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Federal Reserve Board announces the Reserve Banks will adopt a new message format for the Fedwire® Funds Service and invites public comment on proposal to expedite adoption

10/04/2021 | 02:46pm EST

FEDERAL RESERVE SYSTEM

Docket Number: OP-1613

New Message Format for the Fedwire® Funds Service

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of adoption of message format and request for comment.

SUMMARY: The Board of Governors of the Federal Reserve System (Board) is announcing that the Federal Reserve Banks (Reserve Banks) will adopt the ISO® 20022 message format for the Fedwire® Funds Service. The Board is also requesting public comment on a revised plan for migrating the Fedwire Funds Service to the ISO 20022 message format. Specifically, the Board is proposing that the Federal Reserve Banks would adopt the ISO 20022 message format on a single day rather than in three separate phases, as previously proposed. This single-day migration would be targeted for, and would be no earlier than, November 2023. Adopting ISO 20022 for the Fedwire Funds Services is part of a broader set of strategic initiatives to enhance Federal Reserve payment services, including an initiative to potentially expand the operating hours of the Fedwire Funds Service and the National Settlement Service.

DATES: Comments must be received on or before [insert 90 days after date of publication in the Federal Register].

ADDRESSES: You may submit comments, identified by Docket No. OP-1613, by any of the following methods:

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.cfmas 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, Senior Counsel (202- 872-7578); or Cody Gaffney, Attorney (202-452-2674), Legal Division; Kristopher Natoli, Manager (202-452-3227); or Amber Latner, Lead Financial Institution Policy Analyst (202- 973-6965), Division of Reserve Bank Operations and Payment Systems.

SUPPLEMENTARY INFORMATION:

  1. Background

The Fedwire Funds Service is a real-time gross settlement (RTGS) system owned and operated by the Reserve Banks that enables participants to make immediately final payments using their balances held at the Reserve Banks or intraday credit provided by the Reserve Banks. The Fedwire Funds Service and the CHIPS® funds-transfer system, which is owned and operated by The Clearing House Payments Company L.L.C. (TCH), are the

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main large-value payment systems in the United States.1

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

In 2004, the International Organization for Standardization (ISO)-an independent, non-governmental organization currently comprising 165 national standards bodies- published the ISO 20022 standard, which includes a suite of message format standards for the financial industry, including messages for payments, securities, trade services, debit and credit cards, and foreign exchange. ISO 20022 messages use extensible markup language (XML) syntax, have a common data dictionary that can support end-to-end payment message flow, and include structured data elements that provide for potentially richer payment message data than the current Fedwire Funds Service message format. ISO last reviewed and confirmed the ISO 20022 standard in 2019.

  1. Adoption of the ISO 20022 Standard for the Fedwire Funds Service

For the reasons set forth below, the Board is announcing that the Reserve Banks will adopt the ISO 20022 standard for the Fedwire Funds Service. Migrating the Fedwire Funds

1 In 2020, theFedwire Funds Service processed approximately 184 million payments with a total value of approximately $840 trillion, and CHIPS processed approximately 117 million payments with a total value of approximately $419 trillion. See https://www.theclearinghouse.org/media/new/tch/documents/payment- systems/chips-volume-and-value.pdf.

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Service to the ISO 20022 message format will provide a variety of policy and operational benefits and was supported by commenters.

  1. Summary of the Board's 2018 Federal Register Notice Relating to the Adoption of the ISO 20022 Standard

On July 5, 2018, the Board published a notice of proposed service enhancement and request for comment (2018 Notice) on a proposal to adopt the ISO 20022 message format for the Fedwire Funds Service.2 The 2018 Notice more fully described the current Fedwire Funds Service message format and the ISO 20022 message format, including tables that compared the two formats with respect to various message elements. In addition, the 2018 Notice described payments industry efforts related to ISO 20022, including outreach by the Reserve Banks and coordination efforts between the Reserve Banks, TCH, and other stakeholders.

The 2018 Notice further described the potential benefits of adopting the ISO 20022 message format for the Fedwire Funds Service. In particular, the Board highlighted potential benefits, including increased efficiency due to greater interoperability among global payment systems and types of payments, richer data that could improve anti-money laundering and sanctions screening, and broader adoption of extended remittance information (ERI).3

  1. Public Comments Relating to the Adoption of the ISO 20022 Standard The 2018 Notice included a request for comment on the potential benefits and

drawbacks of adopting the ISO 20022 standard. The 60-day comment period ended on

  1. 83 FR 31391 (July 5, 2018).
  2. ERI generally refers to details in the payment message regarding thepurposeof a business-to-business payment. For example, a business that sends a payment to a vendor could includedetails regarding the invoices against which thevendor should apply the payment.

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September 4, 2018. The Board received 17 comments from a range of industry stakeholders, including depository institutions, credit unions, industry associations, software vendors, and other market infrastructure operators.

The commenters all supported the proposal to adopt ISO 20022. Commenters who expressed a view on the benefits of adopting ISO 20022 generally agreed that ISO 20022 would produce the benefits that the Board identified in the 2018 Notice. Commenters also identified other potential benefits, including the possibility that adopting ISO 20022 as a global standard could increase competition in the payment ecosystem by reducing the cost of entry for payment processors and new market infrastructures.

The 2018 Notice also requested comment on the impact on Fedwire Funds Service participants and service providers of adopting the ISO 20022 standard. Commenters generally agreed that, as described in the 2018 Notice, the costs of implementation for a particular participant would vary depending on how that participant accesses the Fedwire Funds Service. In particular, Fedwire Funds Service participants that access the Fedwire Funds Service through solutions that require participants to develop their own software (or rely on software from vendors) will incur greater costs than participants that access the Fedwire Funds Service telephonically or through a Reserve Bank website in which payments are entered manually. A commenter noted that implementation costs incurred by a vendor may ultimately be passed on to a participant's customers.

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This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Board of Governors of the Federal Reserve System published this content on 04 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 October 2021 18:45:39 UTC.


© Publicnow 2021
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