83 FR 31391 - New Message Format for the Fedwire® Funds Service
FEDERAL RESERVE SYSTEM Federal Register Volume 83, Issue 129 (July 5, 2018)
Federal Register Volume 83, Issue 129 (July 5, 2018)
| Page Range | 31391-31396 | |
| FR Document | 2018-14351 |
[Federal Register Volume 83, Number 129 (Thursday, July 5, 2018)] [Notices] [Pages 31391-31396] From the Federal Register Online [www.thefederalregister.org] [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: http://www.federalreserve.gov. Follow the instructions for submitting comments at http://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 http://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 ------------------------------------------------------------------------ ------------------------------------------------------------------------- ISO 20022 Enhancements ------------------------------------------------------------------------ 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. --------------------------------------------------------------------------- \21\ For more information on MyStandards, see https://www.swift.com/our-solutions/compliance-and-shared-services/mystandards. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \22\ For more information on the DIT environment, see https://www.frbservices.org/financial-services/wires/testing/di-testing.html. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \24\ See The Federal Reserve in the Payments System (issued 1984; revised 1990), Federal Reserve Regulatory Service 9-1558, http://www.federalreserve.gov/paymentsystems/pfs_frpaysys.htm. --------------------------------------------------------------------------- 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
![Federal Register / Vol. 83, No. 129 / Thursday, July 5, 2018 / Notices 31391
Board of Governors of the Federal Reserve reasons or to remove personal Although the Fedwire Funds Service
System, June 29, 2018. information at the commenter’s request. message format is proprietary, it can be
Yao-Chin Chao, Accordingly, comments will not be mapped to—and is interoperable with—
Assistant Secretary of the Board. edited to remove any identifying or the CHIPS message format and the
[FR Doc. 2018–14431 Filed 7–3–18; 8:45 am] contact information. Public comments message type (MT) format of the
BILLING CODE P may also be viewed electronically or in SWIFT® messaging network.3 As a
paper in Room 3515, 1801 K Street NW result, multi-step domestic and
(between 18th and 19th Streets NW), international funds transfers can involve
FEDERAL RESERVE SYSTEM between 9:00 a.m. and 5:00 p.m. on payment orders sent over the Fedwire
weekdays. Funds Service, CHIPS, and the SWIFT
[Docket Number OP–1613]
FOR FURTHER INFORMATION CONTACT: Financial Message Service network.
New Message Format for the Fedwire® Evan Winerman, Counsel (202–872– B. ISO 20022
Funds Service 7578), Legal Division; or Melissa Leistra,
AGENCY: Board of Governors of the Manager (202–530–6285), Renuka The International Organization for
Federal Reserve System. Lakshmanan, Senior Financial Services Standardization (ISO) is an
Analyst (202–475–6633), Division of independent, non-governmental
ACTION: Notice of proposed service
Reserve Bank Operations and Payment organization comprised of 161 national
enhancement; request for comment.
Systems. For users of standards bodies. ISO ‘‘brings together
SUMMARY: The Board of Governors of the Telecommunications Device for the Deaf experts to share knowledge and develop
Federal Reserve System (Board) is (TDD) only, contact (202–263–4869). voluntary, consensus-based, market
requesting comment on a proposal to SUPPLEMENTARY INFORMATION: relevant International Standards that
adopt the ISO® 20022 message format support innovation and provide
for the Fedwire® Funds Service. ISO I. Background solutions to global challenges.’’ 4 ISO
20022 is an international standard that The Fedwire Funds Service is a real- publishes standards for a broad range of
would replace the Fedwire Funds time gross settlement system owned and industries.
Service’s current, proprietary message operated by the Federal Reserve Banks The ISO 20022 standard includes a
format. The migration to ISO 20022 (Reserve Banks) that enables suite of messages for the financial
would take place in three phases participants to make final payments industry, including messages for
beginning in 2020 and ending in 2023. using their balances held at Reserve payments, securities, trade services,
DATES: Comment due date: September 4, Banks or intraday credit provided by the cards, and foreign exchange. ISO 20022
2018. Reserve Banks. The Fedwire Funds messages use extensible markup
ADDRESSES: You may submit comments, Service and the CHIPS® funds-transfer language (XML) syntax and have a
identified by Docket No. OP–1613, by system, which is owned and operated common data dictionary that can
any of the following methods: by The Clearing House Payments support end-to-end payment message
• Agency Website: http:// Company, L.L.C. (TCH), are the main flow, including payment initiation (i.e.,
www.federalreserve.gov. Follow the large-value payment systems in the customer to bank messages), interbank
instructions for submitting comments at United States.1 settlement (i.e., bank to bank messages),
http://www.federalreserve.gov/ A. Current Fedwire Funds Service and cash management (i.e., bank to
generalinfo/foia/ProposedRegs.cfm. Message Format customer messages).
• Email: regs.comments@
federalreserve.gov. Include the docket The Fedwire Funds Service uses a ISO 20022 messages include
number in the subject line of the proprietary message format that structured data elements that provide
message. supports multiple types of for potentially richer payment message
• Fax: (202) 452–3819 or (202) 452– communications. Specifically, Fedwire data than the current Fedwire Funds
3102. Funds Service participants can send Service message format. For example,
• Mail: Address to Ann E. Misback, ‘‘value’’ messages that order the ISO 20022 messages contain fields for
Secretary, Board of Governors of the movement of funds and ‘‘nonvalue’’ three intermediary financial institutions
Federal Reserve System, 20th Street and messages that do not result in the while the current Fedwire Funds
Constitution Avenue NW, Washington, movement of funds but rather message format contains a field for only
DC 20551. communicate information or requests to one intermediary financial institution.
All public comments will be made other participants.2 The Fedwire Funds Similarly, ISO 20022 messages can
available on the Board’s website at Service also includes messages that include more structured and detailed
http://www.federalreserve.gov/ enable Fedwire participants to request information than the current Fedwire
generalinfo/foia/ProposedRegs.cfm as account balance information and the Funds message format (see example in
submitted, unless modified for technical processing status of payment orders. Table 1).
TABLE 1
Current Fedwire Funds Service format ISO 20022 format
Free-text lines for address information: Discrete fields for specific address information:
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1 In 2017, the Fedwire Funds Service processed the originator and beneficiary are both banks and 3 SWIFT is a member-owned cooperative
152,649,633 payments with a total value of ‘‘customer transfers’’ in which the originator and/ headquartered in Belgium that provides its users
approximately $740 trillion and CHIPS processed or beneficiary is not a bank. Nonvalue messages (including banking and securities organizations,
112,597,088 payments with a total value of include, e.g., ‘‘requests for reversal’’ in which a market infrastructures, and corporate customers) a
approximately $393 trillion. Fedwire participant requests that another Fedwire global service for financial messages, such as
2 Value messages can be used for multiple types participant send a funds transfer that would return payments and securities transactions.
of funds transfers, e.g., ‘‘bank transfers’’ in which the amount of a previously accepted payment order. 4 See https://www.iso.org/about-us.html.
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II. Payments Industry Efforts Related to common customers.10 The Reserve plans to adopt ISO 20022 (e.g., Canada,
ISO 20022 Banks’ specific proposed timeline for European Union, Hong Kong, United
adopting ISO 20022 for the Fedwire Kingdom).16
In late 2012, the Federal Reserve Bank Funds Service is discussed in greater
of New York and other key entities III. Potential Benefits of Adopting ISO
detail below.
involved in the U.S. payments industry The Reserve Banks have also engaged 20022 for the Fedwire Funds Service
formed a ‘‘Stakeholder Group’’ to assess in extensive public outreach regarding The Board believes that adopting ISO
the merits of adopting the ISO 20022 ISO 20022. For example, the Reserve 20022 for the Fedwire Funds Service
standard in the U.S.6 The Stakeholder Banks and TCH conducted a survey in could be beneficial for a number of
Group engaged an independent external 2015 of over 2,300 Fedwire Funds reasons. As described above, the ISO
consultant to evaluate the business case Service customers, Fedwire and CHIPS 20022 message format would allow
for adopting ISO 20022. The consultant advisory group banks, vendors, and Fedwire Funds Service participants to
identified certain strategic reasons to industry groups on the potential scope, include richer and more structured data
consider adopting ISO 20022 in the U.S. approach, and timing of ISO 20022 in their messages—for example,
for cross-border wire and Automated implementation.11 The Reserve Banks increased character lengths for name
Clearing House (ACH) payments and have also presented at industry data elements and discrete elements for
then, if appropriate, for domestic wire conferences, published webinars, and address information, including a
and ACH payments. For example, the established websites to educate market country code. This data could help
consultant emphasized that adopting participants about ISO 20022 and to banks and other entities meet evolving
ISO 20022 in lieu of proprietary solicit direct informal feedback on plans requirements to screen payments for
standards would improve to implement ISO 20022.12 Finally, the sanctions and anti-money laundering
interoperability between domestic and Reserve Banks have established purposes.
global payment systems.7 In accordance advisory groups that include banks, Adopting ISO 20022 messages could
with the findings of the Stakeholder software vendors, and other also improve domestic and cross-border
Group, the Federal Reserve stakeholders to provide input on how to interoperability between the Fedwire
recommended in its 2015 Strategies for implement ISO 20022 for the Fedwire Funds Service and other payment or
Improving the Payment System paper Funds Service. messaging systems. As noted above,
that the U.S. payments industry SWIFT has initiated a study to TCH has announced plans to adopt ISO
‘‘[d]evelop an implementation strategy consider the migration of cross-border 20022 messages for the CHIPS system
for the application of the ISO 20022 traffic in its proprietary MT format to and SWIFT has initiated a study to
standard to U.S. payment ISO 20022.13 The SWIFT study includes consider the migration of cross-border
transactions.’’ 8 a community consultation to help MT traffic to ISO 20022. Similarly, as
Since 2015, the Reserve Banks have determine the timing and practicalities noted above, many foreign wire transfer
worked with TCH on plans to adopt ISO of migration.14 SWIFT has indicated systems, including those for currencies
20022 for the Fedwire Funds Service that the ‘‘consultation will run until of key U.S. trading partners, have
and CHIPS. While the Reserve Banks early June, with results analysed over adopted or have announced plans to
and TCH decided independently to the following months and a final report adopt ISO 20022. Adopting ISO 20022
pursue implementation of ISO 20022, produced before the end of 2018. The as a common, global standard could
they intend to align ISO 20022 report will draw on the feedback from reduce operating costs for banks and
implementation for the Fedwire Funds the consultation to propose a detailed their customers by reducing the need to
Service and CHIPS to the extent roadmap for’’ migrating cross-border MT map payment information from one
possible.9 The Reserve Banks and TCH traffic to ISO 20022.15 message format to another. This could
have indicated that aligning ISO 20022 Similarly, many foreign wire transfer improve the efficiency of end-to-end
implementation for their respective wire systems, including those for currencies processing of multi-leg domestic and
transfer systems would create of key U.S. trading partners, have international funds transfers.
adopted ISO 20022 (e.g., China, India, Relatedly, adopting ISO 20022 as a
efficiencies that would benefit their
Japan, Switzerland) or have announced common, global standard could allow
6 The other members of the Stakeholder Group are
banks to provide useful services to their
the Federal Reserve Bank of Atlanta; TCH;
10 Id. customers. For example, ISO 20022
NACHA—The Electronic Payments Association, 11 See https://fedpaymentsimprovement.org/wp- would support a structured format for
which develops the rules that govern the content/uploads/iso20022_adoption_ including extended remittance
Automated Clearing House network; and considerations_survey.pdf.
information (ERI) in business-to-
Accredited Standards Committee X9–Financial 12 See ‘‘Fedwire Funds Service ISO 20022
Industry Standards, Inc., which has been accredited Implementation Center,’’ https:// business payment messages.17 While the
by the U.S. national standards body (the American www.frbservices.org/resources/financial-services/ current proprietary message formats for
National Standards Institute) to develop financial wires/iso-20022-implementation-center.html, which the Fedwire Funds Service and CHIPS
standards. includes information on the Reserve Banks’ support ERI, usage of ERI by depository
7 See Appendix 7 of the Federal Reserve’s proposal to implement ISO 20022 for the Fedwire
Strategies for Improving the Payment System (Jan. Funds Service. See also ‘‘The Fed’s Resource Center institutions and their customers has
26, 2015), https://fedpaymentsimprovement.org/wp- for Adoption of ISO 20022 Payment Messages,’’ been limited. Widespread adoption of
content/uploads/strategies-improving-us-payment- https://fedpaymentsimprovement.org/payments-
system.pdf, for a fuller discussion of the efficiency/iso-20022/, which includes links to 16 For further discussion of payment systems that
consultant’s findings. presentations and webinars concerning plans to have adopted ISO 20022 or have announced plans
8 Id. at 19–20. Strategies for Improving the adopt ISO 20022 for wire transfers and ACH to adopt ISO 20022, see section 7.3 of SWIFT’s ISO
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Payment System made a number of other payments. The Reserve Banks will host additional 20022 consultation paper, https://www.swift.com/
recommendations intended to improve, inter alia, webinars and in-person workshops throughout the resource/iso-20022-migration-study.
the speed, efficiency, and security of payments. first half of 2018. The Reserve Banks will also 17 Extended remittance information generally
9 See ‘‘Deep Dive into the ISO 20022 continue to work with NACHA to educate ACH refers to details in the payment message regarding
Implementation Strategy for U.S. High-Value participants about ISO 20022. the purpose of a business-to-business payment. For
13 See https://www.swift.com/news-events/news/
Payment Systems’’, Sibos Community Session (Oct. example, a business that sends a payment to a
18, 2017), slide 7 https:// iso-20022-migration_the-time-is-now. vendor could include details regarding the invoices
14 Id.
fedpaymentsimprovement.org/wp-content/uploads/ against which the vendor should apply the
101817-iso20022-deep-dive.pdf. 15 Id. payment.
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![31396 Federal Register / Vol. 83, No. 129 / Thursday, July 5, 2018 / Notices
Service via the FedLine Direct solution FEDERAL RESERVE SYSTEM DEPARTMENT OF DEFENSE
or uses the import/export feature of
FedPayments Manager-Funds over the Formations of, Acquisitions by, and GENERAL SERVICES
FedLine Advantage solution, do you Mergers of Bank Holding Companies ADMINISTRATION
develop your own software or rely on a
software vendor? The companies listed in this notice NATIONAL AERONAUTICS AND
have applied to the Board for approval, SPACE ADMINISTRATION
2. What costs would your institution
pursuant to the Bank Holding Company [OMB Control No. 9000–0062; Docket No.
incur if the Reserve Banks adopt ISO
Act of 1956 (12 U.S.C. 1841 et seq.) 2018–0003; Sequence No. 5]
20022 for the Fedwire Funds Service? If
(BHC Act), Regulation Y (12 CFR part
possible, please provide dollar estimates Submission for OMB Review; Material
225), and all other applicable statutes
or ranges. and Workmanship
and regulations to become a bank
3. Would the benefits of adopting ISO holding company and/or to acquire the AGENCY: Department of Defense (DOD),
20022 for the Fedwire Funds Service assets or the ownership of, control of, or General Services Administration (GSA),
outweigh any associated costs for your the power to vote shares of a bank or and National Aeronautics and Space
institution? bank holding company and all of the Administration (NASA).
VIII. Competitive Impact Analysis banks and nonbanking companies ACTION: Notice of request for public
owned by the bank holding company, comments regarding an extension to an
The Board conducts a competitive including the companies listed below. existing OMB clearance.
impact analysis when it considers a rule The applications listed below, as well
or policy change that may have a SUMMARY: Under the provisions of the
as other related filings required by the Paperwork Reduction Act, the
substantial effect on payment system Board, are available for immediate
participants. Specifically, the Board Regulatory Secretariat Division will be
inspection at the Federal Reserve Bank submitting to the Office of Management
determines whether there would be a indicated. The applications will also be and Budget (OMB) a request to review
direct or material adverse effect on the available for inspection at the offices of and approve an extension of a
ability of other service providers to the Board of Governors. Interested previously approved information
compete with the Federal Reserve due persons may express their views in collection requirement concerning
to differing legal powers or due to the writing on the standards enumerated in material and workmanship.
Federal Reserve’s dominant market the BHC Act (12 U.S.C. 1842(c)). If the DATES: Submit comments on or before
position deriving from such legal proposal also involves the acquisition of August 6, 2018.
differences.24 a nonbanking company, the review also ADDRESSES: Submit comments regarding
The Board does not believe that the includes whether the acquisition of the this burden estimate or any other aspect
proposal to adopt ISO 20022 for the nonbanking company complies with the of this collection of information,
Fedwire Funds Service would have an standards in section 4 of the BHC Act including suggestions for reducing this
adverse impact on other service (12 U.S.C. 1843). Unless otherwise burden to: Office of Information and
providers. As described above, the noted, nonbanking activities will be Regulatory Affairs of OMB, Attention:
current, proprietary message format for conducted throughout the United States. Desk Officer for GSA, Room 10236,
the Fedwire Funds Service is Unless otherwise noted, comments NEOB, Washington, DC 20503.
interoperable with the proprietary regarding each of these applications Additionally submit a copy to GSA by
message format for the CHIPS system. must be received at the Reserve Bank any of the following methods:
As further described above, the Reserve • Regulations.gov: http://
indicated or the offices of the Board of
Banks have worked with TCH on plans www.regulations.gov. Submit comments
Governors not later than July 26, 2018. via the Federal eRulemaking portal by
to align ISO 20022 implementation for
the Fedwire Funds Service and CHIPS A. Federal Reserve Bank of Dallas searching the OMB Control number
where possible; the Reserve Banks and (Robert L. Triplett III, Senior Vice 9000–0062. Select the link ‘‘Comment
TCH have indicated that such President) 2200 North Pearl Street, Now’’ that corresponds with
Dallas, Texas 75201–2272: ‘‘Information Collection 9000–0062,
coordination will benefit their common
1. Independent Bank Group, Inc., Material and Workmanship’’. Follow the
customers. If the Reserve Banks and
McKinney, Texas; to acquire Guaranty instructions provided on the screen.
TCH each adopt ISO 20022 for the
Bancorp, and thereby indirectly acquire Please include your name, company
Fedwire Funds Service and CHIPS, name (if any), and ‘‘Information
respectively, the message formats for the Guaranty Bank and Trust Company,
Collection 9000–0062, Material and
two systems will remain interoperable. both of Denver, Colorado.
Workmanship’’ on your attached
By order of the Board of Governors of the 2. VBT Financial Corporation, San document.
Federal Reserve System, June 28, 2018. Antonio, Texas; to become a bank • Mail: General Services
Michele Taylor Fennell, holding company by acquiring Vantage Administration, Regulatory Secretariat
Bank Texas, San Antonio, Texas. Division (MVCB), 1800 F Street NW,
Assistant Secretary of the Board.
Board of Governors of the Federal Reserve
Washington, DC 20405. ATTN: Ms.
[FR Doc. 2018–14351 Filed 7–3–18; 8:45 am]
System, June 29, 2018. Mandell/IC 9000–0062, Material and
BILLING CODE P Workmanship.
amozie on DSK3GDR082PROD with NOTICES1
Yao-Chin Chao, Instructions: Please submit comments
Assistant Secretary of the Board. only and cite Information Collection
24 See
[FR Doc. 2018–14432 Filed 7–3–18; 8:45 am] 9000–0062, Material and Workmanship,
The Federal Reserve in the Payments
System (issued 1984; revised 1990), Federal Reserve BILLING CODE P in all correspondence related to this
Regulatory Service 9–1558, http:// collection. Comments received generally
www.federalreserve.gov/paymentsystems/pfs_ will be posted without change to http://
frpaysys.htm. www.regulations.gov, including any
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Document Created: 2018-07-03 23:40:37
Document Modified: 2018-07-03 23:40:37
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | Notice of proposed service enhancement; request for comment. | |
| Dates | Comment due date: September 4, 2018. | |
| 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). | |
| FR Citation | 83 FR 31391 |
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