Trade Digitization and. CAT 7 Enhancements. Richa Mukherjee Director, Trade and Treasury SWIFT

Transcription

1 Trade Digitization and CAT 7 Enhancements Richa Mukherjee Director, Trade and Treasury SWIFT

2 Digitising Trade Finance & MT Category 7xx Enhancements Trade Finance using MT 798 BAFT India Workshop, Chennai August 1st, 2016

3 Agenda 1. Introduction 2. Digitizing trade finance using MT Digitizing trade finance using BPO- ISO MT Category 7xx Enhancements 4. Q & A supplychain@swift.com 3

4 SWIFT scrl is the global provider of secure financial messaging services 2

5 40 years serving the global financial community 1980: First Asian countries connect to SWIFT 1986: SWIFT launches value-added services 1987: SWIFT launches securities services 2001: SWIFTNet goes live 2004: ISO introduction 2008: SWIFT launches Alliance Lite 2009: SWIFT launches Innotribe 23 years serving India s financial community 70s Now serving India s domestic financial markets s s s s 1973: Swift is born 1976: First operating centre opens 1977: SWIFT goes live first message sent 1979: North America connects to SWIFT 2012: SWIFT India joint venture established 2015: SWIFT India approved to provide domestic messaging services, and platform is live 1992: Interbank File Transfer goes live 1994: Customer support centre opens in Hong Kong 1997: SWIFT technology centre opens in the United States 3

6 SWIFT scrl is overseen by the central banks of G10 countries and central banks of an Extended Oversight Group including the Reserve Bank of India G10 Canada Belgium ECB France Germany Italy Japan The Netherlands United Kingdom United States Switzerland Sweden Extended oversight Australia China Hong Kong India Korea Russia Saudi Arabia Singapore South Africa Turkey 4

7 SWIFT scrl in figures million FIN messages peak day (2013) 5+billion FIN messages per year (2013) 10.4% Increase in FIN traffic (2013) 10,500+ SWIFT users 200+ Countries and territories 5

8 Customers can re-use their existing SWIFT gateways to communicate with foreign and domestic counterparties p Provides cross-border messaging services, interfaces, implementation services and support Provides domestic messaging services 8

9 SWIFT India provides financial services to India s domestic markets A joint venture by the community, for the community Comprehensiv e, best in class messaging services Foundation for communicatio n with all financial markets Axis Bank Bank of Baroda Bank of India Canara Bank HDFC Bank ICICI Bank Punjab National Bank SWIFT scrl State Bank of India Union Bank of India (in alphabetical order) Governed by the Indian financial community At a fair and competitive price in rupees Meeting RBI objectives for (i) competition; (ii) reduced concentration risks; and (iii) international best practices. 9

10 SWIFT India values Excellence Community Innovation 10

11 SWIFT India is approved by the Reserve Bank of India to provide domestic financial messaging services across all financial markets Live services Next Gen RTGS (Pilot in progress) NACH (Pilot in progress) Interbank Trade Finance Interbank Treasury Corporate-to-Bank (Payments, Cash Management, Trade Finance and Treasury) Planned services NEFT, IMPS, ABPS, MMID CCIL FX matching, confirmations and reporting Stock Exchanges CSDs Post trade securities settlement 11

12 MT 798 Facilitating multi-banking solutions in documentary trade finance 12

13 Regulators and industry associations are promoting Trade Digitisation too INSTRUMENT SWIFT INDUSTRY STANDARD SWIFT MESSAGING SERVICE INDUSTRY LEGAL RULES AND MARKET PRACTICE Letter of Credit (LC) MT 7xx MT 798 FIN UCP 600 / eucp Bank Payment Obligation (BPO) ISO tsmt Trade Services Utility URBPO 750 Demand Guarantee MT 7xx MT 798 FIN URDG 758 Single European Payments Area Credit Transfer / Direct Debit (SEPA) ISO pain pacs camt FileAct Cross-border Payment MT 103 MT 9xx 13 FIN SWIFT FIN service description

14 Challenges and drivers 14

15 Corporate challenges with traditional trade instruments (1/2) Export documentary credit Difficult to manage advices of export L/Cs and amendments received from multiple banks in paper form and via different banks portals Internally, difficult to collaborate between treasury and various business units on L/C allocation and preparation of documents Lack of visibility of each step in the transaction process Too many discrepancies, slowing down document compliance checking Delayed receipt of payment Import documentary credit Treasury lacks visibility to the allocation of credit facilities to business units for import L/C issuance Lack of standardised approval process for import L/C issuance Delays in import L/C issuance No electronic global data base of import L/Cs for real time reporting of outstanding L/Cs. Ideally by Business Unit, Bank, Product, Counter Party Difficult to link import L/Cs with export L/Cs for back to back transactions Challenging to set up permanent and transactional alarms on key L/C dates 15

16 Corporate challenges with traditional trade instruments (2/2) Standby L/C and Demand Guarantee Management is decentralized and handled independently by each subsidiary Difficult for central treasury to monitor the terms and the availability of Standby L/C and Guarantee facilities and improve the diversification of business allocation between the banks How to offer flexibility for subsidiaries but enforce standard policies moving forward? Reconciliation of related data and settlement of fees is time consuming and prone to errors Complex documentation management will result in increased charges Transparency is not optimal and will result in differences between the banks and treasury s records With different technology solutions, more challenging to on-board subsidiaries and banks 16

17 Drivers for Corporates to adopt multi-banking trade finance solutions Digitise and automate Improve internal workflow and control Consolidate information Accelerate trade processing to be more competitive Standardise bank interface 17

18 Industry standards 18

19 Multi-banking trade finance implementations on SWIFT Rules ICC Banking Commission's rules Messages MT 798 standards ISO standards Identity Business Identifier Code for banks and corporates (BIC or ISO 9362) Channel SWIFT Corporate Environment (SCORE) Solutions Certified vendors applications In-house development 19

20 1 Industry standards for L/Cs and Guarantees MT 798 Documents MT 7XX UCP 600 URDG 758 ISP98 MT 798 Documents Buyer Seller Buyer s bank(s) Seller s bank(s) SWIFT's MT 7xx are industry owned and technology neutral standards in support of ICC's rules for L/Cs, Standby L/Cs and Demand Guarantees 20 FIN MT 7xx FIN MT 798 FileAct

21 MT 798 adoption Case studies and recent adoption news Case studies Volvo: Trade Finance Development Seaboard, GTC & Alliance Lite2: Automating processing of Export Documentary Credits Safran, Credit Agricole-CIB and GlobalTrade Corporation Alcatel-Lucent and Credit Agricole-CIB: Automating Demand Guarantees in a multibank environment using MT798 Date Feb 2016 Oct 2015 Sep 2015 Sep 2015 May 2015 Dec 2014 Recent news Kongsberg Selects GTC's Multi-bank Trade Finance Platform and SWIFT Deutsche Bank: SWIFT MT798 Global integrated solution for Trade Finance SWIFT MT798 supported by IBAS GlobalTrade Corporation (GTC) integrates SWIFT s Alliance Lite2 with its Multi-bank Trade Finance Platform Nokia selects GTC's multi-bank trade finance platform and SWIFT MT798 messages for their trade flows BillerudKorsnas selects GTC Export Document Credit System to manage it s global LC flows supplychain@swift.com 21

22 Corporates adopting the MT 798 standards 20 Corporates live or implementing 22

23 Banks adopting the MT 798 standards Including 13 of the top20 trade banks (*) (*) ranking based on Cat 7 traffic 46 Banking groups live or implementing supplychain@swift.com 23 and more

24 Issues for banks with non standardised multi-bank options Scenarios: Major issues for banks: Increased vendor and technical costs Increased operational costs Increased legal complexity and costs Increased KYC risks Corporate using a vendor platform forcing banks to adopt proprietary formats, security and rules Additional fees for banks to pay to the vendor; additional IT integration Additional vendorspecific operational processes for limited number of clients Parties need to develop vendorspecific contractual arrangements Depends on vendor-owned legal frameworks Corporate reusing its FI BIC and the MT7xx messages on the bank-to-bank FIN service Additional customer-specific operational practices for banks to develop Parties need to develop corporate-specific contractual arrangements Lack of visibility on corporate identity, resulting 24 Corporate using a vendor BIC and the MT798 standards on the bank-to-bank FIN service Parties need to develop vendorspecific contractual arrangements Lack of full visibility to endcorporate identity, Corporate using MT 798 standards with its own BIC in SCORE No fee for banks to re-use SWIFT and SCORE for trade finance Single trade-specific process for all multi-bank corporates Standardised SCORE agreement for cash and trade Standardised SWIFT registration for corporates

25 Issues for corporates with non standardised multi-bank options Scenarios: Major issues for corporates: Corporate using a vendor platform forcing banks to adopt proprietary formats, security and rules Corporate re-using its FI BIC and the MT7xx messages on the bank-tobankfin service Corporate using a vendor BIC and the MT798 standards on the bank-to-bank FIN service Corporate using MT 798 standards with its own BIC in SCORE Increased vendor and technical costs Need for multiple solutions when any of the banks required do not support the vendor platform Proprietary development: so packaged solutions and costs cannot be shared Re-use SWIFT connectivity in use for treasury and cash management Not following industry standards and best practices Dependency on single vendor solution: less competition and technical lock-in Not able to benefit from full MT798 functionality Corporate does not benefit from SWIFT's FIN Responsibility and Liability (R&L) Single process with all banking partners Increased legal complexity and costs Parties need to develop vendorspecific contractual arrangements Parties need to develop corporate-specific contractual arrangements Corporate cannot benefit from standardised legal documentation Standardised SCORE agreement for cash and trade Increased KYC Depends on vendor-owned Lack of visibility on corporate identity, 25 Lack of full visibility to Standardised SWIFT

26 Scope of MT 798 standards 26

27 Corporate-to- Bank Bank-to- Corporate Applicant MT 798<770> MT 798<700> MT 798<701> I S S U A N C E N O T I F I C A T I O N A P P L I C A T I O N MT 798<771> MT 798<700> MT 798<701> Bank MT 798<772> MT 798<707> A M E N D M E N T R E Q U E S T Import Documentary Credits A M E N D M E N T N O T I F I C A T I O N MT 798<773> MT 798<707> A M E N D M E N T A C C E P T A N C E N O T I F I C A T I O N MT 798<736> MT 798<749> D I S C R E P A N C Y A D V I C E MT 798<748> MT 798<750> D I S C R E P A N C Y A D V I C E R E S P O N S E C O M P L I A N C E A D V I C E N O T I F I C A T I O N MT 798<753> MT 798<754> D I S C H A R G E A D V I C E N O T I F I C A T I O N MT 798<731> MT 798<732> R E F U S A L A D V I C E N O T I F I C A T I O N MT 798<733> MT 798<734> P A Y M E N T A D V I C E N O T I F I C A T I O N MT 798<755> MT 798<756> I M P O R T P A Y M E N T S E T T L E M E N T A D V I C E MT 798<757> 27

28 Bank MT 798<774> MT 798<700> MT 798<701> Corporate-to- Bank Bank-to- Corporate C R E D I T A D V I C E Beneficiary MT 798<776> MT 798<707> A M E N D M E N T A D V I C E A M E N D M E N T A C C E P T / R E F U S A L A D V I C E MT 798<735> MT 798<780> MT 798<710> MT 798<711> T H I R D B A N K A D V I C E Export Documentar y Credits MT 798<737> MT 798<751> MT 798<752> MT 798<753> MT 798<754> P R E S E N T A T I O N R E S P O N S E A U T H O R I S A T I ON A D V I C E N O T I F I CA T I O N C O M P L I A N C E A D V I C E N O T I F I C A T I O N MT 798<731> MT 798<732> D I S C H A R G E A D V I C E N O T I F I C A T I O N MT 798<733> MT 798<734> R E F U S A L A D V I C E N O T I F I C A T I O N MT 798<755> MT 798<756> P A Y M E N T A D V I C E N O T I F I C A T I O N MT 798<782> MT 798<720> MT 798<721> MT 798<758> T R A N S F E R R E Q U E S T E X P O R T P A Y M E N T T R A N S F E R A D V I C E MT 798<722> S E T T L E M E N T A D V I C E 28

29 Corporate-to- Bank Bank-to- Corporate Applicant MT 798<761 or 784 > MT 798<760> A P P L I C A T I O N Bank Guarantees / Standby Letters of Credit MT 798<763 or 786 > MT 798<767> A M E N D M E N T N O T I F I C A T I O N MT 798<778> N O T I F I C A T I O N E X T E N D / P A Y Q U E R Y A M E N D M E N T R E Q U E S T E X T E N D / P A Y R E S P O N S E MT 798<762 or 785 > MT 798<760> MT 798<764 or 787 > MT 798<767> MT 798<777> C L A I M N O T I F I C A T I O N MT 798<779> C L A I M / C H A R G E S S E T T L E M E N T MT 798<781> MT 798<783> R E D U C T I O N / R E L E A S E R E Q U E S T R E D U C T I O N / R E L E A S E A D V I C E MT 798<766 > MT 798<769> 29

30 Bank MT 798<745 or 746 > MT 798<760> MT 798<743 or 744 > MT 798<767> Corporate-to- Bank Bank-to- Corporate A D V I C E A M E N D M E N T A D V I C E Beneficiary P A Y M E N T C L A I M MT 798<712> Guarantees / Standby Letters of Credit MT 798<714> C L A I M A C K N O W L E D G E M E N T 30

31 Applicant Corporate-to- Bank Bank-to- Corporate C H A R G E S S E T T L E M E N T N O T I CE MT 798<793> MT 798<790> Bank C H A R G E S S E T T L E M E N T R E Q U E S T MT 798<794> MT 798<791> MT 798<788> MT 798<799> F R E E F O R M AT Common Group F R E E F O R M A T MT 798<789> MT 798<799> Bank MT 798<793> MT 798<790> Corporate-to- Bank Bank-to- Corporate C H A R G E S S E T T L E M E N T N O T I CE Beneficiary MT 798<794> MT 798<791> C H A R G E S S E T T L E M E N T R E Q U E S T F R E E F O R M AT MT 798<788> MT 798<799> MT 798<789> MT 798<799> F R E E F O R M A T 31

32 Benefits and next steps 32

33 Win-win benefits for corporates and banks Benefits Consolidated Trade finance positions and increased visibility Single multi-bank & multi-business channel Dematerialization & standardization Re-use bank-to-bank FIN MT7xx data fields with Corporates Re-use of FileAct for any needed documents to be included in the information flows Overall cost reduction Improved straight-through processing end-to-end Improved overall transaction time Only one interface development to integrate to Bank back office (no need for vendor-specific interfaces, procedures, contracts, formats) Corporates and banks can make independent decisions 33 Corporat es Banks

34 Bank Payment Obligation A new payment method 34

35 URBPO ICC Uniform Rules for Bank Payment Obligations A BPO is an irrevocable undertaking given by one bank to another bank that payment will be made on a specified date after a successful electronic matching of data according to an industry-wide set of rules. Designed to complement and not to replace existing solutions Confidential to participants only 35

36 Adoption of ISO for BPO in Trade Finance 55+ Corporate relationships live on BPO 19 Banking groups live on BPO / TSU 18 / of the top20 trade banks (*) are reachable on TSU to process BPOs 68% 68% of the top50 trade banks (*) are reachable on TSU to process BPOs 25 Banking groups testing BPO on TSU 80 Banking groups reachable on TSU (*) ranking based on Cat 7 traffic supplychain@swift.com 50 Countries reachable on TSU 189 Banks (BIC8) reachable on TSU

37 ISO for BPO brings value in various industries Chemicals General Retailers Personal Goods Mining Technology Hardware & Equipment Automobiles & Parts Food Producers 37

38 19 banking groups live on ISO for the BPO Including 6 of the top15 trade banks (*) supplychain@swift.com 38 (*) ranking based on Cat 7 traffic

39 Banking groups testing BPO on TSU EMEA Banca popolare dell'emilia Romagna Banco Santander Bank al Etihad Crédit Agricole CIB Danske Bank Deutsche Bank Finansbank Garanti Bank ING la Caixa Rand Merchant Bank Samba Financial Group Standard Bank of South Africa The Royal Bank of Scotland UBS AM Bank of America Citi J.P. Morgan AP Bank Mandiri HSBC Kasikornbank Mizuho National Australia Bank Sumitomo Mitsui Banking Corp. (SMBC) Non-live banks with 1 or more established baseline(s) in test in the last 12 months supplychain@swift.com 39

40 BPO wins Payment Awards 2015 B2B Payments Innovation of the Year Read full article 40

41 ISO for BPO adoption Case studies and recent adoption news Case Studies Date Recent news BNP Paribas Fortis - BP Aromatics (2015) UniCredit (2015) TEB, TEMSA, ZF and UniCredit (2015) Commerzbank (2015) China Merchants Bank and Angel Yeast (2015) Bank of Tokyo-Mitsubishi UFJ ROI for BP Petrochemicals Itō Yōkadō, Bank of Tokyo Mitsubishi UFJ and Bank of China Bank of Tokyo-Mitsubishi UFJ (PPT) Siam Commercial Bank and PTT Polymer Marketing Isbank Nov 2015 Oct 2015 Aug 2015 Jul 2015 Jul 2015 Apr 2015 Apr 2015 Toyota s Middle East car dealer eyes more BPOs BCG Paper: Embracing Digital in Trade Finance Standard Chartered completes first end-to-end electronic transaction in the Middle East automotive sector A new Digital Era for Trade (JPMorgan) How the digitisation of trade finance is rocking the boat for banks (ANZ) 90-second update: The BPO (video) (GTR) First ever CargoDocs BPO Plus (BPO+) transaction completed successfully supplychain@swift.com 41 Mar First BPO in Italy to replace open

42 Documents Advice Data Data The Bank Payment Obligation A new payment method between L/C and open account Contract Contract Contract Buyer Seller Buyer Documents Seller Buyer Documents Seller Application Letter of Credit Documents Bank Payment Obligation Open Account LC Issuing Bank Documents Issuance LC Advising Bank BPO Obligor Bank Data BPO Recipient Bank Buyer s Bank Seller s Bank Payment Payment Payment Bank services based on paper document processing Bank services based on electronic trade data exchange Bank services limited to payment processing Array of risk, financing and processing services to address both cash management and trade finance needs 42

43 The Bank Payment Obligation (BPO) What is BPO? The Bank Payment Obligation is a new payment method based on data matching which can be used for risk mitigation and financing! What is new? For the first time an open account payment obligation can be confirmed by banks in order to get financed. The ICC supports the market launch with the release of unified rules (URBPO). What are the general criterias of a BPO? irrevocable concret & conditional A Bank Payment Obligation (BPO) is an irrevocable and independent undertaking of an Obligor Bank to pay or to incur a deferred payment obligation and pay at maturity a specified amount to a Recipient Bank in accordance with the conditions specified in an established baseline. (Extract from the ICC URBPO) 43

44 Key roles and responsibilities for BPO Buyers and Sellers Negotiate the merchandise details (description, quantities, unit price,...) Agree on the amount of the payment obligation and settlement/charges conditions Define the payment terms: on receipt of the invoice, on delivery or deferred Agree on the expiry date, the shipping terms and latest shipment date Obligor bank(s) Analyse the risk and manage internal compliance (KYC of the buyer) Price the BPO to the Buyer Propose the BPO in favour of the Recipient Bank (Seller s Bank) Settle the BPO on the due date, subject to matching conditions having been met Provide optional financing services to the Buyer, as required Recipient Bank Analyse the risk and manage internal compliance ( KYC on the Seller) Validate the Seller s data set submissions Price the BPO-based services to the Seller Advise/confirm the BPO to the Seller Provide optional financing services to the Seller, as required 44

45 tsmt Baseline Baseline Core data See next page See PaymentTerms component The baseline specifies the commercial details of an underlying transaction and the expected Data Sets

46 BPO flows for data, documents and goods Delivery of goods Use minimum fields Carriers 1 Purchase order 4 Shipment Documents sent directly to the client Buyer 8 Shipping documents and invoice Seller 6 2 Transport and invoice data Request BPO based on PO BPO Obligor Bank TSU 9 Transfer funds at maturity 46 BPO Recipient Bank 3 Inform of BPO establishment 5 7 Transport and invoice data Inform that payment is due on agreed date

47 The baseline gathers the matching conditions using data extracted from trade documents 47

48 Components for electronic matching of commercial trade data Communication standard ISO TSMT (Trade Service Management) Between Banks: TSU (Trade Services Utility) Communication Channel Between customer and banks: Bilaterally to be agreed (Portal/SWIFT Score/ Papier ) Payment risk mitigation instrument BPO (Bank Payment Obligation) 48

49 ISO tsmt messages C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B C2B Message type tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt Business message Acknowledgement Activity Report Activity Report Request Activity Report Set Up Request Amendment Acceptance Amendment Acceptance Notification Amendment Rejection Amendment Rejection Notification Baseline Amendment Request Baseline Match Report Baseline Report Baseline ReSubmission Data Set Match Report Data Set Submission Delta Report Error Report Forward Data Set Submission Report Full Push Through Report Initial Baseline Submission MisMatch Acceptance MisMatch Acceptance Notification MisMatch Rejection MisMatch Rejection Notification Action Reminder C2B C2B C2B C2B tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt tsmt Status Change Notification Status Change Request Status Change Request Acceptance Status Change Request Notification Status Change Request Rejection Status Change Request Rejection Notification Status Extension Acceptance Status Extension Notification Status Extension Rejection Status Extension Rejection Notification Status Extension Request Status Extension Request Notification Status Report Status Report Request Time Out Notification Transaction Report Transaction Report Request IntentToPayNotification ForwardIntentToPayNotification IntentToPayReport SpecialRequest SpecialNotification RoleAndBaselineAcceptance RoleAndBaselineRejection RoleAndBaselineAcceptanceNotification RoleAndBaselineRejectionNotification

50 Benefits of the BPO 50

51 Supply chain risks When dealing on open account trade terms, both buyers and sellers are faced with a series of risks and financing needs that banks are best placed to deal with Ordering Production Delivery Invoicing Good Acceptance Payment Initiation Purchase Order (PO) Certificates Transport documents Invoice issuance Invoice approval Payment Payment risk mitigation Pre-shipment finance Postshipment finance Receivables finance Payment processing Higher risk zone Payment assurance & financing services No/Low risk zone (Early) Payment services By getting involved in open account trade relationships as early as possible, banks can efficiently secure and finance those transactions 51

52 BPO benefits Payment Assurance Receivables finance BP O Increased operational efficiency Payables finance Risk mitigation 52

53 Risk mitigation Benefits for: Importer Exporter Possibility to get goods earlier Delayed and nonpayment risk mitigation Increased flexibility vs L/C when changing deal parameters Safer than open account payment Improve relationship with exporter by diversifying settlement method and add flexible options 53 Credit risk is transferred from importer to the obligor bank or confirming bank

54 Payment assurance Importer Benefits for: Exporter Offer payment assurance to my supplier and confirm the purchase order -> negotiate better payment terms Certainty to be paid on time -> improve liquidity forecasts Control payment time execution Avoid advance payments Early settlement (if at sight ) 54

55 Improved operational efficiency Importer Benefits for: Both Exporter Easy procedure to issue BPO Reduce operational burden of treating complicated L/C and trade documents Just in time orders to improve inventory management and avoid storage costs Improve visibility and traceability Smooth reconciliation of payment & A/P or A/R Electronic matching of structured data is faster than manual examination 55 Documents sent directly to importer and kept outside of the banking system Reduce the risk of discrepancies, limit to relevant trade information only Reduce discrepancy workload

56 Time savings and efficiencies thanks to BPO Present doc Send out doc Receive doc Payment (clean) Payment (discrepancy) Sight Letter of Credit Doc checking (by Advising Bank) Courier Doc checking (by Issuing Bank) Discrepancy dispute Same day 2 days 5 working days Dispute period 8 working days Extended period Bank Payment Obligation Submit data Data matching Send out doc Courier Receive doc / Payment (matched) Acceptance of mismatch Same day 2 days Acceptance period Payment (mismatch) 3 working days Collection days eliminated 56 Source: Dubai Trade

57 TSU/BPO for domestic trade flows All parties are in same country Buyer BPO Obligor Bank URBPO & ISO on TSU BPO Recipient Bank Seller When banks are from same banking group: Use 2 different BICs (BIC8 or BIC11) For the Obligor bank and the Recipient bank 57

58 ICC publications on the BPO Click image to ICC website Source: ICC Click image to ICC website Source: ICC Click image to ICC website Source: ICC For more BPO related documents, click here and scroll down to: BPO Accounting and Capital Treatment BPO Frequently Asked Questions for Banks (October 2014) BPO Frequently Asked Questions for Corporates (October 2014) BPO Brochure ICC Guidelines for the Creation of BPO Customer Agreements (August 2015) 58

59 Recent BPO routes B E DE S ITI T R KW CN K R JP UA E OM T H H K T W MY S G A U supplychain@swift.com 59

60 ISO traffic for BPO 60

61 Banks reachable on TSU to process BPO transactions CA 1 US 9 AR 2 BR 4 CL 1 PE 1 AT 2 BE 3 BG 1 CH 1 DE 7 ES 5 FR 5 GR 1 IT 6 NL 3 RO 1 SI 1 GH 1 KE 1 MA 1 NG 1 ZA 3 DK 1 FI 1 GB 11 SE 2 AE 5 JO 1 KW 1 LB 1 OM 1 QA 4 SA 1 TR 5 CN 18 HK 13 IN 4 JP 6 KR 4 LK 1 PK 2 TW 2 ID 5 MY 5 PH 2 SG 17 TH 7 VN 3 AU 4 50 Countries reachable on TSU 189 Banks (BIC8) reachable on TSU supplychain@swift.com 61

62 MT Category 7 Enhancements 62

63 Overall Project The Trade Finance Maintenance Working Group (TFMWG) launched a significant revamp of the cat 7 MTs (Letters of credit, guarantees and standbys) in 2013, taking into account change requests from previous years. The work resulted in 34 Change Requests (CRs) submitted by end of May It is a significant upgrade to the functionality and format of the 700 (L/C) series and 760 (guarantees/standbys) series of messages, including 8 new MTs The go-live dates are in November 2018 for L/C and November 2019 for guarantees/standbys. 4 CRs (party fields extension) were rejected by Board Payment Committee decision in September 2015 Advance User Hand-Book (UHB) documentation available in Q The detailed implementation time line is as follows: 63

64 Implementation Time Line Country vote result Annual Deadline for CR BPC Approved 30 CRs BPC Rejected 4 CRs Feb Mar Jun Sep Advance Documentation Feb L/C 2019 Guarantees standbys VTB T&T UHB Documentation LIVE Feb May Jul Nov VTB T&T UHB Documentation LIVE Feb May Jul Nov SRG Documentation Dec SRG Documentation Dec 64

65 65

66 MT Category 7 Update Changed messages MT 700 Issue of a Documentary Credit MT 701 Issue of a Documentary Credit MT 705 Pre-Advice of a Documentary Credit MT 707 Amendment to a Documentary Credit MT 710 Advice of a Third Bank's or a Non-Bank's Documentary Credit MT 711 Advice of a Third Bank's or a Non-Bank's Documentary Credit MT 720 Transfer of a Documentary Credit MT 721 Transfer of a Documentary Credit MT 730 Acknowledgement Documentary Credits MT 732 Advice of Discharge MT 734 Advice of Refusal MT 740 Authorisation to Reimburse MT 742 Reimbursement Claim MT 747 Amendment to an Authorisation to Reimburse MT 750 Advice of Discrepancy MT 752 Authorisation to Pay, Accept or Negotiate MT 754 Advice of Payment/Acceptance/Negotiation MT 756 Advice of Reimbursement or Payment MT 760 Issue of a Demand Guarantee/Standby Letter of Credit MT 767 Amendment to a Demand Guarantee/Standby Letter of Credit Amendment MT 768 Acknowledgement of a Guarantee/Standby Message Guarantees Standbys MT 769 Advice of Reduction or Release 66

67 MT Category 7 Update New messages Documentary Credits MT 708 Amendment to a Documentary Credit MT 744 Notice of Non-Conforming Reimbursement Claim MT 761 Issue of a Demand Guarantee/Standby Letter of Credit Guarantees Standbys MT 765 Guarantee/Standby Letter of Credit Demand MT 775 Amendment to a Demand Guarantee/Standby Letter of Credit MT 785 Guarantee/Standby Letter of Credit Non Extension Notification MT 786 Guarantee/Standby Letter of Credit Demand Refusal All Cat 7 MT 787 Guarantee/Standby Letter of Credit Amendment Response MT 759 Ancillary Trade Structured Message 67

68 MT Category 7 Working Group General L/C and Guarantees/Standbys Creation of a message MT 759 (Ancillary Trade Structured Message) similar to MT 799 using a limited number of coded and structured fields Addition of a field to refer to a document sent by another channel (e.g. FileAct) Adoption of extended Z character set for long fields (e.g. 45A, 46A, 47A, 71, 72, 73, 77) X Z 68

69 MT 759 Ancillary Trade Structured Message 69

70 Field 23H: Function 70

71 Documentary Credits Status quo in electronic communication standards Applicant Issuing Bank Advising Bank Beneficiary well structured C2B and B2C messages (SCORE MT 798) - respective Bank-to-Bank MTs build the backbone of the messages - additional fields for communication Customer-to-Bank and vice versa well structured B2B messages (MT 700, MT 710, MT 707, etc.) - however, some messages are not structured enough (e.g. Amendment) 71

72 Documentary Credits Overview of Re-design work items of MT 707 and topics - 1 Structured fields for any modification Use of codes ADD, DELETE, REPLACE ALL for the long narrative fields Specific tag for amendment charges Addition of 2 fields to indicate the Special Instructions for Payment (to be conveyed to the Beneficiary or for the Advising Bank only) Addition of the Bank that is requested to add confirmation or may add its confirmation NEW MSG: Continuation message for wording changes (MT 708) - 45B Description of Goods and/or Services - 46B Documents Required - 47B Additional Conditions NEW MSG: Advice of non-conforming claim (MT 744) Message sent by the reimbursing bank to the bank claiming reimbursement as notification that the claim, on the face of it, as not to be in accordance with the instruction in the Reimbursement Authorisation for the reason(s) as stated in this message. 72

73 Documentary Credits Overview of work items and topics - 2 Addition of additional narrative field 79Z to MT 730 and MT 752 Renamed field 42P (Deferred Payment Details to Negotiation/Deferred Payment Details) Deletion of some codes from 40A (Form of Documentary Credit) - Deleted revocable codes - In SR2019, the standby codes will be removed Change field 43P (Partial Shipment) and 43T (Transshipment) to code ALLOWED CONDITIONAL NOT ALLOWED Renamed and structured field 48 (Period for Presentation to Period for Presentation in days) 3n[/35x] - (Days)(Narrative) Changed field 49 (Confirmation Instructions) definition Changed usage rules for fields 45, 46 and 47 to support more extension, from 3 to 8 extension messages, for MT 701, MT 711 and MT

74 Use of codes ADD, DELETE, REPLACE ALL for the long narrative fields 74

75 Guarantees and Standby Letters of Credit Current standards Applicant Issuing Bank Advising Bank Beneficiary well structured Customer-to-Bank messages (SCORE MT 798) unstructured Bank-to-Bank messages (MT 760, MT 767, etc.) less structured Bank-to-Customer messages (SCORE MT 798) 75

76 Guarantees and Standby Letters of Credit Overview of work items and topics Enforcement of use of MT 760 (and MT 767) for Demand Guarantees / Standby Letters of Credit Significant re-design of MT new continuation message (MT 761) Significant re-design of MT new continuation message (MT 775) NEW MT: Guarantee/SBLC Demand (incorporating Extend or Pay) (MT 765) NEW MT: Guarantee/SBLC Non-Extension Notification (MT 785) NEW MT: Guarantee/SBLC Demand Refusal (MT 786) NEW MT: Guarantee/SBLC Amendment Response (MT 787) Addition of new field 23X (File Identification) to all messages 76

77 1 Guarantees and Standby Letters of Credit General overview revised message structure of MT760 MT MT 761 Sequence A General Information Sequence B Undertaking Details Sequence C Local Undertaking Details Wording of Undertaking or Counter-Undertaking Requested wording for Local Undertaking 3 MT 761 MT The revised MT 760 message consists primarily of structured fields and fields with coded options (e.g. amount, parties, expiry details, etc.) The message has been designed with three blocks: Sequence A: General information Sequence B: indicates the details of the undertaking or counter-undertaking Sequence C: (optional) indicates the details of the requested local undertaking The extension message MT 761 message consists primarily of a big free text block in order to specify the wording of the undertaking/counter-undertaking as well as the requested wording for the local undertaking if applicable Up to a maximum of 8 MT 761 messages could accompany the MT 760 message 77

78 MT 760 Format Specifications 78

79 Sequence B Undertaking Details 79

80 Sequence C Local Undertaking Details 80

81 Sequence C Local Undertaking Details 81

82 MT 767 Format Specifications 82

83 83

84 SWIFT & OPUS Advisory Information Paper Alexander R. Malaket, CITP, President of Canadian consultancy OPUS Advisory Services International Inc. has worked with SWIFT on this Information Paper Click on image to access online copy 84

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