Bank of New York Mellon (BNY Mellon) and Industrial and Commercial Bank of China (ICBC) both signed up as early adopters for SWIFT's Exceptions and Investigations (E&I) and are now reaping the benefits of live usage. They are encouraging other institutions to emulate their commitment to SWIFT-based standardisation and automation, and working to help bring on new E&I participants. At Sibos 2009, they will be sharing the message that all institutions can benefit from industry collaboration in the exceptions and investigations space.
BNY Mellon's involvement with E&I goes back to the origins of the solution, when the bank helped SWIFT with the design of the business case. The bank became an early adopter, and has been live on E&I since August 2008. It deployed the XML technology on which the E&I messages are based through its existing rule-based enquiry system.
Ms Linda Koperda, Vice President at BNY Mellon, says: "XML provides both flexibility and standardisation for message formatting, allowing systems to communicate without manual intervention. The current FIN format is cumbersome and encourages free format, which can hinder STP and require manual resource." XML was a new technology for her team, and thus involved a learning curve, but this was manageable. The bank then had to find a counterparty with which to conduct testing. "When we went live a year ago, there was not a variety of institutions available to test with," she says. "SWIFT helped us find another bank through the E&I Match-Making Initiative, and all worked out well."
To smooth the path for new users seeking to test E&I, "BNY Mellon offers testing assistance services to other institutions (clients, non-clients and even competitors)," Koperda adds. BNY Mellon has helped create SWIFT's peer-collaboration programme to help other institutions through the testing process, as part of the E&I Match-Making Initiative.
ICBC chose to do inhouse development to implement E&I . The bank went live on E&I this year, having achieved two major project milestones - achieving local language conversion in its E&I application, and integrating the E&I standards into its headquarters-branch processes. "Based on the E&I standards, we developed a series of procedures including process control, permission setting, messaging processing and enquiry management, which are all with ICBC characteristics," says Ms Li Li, Manager and Head of Clearing Center, Operation Management Department, ICBC. "According to our experience, we suggest banks that plan to implement E&I should take full account of integrating E&I with their own features, regardless of whether it's achieved through outsourcing or self-development."
In July 2009, ICBC handled the first SWIFT Exceptions and Investigations enquiry with BNY Mellon. Before that, most of this investigation work was handled manually, leading to increased operating costs and delays, as replies could take more than a day. "E&I enables automation and straight-through processing (STP) and thus increases efficiency and professionalism," explains Li.
Koperda adds: "The initial volume of E&I traffic between ICBC and BNY Mellon is just being established. Both companies are eager to work together. The strategy is to increase qualified volumes by rolling out the solution to various back offices. The traffic we have exchanged to this point clearly indicates that improved efficiencies regarding enquiry handling time, message accuracy and overall throughput of the cases are being realised."
"BNY Mellon will continue to provide assistance to those financial institutions and corporations that have made the commitment to implement SWIFT E&I," continues Koperda. "This approach will continue to build a network of global organisations that are willing to share the benefits of uniform messages, and provide guidance to others undertaking this initiative."
The bank has made a conscious choice to recruit and help other counterparties with the implementation of SWIFT E&I, she emphasises. "Assisting our counterparts will enhance the process and allow all users to fully realise the benefits that E&I will offer. BNY Mellon is always actively engaged in exploring opportunities to build on the quality service it provides to its clients. Sharing our experience with others and providing testing guidance is the most effective and efficient way to bring other organisations into this arena so that we may all realise the benefit of STP for investigations. XML messaging provides flexibility and standardisation and this is the key that will allow BNY Mellon to continue to provide the highest level of customer service. "
ICBC sees the implementation of E&I as an "inevitable trend" for the industry. "Nowadays, given the commoditisation of clearing products, it's well known that service quality is key to competitive positioning," says Li.
To find out more about the experience of these banks in implementing E&I, please visit ICBC and BNY Mellon at Sibos 2009 in Hong Kong.