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8/18/2019 BPO - SWIFT Presentation
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Bank Payment Obligation
David Dobbing – SWIFT Standards
IIBLP - 2012 Singapore Annual LC
Survey Conference
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2
Introduction
How it works
Uniform Rules for Bank Payment Obligation
Agenda
Adoption and Case Studies
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3
Introduction
How it works
Uniform Rules for Bank Payment Obligation
Adoption and Case Studies
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4.43 bil lion messages per year
10,118 customers
210 countries and territories
2,000 employees
Average daily traffic 17.56 million messages
Last peak day – 20.002 mil lion messages – 1st June 2012
What is SWIFT?SWIFT in numbers
Platform
49%44%
6%1% Trade
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The current instruments
5
SellerBuyer
LC AdvisingBank
LC IssuingBank
D o c um
en t s
Contract
Documents
D o c u
m e n t s
A d
v i c e
A p pl i c a
t i on
Issuance
Payment
Letter of
Credit
Bank risk / financing services
based on paper document
processing
SellerBuyer
Seller’s
Bank
Buyer’s
Bank
Contract
Payment
Open
Account
Documents
Bank services limited to
payment processing.
If any risk, Credit Insurance or
Payment Guarantee is added
Market
Trend
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The opportunity for banks
6
SellerBuyer
Seller’s
Bank
Buyer’s
Bank
Contract
Payment
Open
Account
Documents
Bank services limited to
payment processing
SellerBuyer
RecipientBank
ObligorBank
Contract
Documents
Payment
Bank
PaymentObligation
Bank risk / financing services
based on electronic trade data
Data
D a t a
D a t a
Bank-assisted
open account
The BPO enables bank-assisted Open Account trade
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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 matching
of data according to an industry-wide setof rules.
Therefore, a BPO offers:
• An assurance of payment
• Risk mitigation for all parties• Possible use as collateral for finance
7
An alternative instrument for trade settlement
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Key features of the BPO
8
Payment Assurance
Structureddata ande-matching
Riskmitigation
Payablesfinance
Receivablesfinance
Bank
Payment
Obligation
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Adoption and Case Studies
Uniform Rules for Bank Payment Obligation
9
Introduction
How it works
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Establishment of a BPO in a TMA
Buyer’s Bank = Obligor Bank Seller’s Bank = Recipient Bank
Buyer Seller
2 .
P O
S u b
m i s s i o n 2 .
P O C
o n f i r m a t i o n
1. Contract
6 .D a t a
S u b mi s s i o n
9 .P
a y m e n t 9
. P a y m e n t
5. Shipment & Documents
9. Payment
TMA
BPO
established
BPO
due
TMA = Transaction Matching Appl ication
TSU
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The baseline gathers the matching conditions
using data extracted from trade documents
11
Baseline
Commercialdata set Transportdata set Insurancedata set Certificatesdata set
Purchase order
Insurancedocument
Certificatedocument
Invoice Air Waybill (AWB), Billof Lading (BOL),…
Matchingconditions
A BPO is anoptional part of aTMA Baseline
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The BPO transaction lifecycle
Initial Baseline Submissions
Dataset submission and reports
Mismatch acceptance or rejection
BPO
establishment
Data SetMatching
Baseline Match report
P u r c h a s e
o r d e r d a t a
T r a n s p o r t a n d
I n v o i c e d a t a
P a y m e n
t Payment
Cash reportingPayment due
BPO irrevocable & conditional to matching of specified data
Bank Payment Obligation due (at sight or deferred)
12
I n s i d e s c o p e
o f T M A
O u t s i d e
s c o p e
o f T
M A
Baseline amendments
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FIN MT 798
FIN MT 7xx
Buyer’s
bank(s)
SellerSeller’s
bank(s)
Buyer
1 2 3
Industry Standards for Traditional Trade
13
SWIFT's MT 7xx are industry owned, technology
neutral standards in support of ICC's rules for L/Cs,
Standby L/Cs and Demand Guarantees
MT 798 Documents MT 798 Documents
UCP 600
URDG 758
ISP98
FileAct
MT 7XX
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Industry Standards for BPO
14
Any channel /
any format /any solution
Trade Txn
MatchingScheme
Any channel /
any format /any solution
SellerBuyer
1 2 3
Bank
Payment
Obligation P u b l i c D o m a i n
C o m m e r c i a
l
• SWIFT's Trade ServicesUtility (TSU)
• Any inter-bank schemebased on ISO 20022
messages & rules
• Bank portal• SWIFT's SCORE• Paper
• Bank portal• SWIFT's SCORE• Paper
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15
Introduction
How it works
Uniform Rules for Bank Payment Obligation
Adoption and Case Studies
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ICC / SWIFT Cooperation
Establish BPOas a
technologyneutral and
industryowned
instrument
Objective Sub-groups
LegalEducation
Commercialisation
TargetpublicationQ1 2013
Timeline
16
Co-chairs ICC BPO Working Group:Dan Taylor, Executive Director J.P. Morgan André Casterman, Head of Banking and Trade Solutions, SWIFT
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ICC UR BPO Rules Timeline
17
DATE MILESTONE
March 2012 First review by ICC BPO Consulting Group
End March 2012 Presentation to ICC Banking Commission in Doha
May 2012 Second review by ICC BPO Consulting Group
May 2012 Drafting Group review comments from Consulting Group
May 2012 Send draft version to National Committees
August 2012 Review of comments from ICC National Committees
September 2012 Drafting Group to issue revised version
November 2012 Full presentation of ICC BPO Rules to ICC Banking Commission
December 2012 Review of additional comments from ICC National Committees
January 2013 Drafting Group distribute proposed final version of ICCBPO Rules toNational Committees
March / April 2013 Targeted approval at ICC Banking Commission
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Draft ICC Uniform Rules for Bank Payment
Obligations• Article 1 Scope• Article 2 Application• Article 3 General Definitions• Article 4 Message Definitions• Article 5 Interpretations• Article 6 Bank Payment Obligations vs. Contracts
• Article 7 Data v. Goods, Services or Performance• Article 8 Expiry Date and Submission• Article 9 Role of an Involved Bank• Article 10 Undertaking of an Obligor Bank• Article 11 Amendments• Article 12 Charges• Article 13 Disclaimer on Effectiveness of Data• Article 14 Force Majeure• Article 15 Unavailability of the Transaction Matching Application• Article 16 Applicable Law• Article 17 Assignment of Proceeds
18
ICC Uniform Rules for
Bank Payment
Obligations
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Adoption and Case Studies
Uniform Rules for Bank Payment Obligation
19
Introduction
How it works
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38 banks adopting BPO (update as at 20 June 2012)
Including 14 from the top 20 Trade banks
20
Live
http://www.ubs.com/
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BP Chemicals caseSCB offers BPO to replace confirmed L/Cs
21
Challenges• About 50% of exposure on secured terms• Competitive commodities market requires a
secure and cheaper alternative to L/Cs• High processing and confirming costs (0,8%
of transaction value)
• LCs process limits commercial possibilitiesand weakens compliance under certainconditions
Company profile• 2010 Revenues of USD 14 billion• Revenue created for approx. 50% in Asia• Trade account receivables of EUR 1.4 billion
(consolidated receivables only)• More than 600 clients worldwide
Key benefits• Get paid on time and avoid judicial proceedings• Reduce complexity – removal of paper trail• Limit to relevant trade information only• Reduce cost by removing vetting activities and
presentation assistance• Improve customer offer by allowing for flexible
options• Improve speed of handling discrepancies• Reduce the risk of discrepancies• Reduce need for confirmation cost by being able to
tap larger pools. Free up banking lines.• Easy to exercise tool for liquidity
• Easier access to banks to secure transactions• Possibility to spread the risk with multiple obligors• Avoid unnecessary paper flows
Gains expected greater than $1m worldwide but most ofthe upside lies in more marginal income
Live
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Multi-bank export to China at Vale
Proof-of-concept (ongoing)
22
TSU
BPOObligorBankbranches
BPORecipientBanks
BPO
Manufacturers
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Thank you