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Press STOP! TARGET2 migration delayed. Will SWIFT be next?

As my colleague Luis reported just a couple of months ago, the move to ISO 20022 standards is a significant one for banks and other financial institutions across the globe. And, as many who were at SIBOS can attest, there were multiple sessions (including some from SWIFT themselves) on the topic of ISO 20022. Many were focused on how financial institutions would extract value going forward from the richer payments data held within the larger XML based format, while others examined the challenges of the impending CBPR+ migration during the weekend of November 19th and 20th.  

And to that end, just a few days later, we get the bombshell announcement (arguably quite late in the day) from the European Central Bank that they would be delaying the move to the new TARGET2 system also using ISO 20022 HVPS+ messaging, stating that participants would require more testing time.  

This last-minute delay to allow FIs time to test against significant central system updates, patches, etc., in the TARGET system, is a sensible decision. However, it begs the question: Will SWIFT will make the move too? 

Most banks have payment systems that are multi-rail and were primed for the migration of both systems (TARGET2: MT to HVPS+ and SWIFT: MT to CBPR+) on the same date, particularly as both run over the SWIFT network. Indeed, other major RTGS systems were aligned to this migration date, including the Canadian Lynx RTGS (LVTS), Australian HVCS, and New Zealand ESAS systems.   

Thus, the fact that one (possibly multiple) clearing and settlement mechanisms are delayed will no doubt significantly impact bank migration plans and operational considerations for the weekend of November 19th and 20th.   Banks that were expecting to be migrating systems for potentially 2 or more payment schemes, all using ISO 20022, will now have to refactor to continue processing the existing MT formats.

I suspect there are some in depth senior level central bank discussions happening as I write this and it’s difficult to believe that SWIFT and others won’t follow suit. And as to the future, the UK RTGS CHAPS was scheduled to move to ISO 20022 in April 2023 – could this be impacted now with this move by the ECB?

If you are still experiencing challenges in the handling of ISO 20022 payments and related CSM messaging, or still need to plan for a fuller adoption (sending as well as the mandatory receiving over SWIFT) or better use of the richer payments data across your organization, we’d love to chat with you. Feel free to review and try our ISO 20022 Service at no cost (we offer a free Sandbox) and/or schedule a call with one of our ISO 20022 and payments experts.

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