[Federal Register Volume 87, Number 204 (Monday, October 24, 2022)]
[Notices]
[Pages 64217-64223]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23002]
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FEDERAL RESERVE SYSTEM
[Docket No. OP-1613]
New Message Format for the Fedwire[supreg] Funds Service
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Notice.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
is announcing that the Federal Reserve Banks (Reserve Banks) will adopt
the ISO[supreg] 20022 message format for the Fedwire[supreg] Funds
Service on a single day, March 10, 2025. The Board is also announcing a
revised testing strategy, backout strategy, and other details
concerning the implementation of the ISO 20022 message format for the
Fedwire Funds Service.
DATES: Implementation date: March 10, 2025.
FOR FURTHER INFORMATION CONTACT: Cody Gaffney, Attorney (202-452-2674),
Legal Division; Amber Latner, Lead Financial Institution Policy Analyst
(202-973-6965), Division of Reserve Bank Operations and Payment
Systems.
SUPPLEMENTARY INFORMATION:
I. Background
The Fedwire Funds Service is a real-time gross settlement system
owned and operated by the Reserve Banks that enables participants to
make immediately final payments using either their balances held at the
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\
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\1\ In 2021, the Fedwire Funds Service processed approximately
204 million payments with a total value of approximately $992
trillion. See FRBServices.org, Fedwire[supreg] Funds Service--Annual
Statistics, https://www.frbservices.org/resources/financial-services/wires/volume-value-stats/annual-stats.html. CHIPS processed
approximately 128 million payments with a total value of
approximately $449 trillion. See TCH, CHIPS Annual Statistics from
1970 to 2022, https://www.theclearinghouse.org/-/media/new/tch/documents/payment-systems/chips_volume_value_ytd_march_2022.pdf.
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[[Page 64218]]
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
users, and (iii) other messages that enable Fedwire Funds Service users
to request account balance information and the processing status of
payment orders.\2\ The present Fedwire Funds Service message format can
be mapped to--and is interoperable with--the CHIPS message format and
the message type format of the SWIFT messaging network.
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\2\ In this notice, the term ``users'' refers to (i) Fedwire
Funds Service participants and (ii) software vendors and third-party
service providers that facilitate transactions for Fedwire Funds
Service participants.
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In 2004, the International Organization for Standardization (ISO)--
an independent, non-governmental organization currently comprising 167
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.
On July 5, 2018, the Board published a notice and request for
comment (2018 Notice) on a proposal to adopt the ISO 20022 message
format for the Fedwire Funds Service.\3\ 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, 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.\4\ The 2018 Notice included a request for comment on the
potential benefits and drawbacks of adopting the ISO 20022 standard.
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\3\ 83 FR 31391 (July 5, 2018).
\4\ 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.
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II. Summary of 2021 Notice
After considering public comments received in connection with the
2018 Notice, on October 6, 2021, the Board published a notice and
request for comment (2021 Notice) that announced that the Reserve Banks
will adopt the ISO 20022 standard for the Fedwire Funds Service.\5\ The
Board noted that migrating the Fedwire Funds Service to the ISO 20022
message format will provide a variety of policy and operational
benefits and was supported by commenters.
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\5\ 86 FR 55600 (Oct. 6, 2021).
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At the same time, the Board in the 2021 Notice proposed that the
Reserve Banks adopt the ISO 20022 message format on a single day,
rather than in three separate phases, as previously proposed.\6\ The
2021 Notice stated that as of the implementation date (i.e., the date
on which the Fedwire Funds Service is scheduled to migrate to ISO
20022), all Fedwire Funds Service users would be required to be able to
send and receive fully enhanced ISO 20022 messages and the current
proprietary message format for the Fedwire Funds Service would no
longer be supported. The implementation date would be targeted for, and
would be no earlier than, November 2023. The Board noted that the
Federal Reserve intends to align the timing of ISO 20022 implementation
for the Fedwire Funds Service with that of CHIPS to the extent possible
to maximize benefits for Fedwire Funds Service users that also use
CHIPS.\7\
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\6\ In the 2018 Notice, the Board had proposed to transition
from the current Fedwire Funds Service message format to ISO 20022
in three phases from November 2020 to November 2023. However, as
described in the 2021 Notice, various developments caused the Board
to reconsider its proposed three-phased migration to ISO 20022. For
example, in September 2019, the Payments Market Practice Group--an
independent advisory group of payments experts that reports to the
Banking and Payments Committee of SWIFT's Board of Directors, and
whose members represent global financial institutions from Asia
Pacific, Europe, and North Africa--formally requested that the Board
consider a single-day implementation of the ISO 20022 message
standard for the Fedwire Funds Service. In addition, the Board
engaged with the industry through the Format Advisory Group--which
is jointly chaired by the Federal Reserve Bank of New York and TCH,
and includes 18 global and regional banks, 17 of which are Fedwire
Funds Service users and 10 of which are also CHIPS users--on a
potential single-day implementation strategy.
\7\ In addition, the 2021 Notice addressed commenters' concerns
that the Fedwire Funds Service should remain interoperable with
other payment and messaging systems. For example, the 2021 Notice
described steps that the Reserve Banks will take to reduce the risk
of cross-border interoperability issues during the interim period
between SWIFT's implementation of ISO 20022 (in November 2022) and
the Fedwire Funds Service's implementation of ISO 20022.
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The Board in the 2021 Notice also explained that the Reserve Banks
are using SWIFT's MyStandards application to store and share
documentation related to the ISO 20022 implementation with authorized
Fedwire Funds Service users.\8\ The Board stated that the Reserve Banks
will publish the final message format documents for ISO 20022 messages
after the Board announces a final implementation strategy.
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\8\ For more information on MyStandards, see https://www.swift.com/our-solutions/compliance-and-shared-services/mystandards.
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The 2021 Notice also outlined the Board's proposed strategy for the
testing of ISO 20022 messages prior to the targeted implementation
date. Specifically, the Board proposed that the Reserve Banks require
rigorous testing in three different environments. First, the Reserve
Banks would enable authorized Fedwire Funds Service users to use the
Readiness Portal feature within MyStandards to ensure that their ISO
20022 messages conform to Fedwire Funds Service requirements. Second,
the Reserve Banks would introduce a new depository institution testing
(DIT) environment 9 to 12 months ahead of the targeted implementation
date to provide users a dedicated environment for testing ISO 20022
messages, including the opportunity to conduct coordinated testing to
confirm their ability to send and receive ISO 20022 messages among each
other. The Reserve Banks would also provide opportunities for users to
test ISO 20022 messages in the production environment on select
Saturdays two to three months prior to the targeted implementation
date. Third, the Reserve Banks would require certain users to complete
a separate test script in each testing environment (i.e., the
MyStandards Readiness Portal, the DIT environment, and the production
environment). The Board stated in the
[[Page 64219]]
2021 Notice that the Reserve Banks would publish a final testing plan,
including the testing requirements for each testing environment, after
the Board announces a final implementation strategy.
Finally, the 2021 Notice described the Board's proposed backout
strategy if the Reserve Banks encounter significant problems deploying
ISO 20022-related changes on the Saturday before the targeted
implementation date, and the Board's proposed strategy for addressing
significant problems that arise on or after the implementation date.
With respect to issues that arise on the Saturday before the
implementation date, the Reserve Banks would have the ability to ``back
out'' the ISO 20022 changes and return to the legacy format on a
temporary basis. For this reason, Fedwire Funds Service users would
need to attest to their ability to back out their ISO 20022 changes
when they conduct their production testing. With respect to issues that
arise on or after the implementation date, the Reserve Banks would not
be able to return to the legacy format but would instead follow a
``fix-in-place'' strategy to address the issue.
The Board requested comment on all aspects of its proposal to
migrate the Fedwire Funds service to the ISO 20022 message format on a
single day. In addition, the 2021 Notice sought comment on eight
specific questions.
III. Summary of Public Comments
The Board received 60 comment letters in response to the 2021
Notice. Of those, 35 were from banks, 14 were from individuals, 5 were
from industry organizations, 4 were from third-party software vendors,
and 2 were from financial market utilities.\9\
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\9\ Duplicate submissions or similar comments from the same
commenter were treated as a single submission.
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The remainder of section III summarizes commenters' responses to
the eight specific questions that the Board posed in the 2021 notice,
as well as other issues raised by commenters.\10\
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\10\ For simplicity, two of these questions related to testing
are discussed together in section III.E, infra.
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A. Support for Single-Day Implementation Strategy
Of commenters expressing a preference regarding the ISO 20022
implementation strategy, the vast majority of commenters preferred the
single-day implementation strategy to a phased implementation approach.
However, three commenters, including a major trade association
representing community banks, opposed the single-day implementation
strategy, arguing that the single-day implementation approach would be
unacceptably costly, would strain testing capacity, and would increase
implementation risk. One commenter that opposed the single-day
implementation strategy suggested that the Reserve Banks should instead
implement ISO 20022 for a small group of Fedwire Funds Service users,
and if that goes smoothly, migrate the remaining users to ISO 20022 at
a later time. In subsequent discussions between Reserve Bank staff and
the community bank trade association that expressed opposition to a
single-day implementation approach, the commenter expressed support for
a single-day implementation approach provided that the implementation
date is significantly delayed past November 2023 and there is a full
year of testing in the DIT environment.
In light of the broad support for the single-day implementation
approach, and as discussed further in section IV, infra, the Board is
announcing that the Reserve Banks will adopt the ISO 20022 standard for
the Fedwire Funds Service on a single day.
B. Proposed Implementation Date
While several commenters supported the proposed targeted November
2023 implementation date, the vast majority of commenters that
addressed the implementation date requested a 6- to 12-month extension
beyond the implementation date proposed in the 2021 Notice. In
addition, several commenters suggested that the implementation date
should not fall close to a U.S. banking holiday or the winter holiday
season to avoid implementing ISO 20022 during a period of increased
Fedwire Funds Service transaction volume; in subsequent discussions
with Reserve Bank staff, some of these commenters similarly expressed a
preference that the implementation date should not fall at the end of a
month or a calendar quarter. One commenter urged the Board and the
Reserve Banks to work with the other global payment systems operators
and SWIFT to ensure that the international ISO 20022 implementation
schedule includes adequate buffer time between the implementation dates
for various payment systems. One commenter suggested that the Board
consider an implementation date that provides a gap--preferably up to
one year--between the launch of the FedNow\SM\ Service and the ISO
20022 implementation for the Fedwire Funds Service. Another commenter
asked the Board to consider the impact that the proposed implementation
timeline would have on third-party vendors performing fraud detection
and compliance services for Fedwire Funds Service users.
The Board has reconsidered the proposed targeted November 2023
implementation date in light of the comments received. As discussed
further in section IV.A., infra, the Board is announcing that the
Reserve Banks will implement the ISO 20022 message format for the
Fedwire Funds on March 10, 2025.
C. Synchronization With CHIPS
Many commenters expressed a preference for synchronizing the ISO
20022 implementation timing of the Fedwire Funds Service and CHIPS. Of
these commenters, one commenter suggested that if the implementation
dates for the Fedwire Funds Service and CHIPS do not align, then the
Board should ensure that the implementation timeline for the Fedwire
Funds Service builds in an adequate gap between the two migrations. By
contrast, two commenters noted that implementing the ISO 20022 message
format for the Fedwire Funds Service and CHIPS at the same time would
increase the risk that an implementation-related issue could result in
the simultaneous disruption of both services, leaving users without an
alternative operator to process wire transactions.
While the Reserve Banks and TCH decided independently to pursue
implementation of ISO 20022, the Reserve Banks have worked with TCH on
plans to adopt the ISO 20022 message format for the Fedwire Funds
Service and CHIPS since 2015. The Reserve Banks intend to continue
working with TCH to coordinate the implementation of ISO 20022 for the
Fedwire Funds Service with that of CHIPS to the extent possible to
reduce both interoperability issues and the risk of simultaneous
disruptions to users of both services.
D. Resource Constraints
Multiple commenters expressed concerns about resource constraints
resulting from the need to prepare simultaneously for the launch of the
FedNow Service and the implementation of the ISO 20022 message format
for the Fedwire Funds Service. Specifically, several commenters
suggested the Board consider the effects of any new payment systems
technology initiatives on financial institutions' already strained
technology resources. One of these commenters specifically noted that
the potential concurrent implementation of the FedNow Service and the
ISO 20022
[[Page 64220]]
message format for the Fedwire Funds Service would strain the resources
of community banks, particularly their information technology
departments and vendors. Another commenter noted that in addition to
the Federal Reserve's payment system modernization efforts, some banks
must also allocate resources in preparation for SWIFT's transition to
the ISO 20022 format in November 2022.
Commenters also suggested that the Board communicate to the
industry its prioritization of the Federal Reserve's ongoing and
potential payment systems technology initiatives. For example,
commenters suggested the Board communicate whether it is prioritizing
the implementation of the ISO 20022 message format for the Fedwire
Funds Service relative to the deployment of the FedNow Service and the
potential expansion of the operating hours of the Fedwire Funds Service
and National Settlement Service (NSS).
The Board is cognizant of the fact that institutions may have
limited financial and human capital resources available for competing
payments-related priorities. The FedNow Service is expected to go
online in 2023.\11\ The Board believes that shifting the implementation
date for the migration of the Fedwire Funds Service to the ISO 20022
format to March 10, 2025, rather than targeting November 2023 as
proposed, should mitigate commenters' concerns regarding resource
constraints in light of the launch of the FedNow Service.
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\11\ See FRBServices.org, Federal Reserve Updates FedNow \SM\
Service Launch to 2023 (Feb. 2, 2021), https://www.frbservices.org/financial-services/fednow/blog/updated-fednow-service-launch-to-2023.html.
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In the 2021 Notice, the Board indicated that it planned to issue a
Federal Register notice in 2022 to seek input on a proposal to expand
Fedwire Funds Service and NSS operating hours up to 24x7x365. The Board
believes that the goal of providing large-value payments 24x7x365
aligns with the Federal Reserve's commitment to position the nation's
payment and settlement infrastructure for the future.\12\ While the
Federal Reserve intends to continue exploring the potential expansion
of the Fedwire Funds Service and NSS operating hours, the Reserve Banks
plan to dedicate more resources in the near term to ensuring the
successful implementation of ISO 20022. The Reserve Banks plan to
engage further with Fedwire Funds Service and NSS users throughout 2022
to inform considerations related to the Reserve Banks' longer-run
provision of large-value payments, including the potential expansion of
Fedwire Funds Service and NSS operating hours. The Board believes that
a Federal Register notice regarding the potential expansion of
operating hours should be informed by insights that will be gained
through the Reserve Banks' discussions with users. Therefore, the Board
plans to issue a Federal Register notice regarding the potential
expansion of Fedwire Funds Service and NSS operating hours after the
Reserve Banks complete their outreach sessions.
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\12\ 86 FR 55600, 55606 (Oct. 6, 2021).
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E. Proposed Testing Strategy, Requirements, and Timeline
The majority of commenters that took a position on testing were
supportive of, or neutral about, the proposed testing strategy and
requirements. Several commenters encouraged the Board to share, as
early as possible, testing plans and test scripts for the three
proposed testing environments. One commenter noted that the proposed
Saturday production testing plan did not offer enough Saturdays for
users to conduct production testing. Another commenter suggested that
the Reserve Banks provide test accounts for users during testing. This
commenter also suggested the Board establish a technology roadmap that
would lay out a series of key dates and milestones for the system
requirements and testing procedures. In addition, two commenters stated
that the Board and TCH should coordinate on industry testing for the
Fedwire Funds Service and CHIPS. One commenter requested the Board
provide additional details regarding (i) validation capabilities of the
MyStandards Readiness Portal; (ii) whether the new DIT environment
requires Fedwire Funds Service users to internally operate two parallel
test environments; (iii) who will coordinate testing between users;
(iv) whether there will be specific periods to test functionality
between users; and (v) what the specific test scripts will entail.
Commenters expressed a variety of opinions about the amount of time
needed for testing in the MyStandards Readiness Portal and the DIT
environment. For testing in the MyStandards Readiness Portal, preferred
timeframes ranged from one week to nine months. For testing in the DIT
environment, many commenters expressed comfort with the 9- to 12-month
timeframe proposed in the 2021 Notice, while others felt that the
proposed range was too short. Of those, several requested no less than
12 months of DIT environment testing time, while others requested an
additional 12 months of testing time on top of the 9- to 12-month range
proposed in the 2021 Notice.
One commenter requested that the Board ensure all Fedwire Funds
Service users be granted adequate access to all of the testing
environments. The commenter also suggested that certain third parties
should be subject to the certification process at all stages, and
information about their progress should be made publicly available.
The Board has considered all comments related to the proposed
testing strategy, requirements, and timeline. As discussed further in
section IV.B, infra, the Board is announcing a revised testing strategy
in response to commenter feedback. In particular, the revised testing
strategy includes 12 months of DIT testing time for users to prepare
for the migration of the Fedwire Funds Service to the ISO 20022 message
format.
F. Proposed Backout Strategy and Fix-in-Place Strategy
Most commenters that addressed the proposed backout and fix-in-
place strategies described in the 2021 Notice were neutral about, or
supportive of, the proposed strategies. Two commenters expressed
concern that the backout timeframe was too short, providing only two
days of notice for users to revert back to the legacy format. One
commenter noted that some users typically require one week or more to
complete change control processes. Another commenter recommended the
Board commence the backout period one week earlier than was proposed in
the 2021 Notice, thereby providing users with up to nine days to revert
back to the legacy format prior to the implementation date. This would
provide users that have prepared large numbers of ISO 20022-formatted
payments in advance with adequate time to convert those payments back
to the legacy format. A different commenter suggested the Board
consider a continuity strategy that includes criteria for users to
request an extension in the event that they are not prepared to
implement ISO 20022 on a designated date. Finally, one commenter
suggested the Board consider conducting a mock activation test before
the implementation date to perform a final assessment of industry
readiness and simulate the steps needed to perform a backout.
The Board has considered all comments related to the proposed
backout strategy and fix-in-place strategy. As discussed further in
section IV.D, infra, the Board is announcing a revised backout strategy
that will provide Fedwire Funds Service users
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with at least two weeks' advance notice if the implementation of ISO
20022 must be delayed.
G. Other Issues Raised by Commenters
The Board received many comments that, while relevant to the ISO
20022 implementation strategy for the Fedwire Funds Service, did not
directly respond to one of the questions in the 2021 Notice.\13\ For
example, two commenters addressed the possibility that some financial
institutions would not be prepared to meet a November 2023
implementation timeframe and suggested the Board and the Reserve Banks
develop a service to translate legacy Fedwire Funds Service messages to
the ISO 20022 format while supporting normal transaction volumes for
all users. However, one of the two commenters noted that the benefits
of such a service should be weighed against any potential
implementation delay caused by its development. The Reserve Banks
considered developing such a translation service but concluded that
doing so would further delay the ISO 20022 implementation process.
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\13\ In addition, the Board received a number of comments that
were not relevant to the proposed ISO 20022 implementation strategy
for the Fedwire Funds Service. The Board is not responding to these
comments in this notice.
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Another commenter suggested the Board develop policies and
procedures regarding the storage and retrieval of data under the old
and new formats. The Reserve Banks have already announced policies
regarding retrievals, which differ depending on how users access the
Fedwire Funds Service.\14\
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\14\ See FRBServices.org, Fedwire Funds Service ISO 20022
Implementation Frequently Asked Questions (rev. as of October 2021),
https://www.frbservices.org/resources/financial-services/wires/faq/iso-20022-implementation.html (``How will retrievals be supported
when the new format is implemented?'').
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Many commenters supported future educational efforts and industry
outreach related to ISO 20022 by the Board and the Reserve Banks,
including a comprehensive education and training campaign through
webinars, online training, and in-person workshops. In addition, many
commenters expressed support for transparent and continuous
communication to, and coordination with, the industry by the Board and
the Reserve Banks at various stages of the ISO 20022 implementation
process. One commenter suggested the Reserve Banks provide real-time
updates to the industry during the go-live weekend so the industry
could prepare to activate the back-out strategy if needed. Another
commenter suggested the Reserve Banks provide Fedwire Funds Service
users with status updates on the progress their peers are making toward
implementing the ISO 20022 message format so that all users can gauge
whether the Reserve Banks are on track to meet the implementation date.
One commenter suggested the Reserve Banks establish and publicly
disseminate a certification process for each essential stage of the ISO
20022 implementation. The commenter asserted that this certification
process would allow users to benchmark their progress against that of
their peers, while providing the Board and the Reserve Banks with an
early warning system in the event that users fall behind the
certification schedule. Finally, to fully evaluate the best approach
for the industry, a commenter recommended the Reserve Banks engage in
continuous dialogue and coordination throughout the ISO 20022
implementation process with TCH, as well as common users of both the
Fedwire Funds Service and CHIPS, and key third-party service providers
(e.g., cloud computing companies and platform software vendors).
The Board agrees with commenters that effective communication and
industry outreach are essential to ensuring a smooth transition to the
ISO 20022 message format for the Fedwire Funds Service. As discussed
further in section IV.E, infra, the Reserve Banks are developing a
communication and education strategy that is intended to promote
industry readiness. In addition, as discussed further in section IV.C,
infra, the Reserve Banks will develop an Industry Readiness Dashboard
to provide transparency regarding industry readiness for the ISO 20022
migration.
Although the Board did not request feedback on this topic, several
commenters provided feedback regarding the format and content of
specific message data elements, character sets, and other ISO 20022
format specifications discussed in the 2018 Notice and the 2021 Notice.
The Board notes that the Reserve Banks will soon publish the ISO 20022
message format specifications for the Fedwire Funds Service on the
MyStandards application; the specifications will be made publicly
available and they will align with industry guidelines for high-value
payment systems.
IV. Implementation of the ISO 20022 Standard for the Fedwire Funds
Service
The Board has considered all feedback received in connection with
the 2021 Notice and is announcing that the Reserve Banks will implement
the ISO 20022 message format for the Fedwire Funds Service on a single
day, as proposed. The Board notes that the proposed single-day
implementation strategy was supported by the vast majority of public
commenters. The Board continues to believe that a single-day
implementation strategy is preferable to a three-phased implementation
approach because it is both simpler and more efficient for Fedwire
Funds Service users and the Reserve Banks to meet a single
implementation deadline rather than three unique deadlines.
Specifically, by removing the first two phases of the three-phased
implementation approach proposed in the 2018 Notice, the single-day
implementation approach enables users to focus their attention and
resources on a single development and testing target. Eliminating the
first two phases of the implementation strategy is also likely to
reduce Fedwire Funds Service users' overall costs related to software
development, testing, and training.
Further, the Board believes the single-day implementation strategy
will be more expedient than the proposed three-phased implementation
strategy. Many domestic and international large-value payment and
messaging systems have announced plans to migrate to the ISO 20022
format in 2022 and 2023, and the Board believes that a single-day
implementation strategy will more closely align the implementation of
the ISO 20022 format for the Fedwire Funds Service with that of other
payment and messaging systems.\15\
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\15\ As noted previously, SWIFT will transition to the ISO 20022
message format in November 2022. TCH has announced that CHIPS will
transition to the ISO 20022 message format in November 2023.
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The remainder of this section provides additional information
regarding the Reserve Banks' strategy for implementing ISO 20022 for
the Fedwire Funds Service.
A. Implementation Date
The Board is announcing that the Fedwire Funds Service will migrate
to the ISO 20022 message format on March 10, 2025. The Board determined
that it is appropriate to shift the implementation of ISO 20022 for the
Fedwire Funds Service beyond the proposed targeted November 2023
implementation date based on commenters' requests for additional time
for testing ISO 20022 messages, as well as their concerns that
competing payment systems-related technology initiatives would
constrain resources needed for ISO 20022 implementation. In addition,
the Board selected the date to avoid implementing the ISO 20022 message
format close to a U.S. banking holiday, during the winter holiday
season (which also generally coincides
[[Page 64222]]
with many firms' annual freeze periods for significant technology
changes), or at the end of a month or quarter. The date also provides a
gap between the launch of the FedNow Service and the ISO 20022
implementation for the Fedwire Funds Service.
B. Revised Testing Strategy
The Board is announcing that the Reserve Banks will adopt the
proposed testing strategy in the 2021 Notice, with several
modifications in response to commenter feedback. Given the magnitude of
the changes required to support the ISO 20022 messaging standard, the
Reserve Banks will require certain users to complete robust
testing.\16\ By the end of 2022, the Reserve Banks will notify all
users that will be required to complete testing. The required testing
will take places across multiple testing environments, described in
more detail below. The Reserve Banks will provide detailed test scripts
and attestation forms for each test environment in advance of making
each environment available for testing.
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\16\ The Reserve Banks will require the following types of users
to complete a test script in each of the three test environments:
(i) all users that have their own FedLine Direct[supreg] connection
to the Fedwire Funds Service, which includes service providers that
host the connection for other users, bankers' banks, and corporate
credit unions; and (ii) users that import 100 or more transactions
per day using the FedPayments Manager--Funds application via the
FedLine Advantage[supreg] solution. Based on additional analysis by
the Reserve Banks, this list of users who will be required to test
has been modified slightly from the proposed testing strategy
described in the 2021 Notice.
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i. Advance Testing Through the MyStandards Readiness Portal
The MyStandards Readiness Portal will be a dedicated testing
environment that will allow users to validate their ISO 20022 messages
against the Fedwire Funds Service ISO 20022 specifications before
beginning testing in the new DIT environment described below.
Specifically, users will be able to submit their ISO 20022 messages to
the MyStandards Readiness Portal to ensure that their messages are
structured properly and pass various format requirements for each
message (e.g., mandatory versus optional data elements, minimum or
maximum field lengths, allowable characters or codes). This advance
testing will greatly reduce the risk of Fedwire Funds Service users
encountering message format errors during the next phases of testing.
Certain users will be required to attest to successful completion of a
test script in the MyStandards Readiness Portal before conducting
testing in the new DIT environment.
Users will need a valid swift.com login ID and password to access
the MyStandards Readiness Portal. The Reserve Banks will make the
MyStandards Readiness Portal available to users by the end of 2022; the
MyStandards Readiness Portal will remain available throughout the ISO
20022 implementation process.
ii. New Depository Institution Testing Environment (DIT2)
The Reserve Banks will introduce a new testing environment that
will allow users to perform dedicated testing with the new ISO 20022
version of the Fedwire Funds Service application software.\17\ In early
2023, the Reserve Banks will notify users about the process for
establishing access to DIT2. The Reserve Banks will make the DIT2
environment available to users at least 12 months prior to the
implementation date, rather than 9 months as proposed. The Reserve
Banks will also provide opportunities for users to test with each other
in DIT2. Certain users will be required to attest to successful
completion of a test script in DIT2 before conducting testing in the
production environment.
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\17\ The existing user testing environment (DIT1) will remain
available and include the version of the Fedwire Funds Service
application software that will become effective November 21, 2022.
DIT1 will be available for users to perform application
functionality testing with the current format to support internal
changes necessary before ISO 20022 implementation. It will also
enable service providers to onboard new users prior to ISO 20022
implementation.
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iii. Production Environment
The Reserve Banks will deploy the ISO 20022 version of the Fedwire
Funds Service software to the production environment on select
Saturdays prior to the implementation date to allow users to test their
ISO 20022 changes with the Fedwire Funds Service production software.
Certain users will be required to attest to successful completion of a
test script in the production environment prior to the implementation.
The Reserve Banks will announce the dates for the Saturday production
testing at least one year prior to the implementation date.
C. Industry Readiness Dashboard
Once testing begins, the Reserve Banks will publish a dashboard on
the ISO 20022 web page on the FRBservices.org website to provide
transparency into industry readiness throughout the project lifecycle.
The dashboard will also provide early insights into issues that could
potentially impact the implementation timeline. While the Reserve Banks
will monitor individual user readiness, the dashboard will highlight
industry readiness by user categories (e.g., national accounts, service
providers, bankers' banks/corporate credit unions) across key testing
milestones.
D. Revised Backout Strategy and Fix-in-Place Strategy
i. Revised Backout Strategy and ``Go/No Go'' Decision
The Board is announcing that the Reserve Banks will follow a
modified version of the proposed backout strategy, which has been
revised in response to commenter feedback. Under the revised backout
strategy, the Reserve Banks will complete all internal and user testing
activities at least two weeks prior to the ISO 20022 implementation
date and make a ``go/no go'' decision based on internal and industry
readiness. The Reserve Banks will notify all users about the ``go/no
go'' decision no later than two weeks prior to the implementation date.
If a ``go'' decision is made, the Reserve Banks will be subject to a
two-week freeze period during which no further changes would be made to
the ISO 20022 software and production infrastructure. If the Reserve
Banks decide to delay the implementation date for any reason, the
notification would provide users two weeks' advance notice to adjust
their plans.
ii. Fix-in-Place Strategy
The Reserve Banks will follow the fix-in-place strategy described
in the 2021 Notice substantially as proposed. On the Saturday before
the implementation date (assuming that a ``go'' decision was made, and
following the two-week freeze period), the Reserve Banks will deploy
the ISO 20022 software to the production environment. The Reserve Banks
will follow a fix-in-place strategy if any issues arise during or after
the deployment. If issues do arise, the Reserve Banks will implement a
software update to address the issue as soon as the fix has been
identified and fully tested. This strategy is consistent with prior
customer-facing initiatives and received broad support from commenters.
E. Communication and Education Strategy
The Reserve Banks are planning to share information pertaining to
the implementation of the ISO 20022 message format for the Fedwire
Funds Services through the following channels:
The ISO 20022 web page on the FRBservices.org website,
which will
[[Page 64223]]
provide up-to-date information on all aspects of the ISO 20022
migration, including frequently asked questions, a list of software
vendors that the Reserve Banks are working with to ensure readiness for
the ISO 20022 implementation, and the industry readiness dashboard to
track industry progress against key milestones;
SWIFT's MyStandards application, which will include
technical documentation related to the ISO 20022 messages that will be
implemented for the Fedwire Funds Service;
Fed360 articles and targeted user communications, which
will announce the final ISO 20022 implementation timeline and testing
requirements, highlight key milestones pre- and post-implementation,
invite users to education events, and remind users about testing
requirements and deadlines; and,
Webinars, which will educate users on all aspects of the
ISO 20022 migration. The first series of webinars will begin in the
fourth quarter of 2022. The Reserve Banks will announce the dates for
the webinars at least one month ahead of each webinar. The Reserve
Banks will record the webinars and make them available to users.
By order of the Board of Governors of the Federal Reserve
System.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
[FR Doc. 2022-23002 Filed 10-21-22; 8:45 am]
BILLING CODE P