Bank Of England: Minutes Of The Standards Advisory Panel - November 2022

Minutes

Item 1: Welcome and introductions

The Chair welcomed members and provided an overview of the agenda for the meeting.

The Chair walked through actions from the last SAP meeting. Given the number of items on this SAP’s agenda and to allow for appropriate progress, the Chair proposed to move the SEF action to the next SAP. The remaining actions were meeting agenda items on the day.

Item 2: ISO 20022 implementations – update and discussion

Since the last SAP there have been changes to the international migration of market infrastructures to ISO 20022, which have the potential to impact to the UK implementation of ISO 20022.

The Bank of England (“Bank”) updated the group on the ECB/Swift ISO migration date change announcement and its impacts: A month ago the ECB decided to postpone ISO 20022 “go live” date from 21st November 2022 to 20th March 2023 due to test system defects, followed by Swift, Australia, Canada and New Zealand deciding also to move their dates to March 2023. The Bank consulted CHAPS Direct Participants (DPs) after the ECB announcement given the proximity to TS2.1 (Transition State 2.1) go-live for RTGS/CHAPS on 17 April. The feedback received was a strong preference to maintain a three-month gap between ECB/SWIFT and CHAPS, to provide DPs with sufficient time to deal with any post ECB/SWIFT go-live issues. The Bank is working on more detailed timelines and the final date will be announced at its industry event on 5th December 2022. The TS3 (Transition State 3) new RTGS2 core ledger date will also need to be reviewed and may be impacted, and the mandating of Enhanced Data is likely to move from Summer to November 2024.

The Bank still intends to mandate (via the CHAPS rulebook) structured addresses in November 2025. However, it is aware that this date is dependent on SWIFT retiring MT for payments in November 2025, and appreciates that there is still a lot of work for participants to fully implement MX/ISO 20022 by then. The CPMI Building Block (BB14) joint taskforce work (with PMPG) on drafting a common minimum (technical) standard for cross-border payments is likely to be the key foundation for CHAPS to implement any enforcement of structured addresses (and structured remittance data). The joint taskforce will be consulting publicly on their proposals in early 2023 – both in respect of the technical schema, and recommendations about the timing of its introduction and enforcement. Some initial discussions on the broader global strategy for the ISO 20022 standard for payments beyond 2025 were held at the PMPG meeting in Amsterdam in October. Discussions between the different FMIs, and then with their relevant user communities will continue next year.

A Panel member raised concerns about the waterfall/domino effect demonstrated by the ECB’s date change, given this has directly caused a number of other FMIs to need to move ISO migration dates out, including CHAPS. In particular, they questioned whether this model needed to be changed ahead of FMIs starting to adopt a regular change programme for ISO schemas, and how international coordination of future changes would be managed given that ISO 20022 is an open standard, yet global interoperability was critical. The Bank noted that in general they have observed participants building schemas for domestic FMIs as individually switchable rather than waterfall implementations. However, as SWIFT is the key cross-border FMI, and as the ECB and SWIFT had always targeted the same go-live date, some European banks had built a single technical implementation for the November 2022 weekend, which then acted as a foundation for all further domestic FMI implementations. SWIFT has since made it clear to their participants that the CBPR+ implementation should be technically independent of any domestic FMI implementation. In terms of the coordination of global change going forwards, the Bank would continue to discuss options for managing change after November 2025 with relevant other FMIs. Among the suggestions of the Panel members was whether there should be a global version of this SAP, where key payments FMIs could meet to discuss and coordinate changes to their ISO 20022 implementations.

Action: The Chair noted the global migration challenges/impacts and asked to bring this topic back after checking whether there were similar such ‘global coordination’ groups in other sectors outside payments.

Item 3: Fraud Industry Initiative and future strategy on Purpose Code – update and discussion

Pay.UK updated SAP on the latest work on the development of the Enhanced Fraud Data standard being developed by UK Finance and Pay.UK as well as the current progress on the API Fraud prototype. Of note:

• The priority for Phase 2 Data standard is to produce technical standards collateral on the data built of the UK Finance's data sharing exercise. The Working Group will re-convene in December with some UK Finance members and aim to produce the first iteration of the collateral in Q1.
• The API Sandbox environment will be accessible at the start of next year.
• Following a question from a Panel member, Pay.UK confirmed that the API would be used to send the data being standardised in the Data Standard work.

Pay.UK updated SAP on rolling out Purpose Codes as part of the APP Fraud initiative:

• Fraud remains a priority for many firms and ISO 20022 is also a primary strategy. Enhanced Data continues being a popular topic with LEI, UETR, Structured Remittance Data etc. Whether to mandate Purpose Codes depends on the outcome the customers wish to receive. Pay.UK plans to work with economic crime specialists to identify a consolidated purpose codes list to map a subset of high-risk payments. Given the resource constraints the work is paused until 2023. The link between fraud and purpose codes will galvanize the adoption (accuracy) of the latter. Pay.UK will only seek to mandate it with the full support of the industry, regulators etc.
• Pay.UK confirmed that following feedback they had received; this aspect of the work would be paused due to capacity constraints in the industry. A Panel member questioned the de-prioritization of fraud linkage to Purpose Code work and expressed the willingness of contributing resources to push the agenda forward.

Pay.UK updated SAP on the PSR’s APP Reimbursement proposals and asked the Panel for views on the challenges and the roles the Bank, Pay.UK and SAP should play in the APP Reimbursement development:

• Pay.UK sought to understand the Panel's views on two questions: Key challenges and the Roles. The questions can be taken from two different lenses: Pay.UK lens and a Standards-only lens.
• The Chair asked Pay.UK on the positions considered so far. Pay.UK replied that there are two potential views, one being with strong support by the Panel and the industry subject to the right resources and funding, Pay.UK can play a role. Another aspect is the question of who would be in scope for the reimbursement model. The Chair agreed that the scope is important, and the responsibility of ensuring an end-to-end role; it cannot just rely on banks. The Panel agrees the importance of well-structured Standards, SLAs and processes and the key roles they have on the delivery. The Standards being in particularly important as the complexity of different payment schemes, digital channels etc. A Panel member expressed two concerns: one concern being APP fraud and Card fraud are different in nature; therefore, the rules and guidelines of APP reimbursement should not mirror the Cards commercial model/scheme. The other concern is related to the initiative to replace the cards model with account-to-account model, creating a good and qualitative model to protect consumers is challenging. Pay.UK agrees on the challenges ahead.

The Bank reminded SAP of the Bank policy for mandating the Purpose Codes in CHAPS in due course, and how Purpose Codes align with the wider industry work underway on fraud and CMORG on operational resilience. Phase 1 of the CMORG work has reviewed the potential use of purpose codes to prioritise critical high value payments. Under Phase 2, the work would now focus on critical retail payments, with UK Finance taking a key role in the working group.

The Bank then outlined to SAP the work underway to bring together stakeholders to produce more granular guidance on the use of purpose codes in CHAPS, and the next steps for that work.

Action: The Chair asked for another update in due course.

Item 4: 2x Joint Standards workstreams – update and discussion

The A1 workstream lead Panel member updated SAP on the work of the API workstream – the development of an API Framework for the UK payments industry. The workstream has completed the Terms of Reference, and has been obtaining information from other API Standards setters to inform their drafting of the set of API principles/framework for the UK Payment industry, which they can use as a starting point when building APIs. The workstream lead asked the Panel for views on the differences and unharmonized implementations in the UK Payment industry. The next step includes obtaining information from Swift on alignment with their own API product standards, and inviting the views from PSR on the indirect access of APIs. Once the draft is complete, the workstream will share the proposed framework with the Panel. The Chair valued the work done in the A1 API workstream and invited comments on the Terms of Reference and Draft API framework after the meeting.

The Bank updated SAP on the work of A2 Structured Remittance data; in particular the challenges of different sectors having very different needs and challenges. It appeared that the best way forward for this work would be to seek to agree a unified strategy/approach through which guidance can then be written for the different sectors, reflecting the different stakeholders and their requirements within each sector.

Item 5: CPMI – update and discussion

The Bank updated SAP on the G20 Roadmap including the development of international conversations, UK input into an ISO 20022 ‘common minimum standard’ for cross-border payments, API standards and how the CPMI are requesting input from the private sector:

• Two key building blocks are of particular relevance to the Panel: BB14 focuses on creating harmonised requirements for cross-border payments, and in particular is looking at creating an ISO 20022-based ‘common minimum standard’ for these payments to flow in a smooth and efficient way. In essence the aim was to produce enhanced-data cross-border STP (Straight Through Processing) versions of the relevant ISO 20022 messages. The joint taskforce is by representatives from the G20 central banks and PMPG. One of the key proposals is the mandatory use of certain Structured address data in order to improve the speed of AML/Sanction screening to more accurately detect payments of concern whilst also significantly reducing false positives. There will be a consultation on proposals in early 2023. The group is also evaluating and will consult on potential timing The Bank encouraged the UK community to get involved, and would make SAP aware as and when the CPMI released more detail on the consultation in the coming months.
• BB15 is about the API Standards and harmonizing protocols on APIs. It aims to evaluate existing API protocols to consider their appropriateness as a globally harmonised framework in addition to considering a future combined governance model for ongoing maintenance.
• The Chair noted the link with the SAP A1 API workstream, and the A1 workstream lead agreed on the importance of global governance on APIs. A Panel member requested that the A1 and BB15 workstreams be raised on the JROC agenda in terms of UK OBIE.

Action: The Bank to raise as an action with JROC.

Item 6: Any other business

The Chair thanked SAP members for the great contributions in 2022, this is the last SAP meeting in 2022.

Close of meeting.

Attendees

Online meeting by MS Teams videoconference

Members

Karen Braithwaite, Chair (Barclays)
James Barclay (JP Morgan)
David Heron (Pay.UK)
Domenico Scaffidi (Volante)
James Southgate (Bank of England)
Jo Oxley (Government Banking Service)
Mike Walters (Form3)
Robert White (Santander)

Observers

Nick Davey (Payment Systems Regulator)
Hein Wagenaar (Oracle)
Ross Studholme (FCA)

Other attendees

Bank of England & Pay.UK Secretariat
Bank of England & Pay.UK Presenters

Apologies

Caroline Stockmann (ACT)
Toby Young (Ebury)
Ralf Ohlhausenv (PPRO)
Helene Oger-Zaher (FCA)
James Whittle (Pay.UK)
Ian Ellis (Payment Systems Regulator)