January 05, 2022

NAFCU offers recommendations to Fed on ISO 20022 implementation

Federal ReserveNAFCU Senior Counsel for Research and Policy Andrew Morris wrote to the Federal Reserve Tuesday to provide feedback on the proposed adoption of the ISO 20022 message format for the Fedwire Funds Service.

The Federal Reserve earlier in October announced that it will adopt the ISO 20022 message specification, using a single-day implementation approach that leverages a controlled testing environment. The notice also invited the public to comment on the revised plan for migrating to the new message format, which was previously proposed to run in three separate phases. NAFCU sent members a Regulatory Alert to break down the proposal and solicit credit union feedback.

In the letter, Morris stated NAFCU generally agrees with the Board's assessment that migrating from Fedwire's proprietary message format to the ISO 20022 will improve cross-border interoperability and yield greater operational efficiency.

"However, the benefits of the proposed single day implementation strategy are not as clear and will depend on the results of advance testing," added Morris.

In addition, Morris explained that direct and indirect transitional costs incurred by Fedwire participants and vendors will likely be passed on to credit unions and how these costs vary in response to a crowded or rushed testing environment is difficult to judge.

"NAFCU recommends the Board adopt a flexible implementation strategy that provides credit unions with ample time to test the ISO 20022 messaging format as early as possible," wrote Morris.

Morris also recommended that, with regard to the flexible approach to implementation, the Board should allow for delays to the migration deadline based on progress observed in industry testing environments.

NAFCU will continue to remain in close contact with the Federal Reserve and continue to provide credit unions with updates on this topic via NAFCU Today.