Banking initiatives in focus for 2013


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SOFA 2013

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Banking initiatives in focus for 2013

  1. 1. Banking Initiatives in focus for 2013SWIFT Operations Forum AmericasMarch 5, 2013
  2. 2. Agenda• Introductions• Industry initiatives – Fed Perspective – PMPG Viewpoint• SWIFT update – RMB tracker – SWIFTRef – EBAM – Trade/BPO• Q&A 1
  3. 3. Introductions• Roy DeCicco, Managing Director, Corporate and Investment Bank, Industry Issues Executive, J.P. Morgan• Richard Dzina, Senior Vice President, Wholesale Product Office, Federal Reserve Bank of New York• Sean Rodriguez, Senior Vice President, Financial Services Industry Relations, Federal Reserve System• Stacy Rosenthal, Senior Business Manager, SWIFT 2
  4. 4. Federal Reserve FinancialServices – Strategic Direction SWIFT Operations Forum – Americas 2013 March 2013
  5. 5. Federal Reserve Financial ServicesStrategic Direction• Continuity with the past – Maintain our longstanding financial services mission: to foster integrity, efficiency and accessibility of the U.S. payments system – Continue to act as a major service provider to the interbank market – Continue to collaborate with industry and emphasize innovations in electronic payments systems• Shift in emphasis for the future – Additional focus on improving the efficiency and effectiveness of payments system for end users (businesses and individuals) – Seek opportunities to speed clearing, improve transparency of payment information and enhance security of payments from end-to-end 4
  6. 6. Federal Reserve Financial ServicesNew Areas of End-to-End Focus • Maintain and enhance FRB network security Safety and • Enhance understanding of end-to-end security Security • Collaborate and promote industry best practices • Develop solutions to enhance payment speed Speed • Understand market demand for faster payments • Continue migration of paper to electronic • Develop solutions to promote efficiency Efficiency • Understand needs for and barriers to efficiency • Promote standards to improve efficiency 5
  7. 7. Federal Reserve Financial ServicesIndustry Collaboration Payments users select the most effective and Payments industry efficient payment stakeholders work method based on collaboratively to their needs. develop innovative and reliable solutions. The Federal Reserve Banks develop services that align with industry initiatives and end-to-end needs. 6
  8. 8. Federal Reserve Financial ServicesInitial Industry Response• Strong agreement that assessing and improving the effectiveness of payments should explicitly include the end user experience. Call for collaborative and inclusive approach and strong Fed leadership to help define and achieve the future vision.• Improvements in interoperability, affordability and transparency of payments will lead to improved speed and efficiency.• Interest in strategies to bridge the U.S. payments system from todays reality to tomorrows vision (e.g., electronic payment orders (EPO) and directories).• Smaller financial institutions value Fed leadership to ensure broad accessibility and benefits for participants of all sizes and capabilities.• Larger banks and organizations supportive of strategy as well, with strong interest in collaboration on emerging payments and security issues. 7
  9. 9. Banking Issues in Focus for 2013Wholesale Service PerspectivesSWIFT Operations Forum – Americas 2013March 2013
  10. 10. Fedwire Modernization Overview• Strategic decision to move • Fedwire Modernization consists toward distributed of 4 inter-related programs computing – Legacy applications developed in the 1980s Securities Funds Modernization Modernization – Lack of flexibility/long lead times (2015) (2014) for changes Ancillary Infrastructure – Difficult to provide new Projects Systems & Decommission (2013) services/functionality that integrate (2015) well with internet interfaces – Support for legacy systems and environment becoming more – Custom development led by FRBNY challenging 9
  11. 11. Prospective Fedwire Funds ServiceEnhancements and Initiatives • Evaluate opportunities to optimize the efficient use of liquidity by Fedwire Funds participants • Enhance the Fedwire Funds service as a platform for conducting cross border transactions • Consider opportunities to expand the use of net settlement capabilities • Drive adoption of recently introduced payment notification and extended remittance information features • Enhance information services to Fedwire Funds participants as complement to transaction services 10
  12. 12. Prospective Fedwire SecuritiesService Enhancements and Initiatives • Evaluate opportunities to optimize the efficient use of collateral by Fedwire Securities participants • Expanded operating hours? • Enhanced receiver controls? • DVD as supplement to DVP functionality? • Enhance capacity of issuers to market new instruments and products • Enhance account structure and sub-account structure features to provide Fedwire Securities participants greater flexibility in management of activity • Enhance information services to Fedwire Securities participants as complement to transaction services 11
  13. 13. BANKING INITIATIVES IN FOCUS FOR 2013 SWIFT Operations Forum – Americas 2013 March 2013STRICTLY PRIVATE AND CONFIDENTIAL Roy DeCicco Managing Director J.P.Morgan Global Market Infrastructures Payments Market Practice Group – Co-chair
  14. 14. This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered (including such client’s subsidiaries, the “Company”) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of J.P. Morgan. The information in this presentation is based upon any management forecasts supplied to us and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. J.P. Morgan’s opinions and estimates constitute J.P. Morgan’s judgment and should be regarded as indicative, preliminary and for illustrative purposes only. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. In addition, our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company or any other entity. J.P. Morgan makes no representations as to the actual value which may be received in connection with a transaction nor the legal, tax or accounting effects of consummating a transaction. Unless expressly contemplated hereby, the information in this presentation does not take into account the effects of a possible transaction or transactions involving an actual or potential change of control, which may have significant valuation and other effects. Notwithstanding anything herein to the contrary, the Company and each of its employees, representatives or other agents may disclose to any and all persons, without limitation of any kind, the U.S. federal and state income tax treatment and the U.S. federal and state income tax structure of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure insofar as such treatment and/or structure relates to a U.S. federal or state income tax strategy provided to the Company by J.P. Morgan. J.P. Morgans policies on data privacy can be found at J.P. Morgan’s policies prohibit employees from offering, directly or indirectly, a favorable research rating or specific price target, or offering to change a rating or price target, to a subject company as consideration or inducement for the receipt of business or for compensation. J.P. Morgan also prohibits its research analysts from being compensated for involvement in investment banking transactions except to the extent that such participation is intended to benefit investors. IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. J.P. Morgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries worldwide. Securities, syndicated loan arranging, financial advisory and other investment banking activities are performed by a combination of J.P. Morgan Securities LLC, J.P. Morgan Limited, J.P. Morgan Securities Ltd. and the appropriately licensed subsidiaries of JPMorgan Chase & Co. in EMEA and Asia-Pacific, and lending, derivatives and other commercial banking activities are performed by JPMorgan Chase Bank, N.A. J.P. Morgan deal team members may be employees of any of the foregoing entities. This presentation does not constitute a commitment by any J.P. Morgan entity to underwrite, subscribe for or place any securities or to extend or arrange creditSOFA 2013 or to provide any other services.
  15. 15. Agenda  DFA 1073  HVP ISO 20022 Variant  Non-Latin Character Sets  ERI/Payment Notification  RMB GlobalizationSOFA 2013 1
  16. 16. DFA 1073  PMPG, in partnership with TCH Association, published a white paper in October 2012 –  Market Practice Guidance paper is still being finalized – missed 8th February deadline to retain the CCT codeword in the Standards Release Guide 2013  Implications -  Reference to CCT code in field 26T deleted from updated SRG  User Hand Book will not reference the code or the MPG  26T allows for any 3 character code, with bilateral agreement  Market feedback – interest in using field 72 for this code  A baseline MPG paper will be published before the 1073 rules are effective. Actual cross-border payment issues/practices,SOFA 2013 where not addressed, will be included in updates to the paper. 2
  17. 17. HVP ISO 20022 Variant – as markets develop roadmaps for 20022 implementation  PMPG and SWIFT Standards joint sponsorship – payments ecosystem gap analysis  Focus on global interoperability – guidelines for HVP with a cross-border leg  Use the like-for-like principle – to map an ISO formatted payment message into a MT 103  Europe – T2 and EBA/EURO1 - are now debating the variant message as a practical solution for 2017  U.S. should follow this debate and the outcome – what will the format for incoming payment instructions from Europe be after Big Bang in 2017?SOFA 2013 3
  18. 18. Non-Latin Character Sets  PMPG published a white paper in June 2010 – proposed a 5 step process -  Agree on the characters and tags/fields to be used  Must be able to screen these characters  Must transport characters to next party electronically  Or - develop guidelines for translation or transliteration  Consistent definition across business domains  SWIFT DP in December 2012 did not receive support from the industry  Opportunity for the broader SWIFT community toSOFA 2013 work together on a way forward 4
  19. 19. ERI/Payment Notification  PMPG has solicited global industry interest in both a remittance data repository and a payment notification service  Enough interest to keep it on our radar screen  In 2013, the PMPG will work with the CAG and markets that have developed solutions – e.g. U.S. for payment notification – to determine what cross-border practices are feasible and should be put forward for further discussionSOFA 2013 5 1 8
  20. 20. RMB Globalization  China International Payments System (CIPS) - opportunity for the PMPG to work with local market participants – HK and potentially China - in making recommendations for efficient cross-border payment practices  Offshore CNY Cash and Trade Working Group paper includes PMPG comments and will be submitted to PBoC officials  Offer to the PBoC for the HK WG and the PMPG to provide additional input as message standards are developed for CIPSSOFA 2013 6 1 9
  21. 21. The U.S. Representatives to the Payments Market Practice Group  Roy DeCicco – JPMorgan  George Doolittle – Wells Fargo  Michael Knorr - Citibank  We welcome your input –  USNG/C&T Sub-committee  FRBNY Wholesale Customer Advisory Group  TCH CHIPS Business Committee  BAFT-IFSA Payments CommitteeSOFA 2013 7 2 0
  22. 22. SWIFT Banking Initiatives Update
  23. 23. RMB TrackerWhat is it?Monthly reporting andstatistics on renminbi(RMB) progresstowards becoming aninternational currency. 22
  24. 24. RMB TrackerJanuary• Chinese RMB payments fail to take off in the United States• In December, 95.5% of the payments value between the United States and China/Hong Kong was still performed in USD, with only 0.3% in RMB• RMB remains world currency #14 23
  25. 25. Reference dataYour needs.. Who’s the USD- Is this IBAN correspondent valid? Is this BIC of Afriland Bank still active? Is Stuttgart What do i Bank SEPA- need toWhat is the ready ? build a Bank Which IBAN and national master file? BIC correspond clearing to my suppliers’ code of Which BIC What is the local account? Bank of belongs to Taiwan ? BIC of this IBAN? Banco Real? 24
  26. 26. SWIFTRef Utility Background Today TomorrowYou maintain the data SWIFTRef Utility • Yesterday • you needed to worry about maintaining BA payments reference BA SSI data from different EPC SSI ISO sources.SWIF EPC EBA SSI EBA T sort SWIF sort SSI SSI c. T c. SSI ISO • Today, • with SWIFTRef utility, • get consolidated data • through a single channel Beneficary’s BIC • At your choice: Beneficary’s BIC Beneficiary’s acc.nb Beneficiary’s acc.nb Intermediary BIC • the delivery method Intermediary BIC Intermed. acc. nb fully automated or Intermed. acc. nb Intermed. bank code manual Intermed. bank code Payment system X Payment system X FIN service Y ....... • the frequency FIN service Y ....... 25
  27. 27. Distribution channels5 channels available manual query tools data feeds (daily updates) File download (daily (monthly updates) updates) internet internet internet SWIFTRe f utility internet SWIFTNet FileAct web services File delivery (daily (monthly updates) updates) 26
  28. 28. EBAM – Electronic bank account managementCurrent status ISO Messages liveand in production over Adoption is still at early Focus is on industry FileAct & proprietary stages operational readiness channels Corporate and FI Digital signing (3Skey) demand to implementVendor consolidation and account report are for efficiency gains and occurring main features of to support compliance interest requirements 27
  29. 29. 3SKey usage scenarios Multi-banked Corporates Approvals Use of 3SKey to A single 3SKey personal strengthen security in token to reach multiple banks internal and external over SWIFTNet, proprietary approval workflows or domestic channels (e.g. EBAM) Proprietary Security User Authentication Replace or enhance Strong 2-factor 3SKey proprietary solution authentication in on-line with the 3SKey PKI services service Communities 3SKey as a standard and shared market solution amongst banks Market Infrastructures Use of 3SKey for individual approvals and/or signatures on SWIFTNet or proprietary channels
  30. 30. 3SKeyRoll-out status 32 subscribers 50 vendors 65 countries (**) 15,000 treasurers +2,000 corporates (*) 27,000 tokens (*) Estimated based on # of user groups 29 (**) Source: SWIFT for Corporates Bank Readiness Certification Programme
  31. 31. SWIFT’s expanding supply chain portfolio Increased risk for Seller Increased risk for the buyer the seller Seller BuyerFinancing Open Collections L/C Advance BPOinstruments Account Guarantees Payment 80% New Collections L/C MT101 Corporate FileAct MT798 to bankSWIFTportfolio TSU Collections BPO L/C Bank XML MT4xx XML MT7xx to bank New New 30
  32. 32. The Bank Payment Obligation (BPO) A new alternative instrument for trade settlement A BPO is an irrevocable ICC Uniform Rules for undertaking given by one Bank Payment bank to another bank that Obligations 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 New ICC Uniform Rules for BPO Target adoption: April 2013 31
  33. 33. Rules and tools: past, present & future AVAILABLE NOW Q2 2013 Trade Services Utility 2.0 ICC Uniform Rules for Bank Payment Service Obligations DescriptionRulesInter-bankInfrastructure FIN TSU TSUStandards MT700 TSMT TSMT ICC UCP 600 SWIFT TSU BPO ICC UR BPO
  34. 34. Q&A?
  35. 35. Thank you! 34