RESERVE SYSTEM

[Docket No. OP-1613]


New Message Format for the Fedwire[supreg] Funds Service

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is announcing that the Federal Reserve Banks (Reserve Banks) will adopt 
the ISO[supreg] 20022 message format for the Fedwire[supreg] Funds 
Service on a single day, March 10, 2025. The Board is also announcing a 
revised testing strategy, backout strategy, and other details 
concerning the implementation of the ISO 20022 message format for the 
Fedwire Funds Service.

DATES: Implementation date: March 10, 2025.

FOR FURTHER INFORMATION CONTACT: Cody Gaffney, Attorney (202-452-2674), 
Legal Division; Amber Latner, Lead Financial Institution Policy Analyst 
(202-973-6965), Division of Reserve Bank Operations and Payment 
Systems.

SUPPLEMENTARY INFORMATION:

I. Background

    The Fedwire Funds Service is a real-time gross settlement system 
owned and operated by the Reserve Banks that enables participants to 
make immediately final payments using either their balances held at the 
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 2021, the Fedwire Funds Service processed approximately 
204 million payments with a total value of approximately $992 
trillion. See FRBServices.org, Fedwire[supreg] Funds Service--Annual 
Statistics, https://www.frbservices.org/resources/financial-services/wires/volume-value-stats/annual-stats.html. CHIPS processed 
approximately 128 million payments with a total value of 
approximately $449 trillion. See TCH, CHIPS Annual Statistics from 
1970 to 2022, https://www.theclearinghouse.org/-/media/new/tch/documents/payment-systems/chips_volume_value_ytd_march_2022.pdf.

---------------------------------------------------------------------------

[[Page 64218]]

    At present, the Fedwire Funds Service uses a proprietary message 
format that supports multiple types of communications, including (i) 
``value'' messages that order the movement of funds, (ii) ``nonvalue'' 
messages that do not result in the movement of funds but rather 
communicate information or requests to other Fedwire Funds Service 
users, and (iii) other messages that enable Fedwire Funds Service users 
to request account balance information and the processing status of 
payment orders.\2\ The present Fedwire Funds Service message format can 
be mapped to--and is interoperable with--the CHIPS message format and 
the message type format of the SWIFT messaging network.
---------------------------------------------------------------------------

    \2\ In this notice, the term ``users'' refers to (i) Fedwire 
Funds Service participants and (ii) software vendors and third-party 
service providers that facilitate transactions for Fedwire Funds 
Service participants.
---------------------------------------------------------------------------

    In 2004, the International Organization for Standardization (ISO)--
an independent, non-governmental organization currently comprising 167 
national standards bodies--published the ISO 20022 standard, which 
includes a suite of message format standards for the financial 
industry, including messages for payments, securities, trade services, 
debit and credit cards, and foreign exchange. ISO 20022 messages use 
extensible markup language (XML) syntax, have a common data dictionary 
that can support end-to-end payment message flow, and include 
structured data elements that provide for potentially richer payment 
message data than the current Fedwire Funds Service message format.
    On July 5, 2018, the Board published a notice and request for 
comment (2018 Notice) on a proposal to adopt the ISO 20022 message 
format for the Fedwire Funds Service.\3\ The 2018 Notice more fully 
described the current Fedwire Funds Service message format and the ISO 
20022 message format, including tables that compared the two formats 
with respect to various message elements. In addition, the 2018 Notice 
described payments industry efforts related to ISO 20022, including 
outreach by the Reserve Banks and coordination efforts between the 
Reserve Banks, TCH, and other stakeholders. The 2018 Notice further 
described the potential benefits of adopting the ISO 20022 message 
format for the Fedwire Funds Service, including increased efficiency 
due to greater interoperability among global payment systems and types 
of payments, richer data that could improve anti-money laundering and 
sanctions screening, and broader adoption of extended remittance 
information.\4\ The 2018 Notice included a request for comment on the 
potential benefits and drawbacks of adopting the ISO 20022 standard.
---------------------------------------------------------------------------

    \3\ 83 FR 31391 (July 5, 2018).
    \4\ 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.
---------------------------------------------------------------------------

II. Summary of 2021 Notice

    After considering public comments received in connection with the 
2018 Notice, on October 6, 2021, the Board published a notice and 
request for comment (2021 Notice) that announced that the Reserve Banks 
will adopt the ISO 20022 standard for the Fedwire Funds Service.\5\ The 
Board noted that migrating the Fedwire Funds Service to the ISO 20022 
message format will provide a variety of policy and operational 
benefits and was supported by commenters.
---------------------------------------------------------------------------

    \5\ 86 FR 55600 (Oct. 6, 2021).
---------------------------------------------------------------------------

    At the same time, the Board in the 2021 Notice proposed that the 
Reserve Banks adopt the ISO 20022 message format on a single day, 
rather than in three separate phases, as previously proposed.\6\ The 
2021 Notice stated that as of the implementation date (i.e., the date 
on which the Fedwire Funds Service is scheduled to migrate to ISO 
20022), all Fedwire Funds Service users would be required to be able to 
send and receive fully enhanced ISO 20022 messages and the current 
proprietary message format for the Fedwire Funds Service would no 
longer be supported. The implementation date would be targeted for, and 
would be no earlier than, November 2023. The Board noted that the 
Federal Reserve intends to align the timing of ISO 20022 implementation 
for the Fedwire Funds Service with that of CHIPS to the extent possible 
to maximize benefits for Fedwire Funds Service users that also use 
CHIPS.\7\
---------------------------------------------------------------------------

    \6\ In the 2018 Notice, the Board had proposed to transition 
from the current Fedwire Funds Service message format to ISO 20022 
in three phases from November 2020 to November 2023. However, as 
described in the 2021 Notice, various developments caused the Board 
to reconsider its proposed three-phased migration to ISO 20022. For 
example, in September 2019, the Payments Market Practice Group--an 
independent advisory group of payments experts that reports to the 
Banking and Payments Committee of SWIFT's Board of Directors, and 
whose members represent global financial institutions from Asia 
Pacific, Europe, and North Africa--formally requested that the Board 
consider a single-day implementation of the ISO 20022 message 
standard for the Fedwire Funds Service. In addition, the Board 
engaged with the industry through the Format Advisory Group--which 
is jointly chaired by the Federal Reserve Bank of New York and TCH, 
and includes 18 global and regional banks, 17 of which are Fedwire 
Funds Service users and 10 of which are also CHIPS users--on a 
potential single-day implementation strategy.
    \7\ In addition, the 2021 Notice addressed commenters' concerns 
that the Fedwire Funds Service should remain interoperable with 
other payment and messaging systems. For example, the 2021 Notice 
described steps that the Reserve Banks will take to reduce the risk 
of cross-border interoperability issues during the interim period 
between SWIFT's implementation of ISO 20022 (in November 2022) and 
the Fedwire Funds Service's implementation of ISO 20022.
---------------------------------------------------------------------------

    The Board in the 2021 Notice also explained that the Reserve Banks 
are using SWIFT's MyStandards application to store and share 
documentation related to the ISO 20022 implementation with authorized 
Fedwire Funds Service users.\8\ The Board stated that the Reserve Banks 
will publish the final message format documents for ISO 20022 messages 
after the Board announces a final implementation strategy.
---------------------------------------------------------------------------

    \8\ For more information on MyStandards, see https://www.swift.com/our-solutions/compliance-and-shared-services/mystandards.
---------------------------------------------------------------------------

    The 2021 Notice also outlined the Board's proposed strategy for the 
testing of ISO 20022 messages prior to the targeted implementation 
date. Specifically, the Board proposed that the Reserve Banks require 
rigorous testing in three different environments. First, the Reserve 
Banks would enable authorized Fedwire Funds Service users to use the 
Readiness Portal feature within MyStandards to ensure that their ISO 
20022 messages conform to Fedwire Funds Service requirements. Second, 
the Reserve Banks would introduce a new depository institution testing 
(DIT) environment 9 to 12 months ahead of the targeted implementation 
date to provide users a dedicated environment for testing ISO 20022 
messages, including the opportunity to conduct coordinated testing to 
confirm their ability to send and receive ISO 20022 messages among each 
other. The Reserve Banks would also provide opportunities for users to 
test ISO 20022 messages in the production environment on select 
Saturdays two to three months prior to the targeted implementation 
date. Third, the Reserve Banks would require certain users to complete 
a separate test script in each testing environment (i.e., the 
MyStandards Readiness Portal, the DIT environment, and the production 
environment). The Board stated in the

[[Page 64219]]

2021 Notice that the Reserve Banks would publish a final testing plan, 
including the testing requirements for each testing environment, after 
the Board announces a final implementation strategy.
    Finally, the 2021 Notice described the Board's proposed backout 
strategy if the Reserve Banks encounter significant problems deploying 
ISO 20022-related changes on the Saturday before the targeted 
implementation date, and the Board's proposed strategy for addressing 
significant problems that arise on or after the implementation date. 
With respect to issues that arise on the Saturday before the 
implementation date, the Reserve Banks would have the ability to ``back 
out'' the ISO 20022 changes and return to the legacy format on a 
temporary basis. For this reason, Fedwire Funds Service users would 
need to attest to their ability to back out their ISO 20022 changes 
when they conduct their production testing. With respect to issues that 
arise on or after the implementation date, the Reserve Banks would not 
be able to return to the legacy format but would instead follow a 
``fix-in-place'' strategy to address the issue.
    The Board requested comment on all aspects of its proposal to 
migrate the Fedwire Funds service to the ISO 20022 message format on a 
single day. In addition, the 2021 Notice sought comment on eight 
specific questions.

III. Summary of Public Comments

    The Board received 60 comment letters in response to the 2021 
Notice. Of those, 35 were from banks, 14 were from individuals, 5 were 
from industry organizations, 4 were from third-party software vendors, 
and 2 were from financial market utilities.\9\
---------------------------------------------------------------------------

    \9\ Duplicate submissions or similar comments from the same 
commenter were treated as a single submission.
---------------------------------------------------------------------------

    The remainder of section III summarizes commenters' responses to 
the eight specific questions that the Board posed in the 2021 notice, 
as well as other issues raised by commenters.\10\
---------------------------------------------------------------------------

    \10\ For simplicity, two of these questions related to testing 
are discussed together in section III.E, infra.
---------------------------------------------------------------------------

A. Support for Single-Day Implementation Strategy

    Of commenters expressing a preference regarding the ISO 20022 
implementation strategy, the vast majority of commenters preferred the 
single-day implementation strategy to a phased implementation approach. 
However, three commenters, including a major trade association 
representing community banks, opposed the single-day implementation 
strategy, arguing that the single-day implementation approach would be 
unacceptably costly, would strain testing capacity, and would increase 
implementation risk. One commenter that opposed the single-day 
implementation strategy suggested that the Reserve Banks should instead 
implement ISO 20022 for a small group of Fedwire Funds Service users, 
and if that goes smoothly, migrate the remaining users to ISO 20022 at 
a later time. In subsequent discussions between Reserve Bank staff and 
the community bank trade association that expressed opposition to a 
single-day implementation approach, the commenter expressed support for 
a single-day implementation approach provided that the implementation 
date is significantly delayed past November 2023 and there is a full 
year of testing in the DIT environment.
    In light of the broad support for the single-day implementation 
approach, and as discussed further in section IV, infra, the Board is 
announcing that the Reserve Banks will adopt the ISO 20022 standard for 
the Fedwire Funds Service on a single day.

B. Proposed Implementation Date

    While several commenters supported the proposed targeted November 
2023 implementation date, the vast majority of commenters that 
addressed the implementation date requested a 6- to 12-month extension 
beyond the implementation date proposed in the 2021 Notice. In 
addition, several commenters suggested that the implementation date 
should not fall close to a U.S. banking holiday or the winter holiday 
season to avoid implementing ISO 20022 during a period of increased 
Fedwire Funds Service transaction volume; in subsequent discussions 
with Reserve Bank staff, some of these commenters similarly expressed a 
preference that the implementation date should not fall at the end of a 
month or a calendar quarter. One commenter urged the Board and the 
Reserve Banks to work with the other global payment systems operators 
and SWIFT to ensure that the international ISO 20022 implementation 
schedule includes adequate buffer time between the implementation dates 
for various payment systems. One commenter suggested that the Board 
consider an implementation date that provides a gap--preferably up to 
one year--between the launch of the FedNow\SM\ Service and the ISO 
20022 implementation for the Fedwire Funds Service. Another commenter 
asked the Board to consider the impact that the proposed implementation 
timeline would have on third-party vendors performing fraud detection 
and compliance services for Fedwire Funds Service users.
    The Board has reconsidered the proposed targeted November 2023 
implementation date in light of the comments received. As discussed 
further in section IV.A., infra, the Board is announcing that the 
Reserve Banks will implement the ISO 20022 message format for the 
Fedwire Funds on March 10, 2025.

C. Synchronization With CHIPS

    Many commenters expressed a preference for synchronizing the ISO 
20022 implementation timing of the Fedwire Funds Service and CHIPS. Of 
these commenters, one commenter suggested that if the implementation 
dates for the Fedwire Funds Service and CHIPS do not align, then the 
Board should ensure that the implementation timeline for the Fedwire 
Funds Service builds in an adequate gap between the two migrations. By 
contrast, two commenters noted that implementing the ISO 20022 message 
format for the Fedwire Funds Service and CHIPS at the same time would 
increase the risk that an implementation-related issue could result in 
the simultaneous disruption of both services, leaving users without an 
alternative operator to process wire transactions.
    While the Reserve Banks and TCH decided independently to pursue 
implementation of ISO 20022, the Reserve Banks have worked with TCH on 
plans to adopt the ISO 20022 message format for the Fedwire Funds 
Service and CHIPS since 2015. The Reserve Banks intend to continue 
working with TCH to coordinate the implementation of ISO 20022 for the 
Fedwire Funds Service with that of CHIPS to the extent possible to 
reduce both interoperability issues and the risk of simultaneous 
disruptions to users of both services.

D. Resource Constraints

    Multiple commenters expressed concerns about resource constraints 
resulting from the need to prepare simultaneously for the launch of the 
FedNow Service and the implementation of the ISO 20022 message format 
for the Fedwire Funds Service. Specifically, several commenters 
suggested the Board consider the effects of any new payment systems 
technology initiatives on financial institutions' already strained 
technology resources. One of these commenters specifically noted that 
the potential concurrent implementation of the FedNow Service and the 
ISO 20022

[[Page 64220]]

message format for the Fedwire Funds Service would strain the resources 
of community banks, particularly their information technology 
departments and vendors. Another commenter noted that in addition to 
the Federal Reserve's payment system modernization efforts, some banks 
must also allocate resources in preparation for SWIFT's transition to 
the ISO 20022 format in November 2022.
    Commenters also suggested that the Board communicate to the 
industry its prioritization of the Federal Reserve's ongoing and 
potential payment systems technology initiatives. For example, 
commenters suggested the Board communicate whether it is prioritizing 
the implementation of the ISO 20022 message format for the Fedwire 
Funds Service relative to the deployment of the FedNow Service and the 
potential expansion of the operating hours of the Fedwire Funds Service 
and National Settlement Service (NSS).
    The Board is cognizant of the fact that institutions may have 
limited financial and human capital resources available for competing 
payments-related priorities. The FedNow Service is expected to go 
online in 2023.\11\ The Board believes that shifting the implementation 
date for the migration of the Fedwire Funds Service to the ISO 20022 
format to March 10, 2025, rather than targeting November 2023 as 
proposed, should mitigate commenters' concerns regarding resource 
constraints in light of the launch of the FedNow Service.
---------------------------------------------------------------------------

    \11\ See FRBServices.org, Federal Reserve Updates FedNow \SM\ 
Service Launch to 2023 (Feb. 2, 2021), https://www.frbservices.org/financial-services/fednow/blog/updated-fednow-service-launch-to-2023.html.
---------------------------------------------------------------------------

    In the 2021 Notice, the Board indicated that it planned to issue a 
Federal Register notice in 2022 to seek input on a proposal to expand 
Fedwire Funds Service and NSS operating hours up to 24x7x365. The Board 
believes that the goal of providing large-value payments 24x7x365 
aligns with the Federal Reserve's commitment to position the nation's 
payment and settlement infrastructure for the future.\12\ While the 
Federal Reserve intends to continue exploring the potential expansion 
of the Fedwire Funds Service and NSS operating hours, the Reserve Banks 
plan to dedicate more resources in the near term to ensuring the 
successful implementation of ISO 20022. The Reserve Banks plan to 
engage further with Fedwire Funds Service and NSS users throughout 2022 
to inform considerations related to the Reserve Banks' longer-run 
provision of large-value payments, including the potential expansion of 
Fedwire Funds Service and NSS operating hours. The Board believes that 
a Federal Register notice regarding the potential expansion of 
operating hours should be informed by insights that will be gained 
through the Reserve Banks' discussions with users. Therefore, the Board 
plans to issue a Federal Register notice regarding the potential 
expansion of Fedwire Funds Service and NSS operating hours after the 
Reserve Banks complete their outreach sessions.
---------------------------------------------------------------------------

    \12\ 86 FR 55600, 55606 (Oct. 6, 2021).
---------------------------------------------------------------------------

E. Proposed Testing Strategy, Requirements, and Timeline

    The majority of commenters that took a position on testing were 
supportive of, or neutral about, the proposed testing strategy and 
requirements. Several commenters encouraged the Board to share, as 
early as possible, testing plans and test scripts for the three 
proposed testing environments. One commenter noted that the proposed 
Saturday production testing plan did not offer enough Saturdays for 
users to conduct production testing. Another commenter suggested that 
the Reserve Banks provide test accounts for users during testing. This 
commenter also suggested the Board establish a technology roadmap that 
would lay out a series of key dates and milestones for the system 
requirements and testing procedures. In addition, two commenters stated 
that the Board and TCH should coordinate on industry testing for the 
Fedwire Funds Service and CHIPS. One commenter requested the Board 
provide additional details regarding (i) validation capabilities of the 
MyStandards Readiness Portal; (ii) whether the new DIT environment 
requires Fedwire Funds Service users to internally operate two parallel 
test environments; (iii) who will coordinate testing between users; 
(iv) whether there will be specific periods to test functionality 
between users; and (v) what the specific test scripts will entail.
    Commenters expressed a variety of opinions about the amount of time 
needed for testing in the MyStandards Readiness Portal and the DIT 
environment. For testing in the MyStandards Readiness Portal, preferred 
timeframes ranged from one week to nine months. For testing in the DIT 
environment, many commenters expressed comfort with the 9- to 12-month 
timeframe proposed in the 2021 Notice, while others felt that the 
proposed range was too short. Of those, several requested no less than 
12 months of DIT environment testing time, while others requested an 
additional 12 months of testing time on top of the 9- to 12-month range 
proposed in the 2021 Notice.
    One commenter requested that the Board ensure all Fedwire Funds 
Service users be granted adequate access to all of the testing 
environments. The commenter also suggested that certain third parties 
should be subject to the certification process at all stages, and 
information about their progress should be made publicly available.
    The Board has considered all comments related to the proposed 
testing strategy, requirements, and timeline. As discussed further in 
section IV.B, infra, the Board is announcing a revised testing strategy 
in response to commenter feedback. In particular, the revised testing 
strategy includes 12 months of DIT testing time for users to prepare 
for the migration of the Fedwire Funds Service to the ISO 20022 message 
format.

F. Proposed Backout Strategy and Fix-in-Place Strategy

    Most commenters that addressed the proposed backout and fix-in-
place strategies described in the 2021 Notice were neutral about, or 
supportive of, the proposed strategies. Two commenters expressed 
concern that the backout timeframe was too short, providing only two 
days of notice for users to revert back to the legacy format. One 
commenter noted that some users typically require one week or more to 
complete change control processes. Another commenter recommended the 
Board commence the backout period one week earlier than was proposed in 
the 2021 Notice, thereby providing users with up to nine days to revert 
back to the legacy format prior to the implementation date. This would 
provide users that have prepared large numbers of ISO 20022-formatted 
payments in advance with adequate time to convert those payments back 
to the legacy format. A different commenter suggested the Board 
consider a continuity strategy that includes criteria for users to 
request an extension in the event that they are not prepared to 
implement ISO 20022 on a designated date. Finally, one commenter 
suggested the Board consider conducting a mock activation test before 
the implementation date to perform a final assessment of industry 
readiness and simulate the steps needed to perform a backout.
    The Board has considered all comments related to the proposed 
backout strategy and fix-in-place strategy. As discussed further in 
section IV.D, infra, the Board is announcing a revised backout strategy 
that will provide Fedwire Funds Service users

[[Page 64221]]

with at least two weeks' advance notice if the implementation of ISO 
20022 must be delayed.

G. Other Issues Raised by Commenters

    The Board received many comments that, while relevant to the ISO 
20022 implementation strategy for the Fedwire Funds Service, did not 
directly respond to one of the questions in the 2021 Notice.\13\ For 
example, two commenters addressed the possibility that some financial 
institutions would not be prepared to meet a November 2023 
implementation timeframe and suggested the Board and the Reserve Banks 
develop a service to translate legacy Fedwire Funds Service messages to 
the ISO 20022 format while supporting normal transaction volumes for 
all users. However, one of the two commenters noted that the benefits 
of such a service should be weighed against any potential 
implementation delay caused by its development. The Reserve Banks 
considered developing such a translation service but concluded that 
doing so would further delay the ISO 20022 implementation process.
---------------------------------------------------------------------------

    \13\ In addition, the Board received a number of comments that 
were not relevant to the proposed ISO 20022 implementation strategy 
for the Fedwire Funds Service. The Board is not responding to these 
comments in this notice.
---------------------------------------------------------------------------

    Another commenter suggested the Board develop policies and 
procedures regarding the storage and retrieval of data under the old 
and new formats. The Reserve Banks have already announced policies 
regarding retrievals, which differ depending on how users access the 
Fedwire Funds Service.\14\
---------------------------------------------------------------------------

    \14\ See FRBServices.org, Fedwire Funds Service ISO 20022 
Implementation Frequently Asked Questions (rev. as of October 2021), 
https://www.frbservices.org/resources/financial-services/wires/faq/iso-20022-implementation.html (``How will retrievals be supported 
when the new format is implemented?'').
---------------------------------------------------------------------------

    Many commenters supported future educational efforts and industry 
outreach related to ISO 20022 by the Board and the Reserve Banks, 
including a comprehensive education and training campaign through 
webinars, online training, and in-person workshops. In addition, many 
commenters expressed support for transparent and continuous 
communication to, and coordination with, the industry by the Board and 
the Reserve Banks at various stages of the ISO 20022 implementation 
process. One commenter suggested the Reserve Banks provide real-time 
updates to the industry during the go-live weekend so the industry 
could prepare to activate the back-out strategy if needed. Another 
commenter suggested the Reserve Banks provide Fedwire Funds Service 
users with status updates on the progress their peers are making toward 
implementing the ISO 20022 message format so that all users can gauge 
whether the Reserve Banks are on track to meet the implementation date. 
One commenter suggested the Reserve Banks establish and publicly 
disseminate a certification process for each essential stage of the ISO 
20022 implementation. The commenter asserted that this certification 
process would allow users to benchmark their progress against that of 
their peers, while providing the Board and the Reserve Banks with an 
early warning system in the event that users fall behind the 
certification schedule. Finally, to fully evaluate the best approach 
for the industry, a commenter recommended the Reserve Banks engage in 
continuous dialogue and coordination throughout the ISO 20022 
implementation process with TCH, as well as common users of both the 
Fedwire Funds Service and CHIPS, and key third-party service providers 
(e.g., cloud computing companies and platform software vendors).
    The Board agrees with commenters that effective communication and 
industry outreach are essential to ensuring a smooth transition to the 
ISO 20022 message format for the Fedwire Funds Service. As discussed 
further in section IV.E, infra, the Reserve Banks are developing a 
communication and education strategy that is intended to promote 
industry readiness. In addition, as discussed further in section IV.C, 
infra, the Reserve Banks will develop an Industry Readiness Dashboard 
to provide transparency regarding industry readiness for the ISO 20022 
migration.
    Although the Board did not request feedback on this topic, several 
commenters provided feedback regarding the format and content of 
specific message data elements, character sets, and other ISO 20022 
format specifications discussed in the 2018 Notice and the 2021 Notice. 
The Board notes that the Reserve Banks will soon publish the ISO 20022 
message format specifications for the Fedwire Funds Service on the 
MyStandards application; the specifications will be made publicly 
available and they will align with industry guidelines for high-value 
payment systems.

IV. Implementation of the ISO 20022 Standard for the Fedwire Funds 
Service

    The Board has considered all feedback received in connection with 
the 2021 Notice and is announcing that the Reserve Banks will implement 
the ISO 20022 message format for the Fedwire Funds Service on a single 
day, as proposed. The Board notes that the proposed single-day 
implementation strategy was supported by the vast majority of public 
commenters. The Board continues to believe that a single-day 
implementation strategy is preferable to a three-phased implementation 
approach because it is both simpler and more efficient for Fedwire 
Funds Service users and the Reserve Banks to meet a single 
implementation deadline rather than three unique deadlines. 
Specifically, by removing the first two phases of the three-phased 
implementation approach proposed in the 2018 Notice, the single-day 
implementation approach enables users to focus their attention and 
resources on a single development and testing target. Eliminating the 
first two phases of the implementation strategy is also likely to 
reduce Fedwire Funds Service users' overall costs related to software 
development, testing, and training.
    Further, the Board believes the single-day implementation strategy 
will be more expedient than the proposed three-phased implementation 
strategy. Many domestic and international large-value payment and 
messaging systems have announced plans to migrate to the ISO 20022 
format in 2022 and 2023, and the Board believes that a single-day 
implementation strategy will more closely align the implementation of 
the ISO 20022 format for the Fedwire Funds Service with that of other 
payment and messaging systems.\15\
---------------------------------------------------------------------------

    \15\ As noted previously, SWIFT will transition to the ISO 20022 
message format in November 2022. TCH has announced that CHIPS will 
transition to the ISO 20022 message format in November 2023.
---------------------------------------------------------------------------

    The remainder of this section provides additional information 
regarding the Reserve Banks' strategy for implementing ISO 20022 for 
the Fedwire Funds Service.

A. Implementation Date

    The Board is announcing that the Fedwire Funds Service will migrate 
to the ISO 20022 message format on March 10, 2025. The Board determined 
that it is appropriate to shift the implementation of ISO 20022 for the 
Fedwire Funds Service beyond the proposed targeted November 2023 
implementation date based on commenters' requests for additional time 
for testing ISO 20022 messages, as well as their concerns that 
competing payment systems-related technology initiatives would 
constrain resources needed for ISO 20022 implementation. In addition, 
the Board selected the date to avoid implementing the ISO 20022 message 
format close to a U.S. banking holiday, during the winter holiday 
season (which also generally coincides

[[Page 64222]]

with many firms' annual freeze periods for significant technology 
changes), or at the end of a month or quarter. The date also provides a 
gap between the launch of the FedNow Service and the ISO 20022 
implementation for the Fedwire Funds Service.

B. Revised Testing Strategy

    The Board is announcing that the Reserve Banks will adopt the 
proposed testing strategy in the 2021 Notice, with several 
modifications in response to commenter feedback. Given the magnitude of 
the changes required to support the ISO 20022 messaging standard, the 
Reserve Banks will require certain users to complete robust 
testing.\16\ By the end of 2022, the Reserve Banks will notify all 
users that will be required to complete testing. The required testing 
will take places across multiple testing environments, described in 
more detail below. The Reserve Banks will provide detailed test scripts 
and attestation forms for each test environment in advance of making 
each environment available for testing.
---------------------------------------------------------------------------

    \16\ The Reserve Banks will require the following types of users 
to complete a test script in each of the three test environments: 
(i) all users that have their own FedLine Direct[supreg] connection 
to the Fedwire Funds Service, which includes service providers that 
host the connection for other users, bankers' banks, and corporate 
credit unions; and (ii) users that import 100 or more transactions 
per day using the FedPayments Manager--Funds application via the 
FedLine Advantage[supreg] solution. Based on additional analysis by 
the Reserve Banks, this list of users who will be required to test 
has been modified slightly from the proposed testing strategy 
described in the 2021 Notice.
---------------------------------------------------------------------------

i. Advance Testing Through the MyStandards Readiness Portal
    The MyStandards Readiness Portal will be a dedicated testing 
environment that will allow users to validate their ISO 20022 messages 
against the Fedwire Funds Service ISO 20022 specifications before 
beginning testing in the new DIT environment described below. 
Specifically, users will be able to submit their ISO 20022 messages to 
the MyStandards Readiness Portal to ensure that their messages are 
structured properly and pass various format requirements for each 
message (e.g., mandatory versus optional data elements, minimum or 
maximum field lengths, allowable characters or codes). This advance 
testing will greatly reduce the risk of Fedwire Funds Service users 
encountering message format errors during the next phases of testing. 
Certain users will be required to attest to successful completion of a 
test script in the MyStandards Readiness Portal before conducting 
testing in the new DIT environment.
    Users will need a valid swift.com login ID and password to access 
the MyStandards Readiness Portal. The Reserve Banks will make the 
MyStandards Readiness Portal available to users by the end of 2022; the 
MyStandards Readiness Portal will remain available throughout the ISO 
20022 implementation process.
ii. New Depository Institution Testing Environment (DIT2)
    The Reserve Banks will introduce a new testing environment that 
will allow users to perform dedicated testing with the new ISO 20022 
version of the Fedwire Funds Service application software.\17\ In early 
2023, the Reserve Banks will notify users about the process for 
establishing access to DIT2. The Reserve Banks will make the DIT2 
environment available to users at least 12 months prior to the 
implementation date, rather than 9 months as proposed. The Reserve 
Banks will also provide opportunities for users to test with each other 
in DIT2. Certain users will be required to attest to successful 
completion of a test script in DIT2 before conducting testing in the 
production environment.
---------------------------------------------------------------------------

    \17\ The existing user testing environment (DIT1) will remain 
available and include the version of the Fedwire Funds Service 
application software that will become effective November 21, 2022. 
DIT1 will be available for users to perform application 
functionality testing with the current format to support internal 
changes necessary before ISO 20022 implementation. It will also 
enable service providers to onboard new users prior to ISO 20022 
implementation.
---------------------------------------------------------------------------

iii. Production Environment
    The Reserve Banks will deploy the ISO 20022 version of the Fedwire 
Funds Service software to the production environment on select 
Saturdays prior to the implementation date to allow users to test their 
ISO 20022 changes with the Fedwire Funds Service production software. 
Certain users will be required to attest to successful completion of a 
test script in the production environment prior to the implementation. 
The Reserve Banks will announce the dates for the Saturday production 
testing at least one year prior to the implementation date.

C. Industry Readiness Dashboard

    Once testing begins, the Reserve Banks will publish a dashboard on 
the ISO 20022 web page on the FRBservices.org website to provide 
transparency into industry readiness throughout the project lifecycle. 
The dashboard will also provide early insights into issues that could 
potentially impact the implementation timeline. While the Reserve Banks 
will monitor individual user readiness, the dashboard will highlight 
industry readiness by user categories (e.g., national accounts, service 
providers, bankers' banks/corporate credit unions) across key testing 
milestones.

D. Revised Backout Strategy and Fix-in-Place Strategy

i. Revised Backout Strategy and ``Go/No Go'' Decision
    The Board is announcing that the Reserve Banks will follow a 
modified version of the proposed backout strategy, which has been 
revised in response to commenter feedback. Under the revised backout 
strategy, the Reserve Banks will complete all internal and user testing 
activities at least two weeks prior to the ISO 20022 implementation 
date and make a ``go/no go'' decision based on internal and industry 
readiness. The Reserve Banks will notify all users about the ``go/no 
go'' decision no later than two weeks prior to the implementation date. 
If a ``go'' decision is made, the Reserve Banks will be subject to a 
two-week freeze period during which no further changes would be made to 
the ISO 20022 software and production infrastructure. If the Reserve 
Banks decide to delay the implementation date for any reason, the 
notification would provide users two weeks' advance notice to adjust 
their plans.
ii. Fix-in-Place Strategy
    The Reserve Banks will follow the fix-in-place strategy described 
in the 2021 Notice substantially as proposed. On the Saturday before 
the implementation date (assuming that a ``go'' decision was made, and 
following the two-week freeze period), the Reserve Banks will deploy 
the ISO 20022 software to the production environment. The Reserve Banks 
will follow a fix-in-place strategy if any issues arise during or after 
the deployment. If issues do arise, the Reserve Banks will implement a 
software update to address the issue as soon as the fix has been 
identified and fully tested. This strategy is consistent with prior 
customer-facing initiatives and received broad support from commenters.

E. Communication and Education Strategy

    The Reserve Banks are planning to share information pertaining to 
the implementation of the ISO 20022 message format for the Fedwire 
Funds Services through the following channels:
     The ISO 20022 web page on the FRBservices.org website, 
which will

[[Page 64223]]

provide up-to-date information on all aspects of the ISO 20022 
migration, including frequently asked questions, a list of software 
vendors that the Reserve Banks are working with to ensure readiness for 
the ISO 20022 implementation, and the industry readiness dashboard to 
track industry progress against key milestones;
     SWIFT's MyStandards application, which will include 
technical documentation related to the ISO 20022 messages that will be 
implemented for the Fedwire Funds Service;
     Fed360 articles and targeted user communications, which 
will announce the final ISO 20022 implementation timeline and testing 
requirements, highlight key milestones pre- and post-implementation, 
invite users to education events, and remind users about testing 
requirements and deadlines; and,
     Webinars, which will educate users on all aspects of the 
ISO 20022 migration. The first series of webinars will begin in the 
fourth quarter of 2022. The Reserve Banks will announce the dates for 
the webinars at least one month ahead of each webinar. The Reserve 
Banks will record the webinars and make them available to users.

    By order of the Board of Governors of the Federal Reserve 
System.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
[FR Doc. 2022-23002 Filed 10-21-22; 8:45 am]
BILLING CODE P