New SWIFT Payment Format to Impact Bank-to-Bank Cover Payments

E-mail

A new payment format — MT202COV — was introduced by SWIFT as part of their 2009 Standards Release, and J.P. Morgan is using it for all currencies and in all jurisdictions in which we clear cover payments.

MT202COV changed the way banks transfer payment originator and beneficiary details through the payment chain. These regulatory changes, which are designed to strengthen transparency in the payment industry, affect all SWIFT member banks processing commercial payments through the cover payment method. The MT202COV changes are global and apply to all currencies. All SWIFT participants that use the cover payment method are expected to comply.

How the Change Will Be Implemented

This new payment format is used only for bank-to-bank payments that provide covering funds for a commercial (MT103) transaction. The MT202COV carries additional “sequence B” information with customer credit transfer details from the underlying MT103 sent using the cover method. It's important to note that the MT202COV does not replace the existing MT202, which will continue to be used for treasury and trade related bank-to-bank payments.

J.P. Morgan & the New MT202COV Format

J.P. Morgan is able to receive, process and generate the new MT202COV payment format in all currencies and jurisdictions in which we clear.

What You Need to Do

Since all SWIFT member banks must be able to receive and process the new MT202COV payment message, you have likely already made changes in your payment systems in order to carry additional information in the message or to receive and act on this information. Banks that send MT202 cover payments are expected to use the new MT202COV format; this may have required system changes to generate “sequence B” information and to meet new local settlement infrastructure processing criteria.

Regulatory requirements in the receiver's country determine the level of additional processing required; this additional processing is the same as that currently applied to customer credit transfer messages.

The new format also applies to MT205 domestic transfer messages, so there will also be a new MT205COV for domestic customer credit transfer messages using the cover method.

One Possible Alternative

Clients originating commercial payments do have an option. They can send payments to their correspondent banks using the serial payment method (MT103) instead of using the direct and cover method (MT202COV with an MT103 advice to the beneficiary's bank). This option offers a number of potential benefits, including avoiding expensive and time consuming systems changes.

Need More Information?

For additional information on how this may impact your account with J.P. Morgan, please contact your J.P. Morgan Treasury Services representative.