New SWIFT Changes Built to Support More Precise Usage

A long time banker shares insights on his observations and experiences with the major upgrade to the SWIFT 760 (guarantees/standby LCs) series of message types that took effect in November 2021.

At the January 2022 meeting of the BAFT West Coast LC Committee, guest speaker Sam Jebamony of JPMorgan Chase Bank shared insights on his observations and experiences with the major upgrade to the SWIFT 760 (guarantees/standby LCs) series of message types that took effect in November 2021.

In advance of the “go-live date” for this transition, Sam and his bank went through the changes not only from a systems standpoint, but how the new and updated messages will be used. The changes were put into practice without any major problems. Only a few minor questions arose, primarily relating to some unclear FAQs. From his perspective, Sam said that most banks have been sending standbys in the new format. He is aware of a few MT 799 requests which his bank has declined.

One matter that Sam and his colleagues have encountered is the tendency of some banks sending amendments by MT 707 or MT 799 which does not conform to the new SWIFT changes and has caused some difficulties. “We have been accepting some, but emphasize that amendments should come in 767 (Amendment to a Demand Guarantee/Standby Letter of Credit), no matter which [MT 7xx] was used when the LC was first issued”, Sam said. Additionally, Sam noted that some claims have not been sent via MT 765 (Guarantee/Standby Letter of Credit Demand) which has been challenging. “(Receiving MT 765s), we’re able to register a payment against an existing standby. Otherwise our automation doesn’t work”, Sam said. Ultimately, it is up to individual banks to consider how to accept claims sent as MT 759s (Ancillary Trade Structured Message) or 799s (Free Format Message).

In certain limited instances, banks have requested exception from using the new message types and have indicated that they are not fully ready for the SWIFT changes.

Another issue that has emerged among a few banks is MT 760 (Issue of a Demand Guarantee/ Standby Letter of Credit) usage and Field 77U (Undertaking Terms and Conditions). Sam has observed that some banks continue to enter full narrative text of a standby (as in the old MT 760) in 77U. This is not the intention of the 10+ years put into developing the new MT 760 format or intended use of Field 77U. “There’s greater potential for errors by duplicating the data in fields in the narrative also which we want to avoid”, said Sam who added, “the fact that you’re sending a MT760 with ‘issue’ indicates you are issuing a standby LC, then why say ’we hereby issue our irrevocable …’ etc? When you duplicate (data into 77U), it could be slightly different.” In this regard, Sam says it is better to push back and require use of appropriate fields.

Sam pointed out that the intent of Field 45C (Document and Presentation Instructions) is to specify what documents are to be presented and instructions where and how presentation is to be made, whereas Field 77U is harder to complete, especially for counter standbys. “Once you state the basics, there isn’t much more to say. In practice, we haven’t had many terms to input. For 150 lines, we don’t even use 15 or 20. But a lot of banks put the entire narrative in 77U”, Sam said.

Sam also referenced another inquiry being discussed concerning Field 32B (Undertaking Amount) and Field 39D (Additional Amount Information). Regarding “information about additional amounts”, does that mean “additional to the LC amount” or “additional information about the amount”? Sam suggested that in future, SWIFT may add more clarity, so the scope wording may be changed.

In concluding remarks, Sam emphasized that banks should make use of the designated SWIFT fields as they are designed to streamline messages to the right places.

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