Industry Standards for Trade and Supply Chain Finance
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Industry Standards for Trade and Supply Chain Finance

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Presentation on Industry Standards for Trade and Supply Chain Finance - during ICC Banking Commission meeting of October 27th in Beijing.

Presentation on Industry Standards for Trade and Supply Chain Finance - during ICC Banking Commission meeting of October 27th in Beijing.

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    Industry Standards for Trade and Supply Chain Finance Industry Standards for Trade and Supply Chain Finance Presentation Transcript

    • Industry Standards for Letters ofCredit, Guarantees and OpenAccountAndré CastermanHead of Banking, Trade and Supply Chain – SWIFTCo-Chair "Bank Payment Obligation" Project – International Chamber of CommerceLa Hulpe, 1 December 2011
    • Trends Digitisation Regulation Innovation CollaborationIndustry Standards for LCs, Guarantees and Open Account 2
    • Industry standardsDeveloped by international standardisation bodies • Trade Finance instruments • MT standards • ISO 20022 registration authority • ISO 9362 BIC registration authority, … • ISO 20022 Financial Industry standards • ISO 9362 Business Identifier Code (BIC), … Industry Standards are industry owned and technology neutralIndustry Standards for LCs, Guarantees and Open Account 3
    • Issues with proprietary formats and rulebooks Avoid proprietary solutions and vendor lock-in• Some Trade Finance vendors have been trying to impose their proprietary formats in the C2B trade finance space; such vendors intermediate the corporate-to-bank contractual relationship by imposing their own rulebooks• Corporates and banks adopting such formats are locked in into the vendor- specific platforms; this increases operational risks for users as software solutions should be independent of each other and interoperate using Industry Standards• Global Trade banks have resisted adopting those proprietary vendor solutions as each implementation generates huge implementation and running costs (software, legal, operational, technical); usually most fees are charged to the banks whereas the main value proposition targets the corporates• Due to customer pressure, some banks have been forced to implement those formats and suffer from high vendor-specific fees and usage costs• The benefits of multi-banking are therefore limited and never fully achieved neither by corporates, nor by banks.Industry Standards for LCs, Guarantees and Open Account 4
    • Best Practices for banks and corporates Rules • ICC Banking Commissions rules • SWIFTs MTs for LCs and Guarantees Messages • ISO 20022 for open account Identity • Business Identifier Code (BIC or ISO 9362) for banks and corporates • SWIFT for bank-to-bank (FIN or TSU) Channel • SWIFT or Internet for corporate-to-bank • SWIFTReady vendors Solutions • In-house development Industry Standards enable banks and corporates to increase efficiency when respecting all of the above best practicesIndustry Standards for LCs, Guarantees and Open Account 5
    • 1 Industry Standards for LCs and Guarantees MT798 Documents MT798 Documents MT7xx 1 2 3Buyer Seller Buyer’s Seller’s bank(s) bank(s) SWIFTs MT7xx are industry owned, technology FIN MT7xx neutral standards in support of ICCs UCP600 FIN MT798 and URDG758 rules Industry Standards for LCs, Guarantees and Open Account FileAct 6
    • Corporate-to-Bank Bank-to-Corporate Applicant Import Documentary Credits BankIMPORT DOCUMENTARY CREDITS MT 798<770> APPLICATION MT 798<700> MT 798<701> MT 798<771> ISSUANCE NOTIFICATION MT 798<700> MT 798<701> MT 798<772> AMENDMENT REQUEST MT 798<707> AMENDMENT NOTIFICATION MT 798<773> MT 798<707> AMENDMENT ACCEPTANCE NOTIFICATION MT 798<736> DISCREPANCY ADVICE MT 798<748> MT 798<750> MT 798<749> DISCREPANCY ADVICE RESPONSE COMPLIANCE ADVICE NOTIFICATION MT 798<753> MT 798<754> DISCHARGE ADVICE NOTIFICATION MT 798<731> MT 798<732> REFUSAL ADVICE NOTIFICATION MT 798<733> MT 798<734> MT 798<755> PAYMENT ADVICE NOTIFICATION MT 798<756> Industry Standards for LCs, Guarantees and Open Y M E N T I M P O R T P A Account SETTLEMENT ADVICE MT 798<757> 7
    • Corporate-to-Bank Bank-to-Corporate Bank BeneficiaryEXPORT DOCUMENTARY CREDITS MT 798<774> Export Documentary Credits MT 798<700> CREDIT ADVICE MT 798<701> MT 798<776> AMENDMENT ADVICE MT 798<707> AMENDMENT ACCEPT/REFUSAL ADVICE MT 798<735> MT 798<780> MT 798<710> THIRD BANK ADVICE MT 798<711> MT 798<737> PRESENTATION RESPONSE MT 798<751> 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 MT 798<752> MT 798<753> COMPLIANCE ADVICE NOTIFICATION MT 798<754> MT 798<731> DISCHARGE ADVICE NOTIFICATION MT 798<732> MT 798<733> REFUSAL ADVICE NOTIFICATION MT 798<734> MT 798<755> PAYMENT ADVICE NOTIFICATION MT 798<756> TRANSFER REQUEST MT 798<722> MT 798<782> MT 798<720> TRANSFER ADVICE MT 798<721> Industry Standards for LCs, Guarantees and Open Account P O R T P A Y M E N T EX SETTLEMENT ADVICE 8 MT 798<758>
    • GUARANTEES / STANDBY LETTERS OF CREDIT Corporate-to-Bank Bank-to-Corporate Applicant Guarantees/Standby Letters of Credit Bank MT 798<761 or 784 > APPLICATION MT 798<760> NOTIFICATION MT 798<762 or 785 > MT 798<760> MT 798<763 or 786 > AMENDMENT REQUEST MT 798<767> MT 798<764 or 787 > AMENDMENT NOTIFICATION MT 798<767> EXTEND / PAY QUERY MT 798<777> MT 798<778> EXTEND / PAY RESPONSE CLAIM NOTIFICATION MT 798<779> CLAIM / CHARGES SETTLEMENT MT 798<781> MT 798<783> REDUCTION / RELEASE REQUEST REDUCTION / RELEASE ADVICE MT 798<766 > MT 798<769> Industry Standards for LCs, Guarantees and Open Account 9
    • GUARANTEES / STANDBY LETTERS OF CREDIT cont. Corporate-to-Bank Bank-to-Corporate Bank Guarantees/Standby Letters of Credit Beneficiary MT 798<745 or 746 > ADVICE MT 798<760> MT 798<743 or 744 > AMENDMENT ADVICE MT 798<767> PAYMENT CL AIM MT 798<712> MT 798<714> CLAIM ACKNOWLEDGEMENT Industry Standards for LCs, Guarantees and Open Account 10
    • 23 banks adopting SWIFTs MT79812 from the top20 Trade banksIndustry Standards for LCs, Guarantees and Open Account 11
    • Preparing the future for Guarantee &Standby LC using ISO 20022• Demand Guarantees & Standby LCs• Identify all end-to-end business flows – Corporate to bank – Bank to bank – Bank to corporate• Agree on business content – Create new ISO 20022 XML messages – Define fields• ValidateIndustry Standards for LCs, Guarantees and Open Account 12
    • Drivers for ISO 20022 for Guarantees &Standby LCs• Evolution of the MT798 to the XML syntax• Enrich the functionality and granularity• Increased dematerialisation of trade documents• Leverage technology advancements• The release of URDG 758• The creation of templates under ISP 98• The desire to create efficiency and better STP• Complete the full end-to-end flows• Corporates want integrated dematerialised flows combining structured data with attachments and supporting local language character setsIndustry Standards for LCs, Guarantees and Open Account 13
    • 2 Public Domain Industry Standards for supply chain finance Bank Payment Obligation 1 2 3Buyer Seller Any channel / Trade Txn Any channel / Commercial any format / Matching any format / any solution Scheme any solution • Bank portal • SWIFTs Trade Services • Bank portal • SWIFTs SCORE Utility (TSU) • SWIFTs SCORE • Paper • Any inter-bank scheme • Paper based on ISO 20022 messages & rules Industry Standards for LCs, Guarantees and Open Account 14
    • The Bank Payment Obligation (BPO)A BPO is an irrevocable undertakinggiven by a bank to another bank thatpayment will be made on a specifieddate after successful electronic matchingof data according to an industry-wide setof ICC rules.Therefore, a BPO offers: • An assurance of payment • Risk mitigation for all parties • Possible use as collateral for finance An alternative ICC instrument for trade settlementIndustry Standards for LCs, Guarantees and Open Account 15
    • 18 banks adopting BPO in 20117 from the top20 Trade banksIndustry Standards for LCs, Guarantees and Open Account 16
    • The leading Trade Finance vendors are accredited by SWIFT SWIFTReady for SWIFTReady SWIFTReady Corporates – Trade Finance Trade Services Utility Trade Finance• Bank-to-bank • Corporate-to-bank • ISO 20022 TSMT• Corporate-to-bank • LCs and Guarantees messages• LCs and • Bank Payment Guarantees Obligation rules Bank Corp • Open Account Bank Vendor Trade Finance Vendor Trade Finance Vendor Trade Finance Solution Solution SolutionChina Eximbills GTC GlobalTrade ACI Open AccountSystems Corporate ManagerCSI BankTrade Misys Misys Trade China Eximbills Portal Systems EnterpriseMisys Trade Innovation Plus Pinnacle Synergy Trade CSI OpenTrade Solutions Services (TS)MIT CREDOC Misys Misys Trade Incorporated Multi-bank PortalSopra Evolan IB (PSI) Corporate SiteSurecomp DOKA 5, IMEX (Conformance Industry Standards for LCs, Guarantees and Open Account Statement) 17
    • More info• Join our "Supply Chain on SWIFT" group on:• Join our frequent Webinars• Email us at supplychain@swift.comIndustry Standards for LCs, Guarantees and Open Account 18