Trade Finance Maintenance Working Group reverses its earlier decision

The Trade Finance Maintenance Working Group (TFMWG) agreed in September 2004 to restrict Category 7 standards to bank-issued letters of credit. At the request of the US banking community this agreement was recently re-evaluated by the Working Group.

The business practice of issuing nonbank letters of credit is used significantly more in the US than in other countries. US institutions argued that restriction of the SWIFT Category 7 standards to bank-issued letters of credit would prevent US banks from offering a full range of trade services to their corporate customers. The TFMWG agreed, and also recognised that this business practice might be taken up in other countries to enhance service offerings.

To cater for nonbank-issued letters of credit, the TFMWG has therefore revised its decision. A temporary way forward for the current Category 7 standards has been agreed.

In the 2005 version of the SWIFT User Handbook, a usage rule will be added that makes clear that it is the responsibility of the sender of the MT 710 and MT 720 to inform the receiving bank about the issuer's nonbank status. This rule will come into effect with the Standards Release of 14 May 2005.

At the next TFMWG meeting in February 2005, the group will discuss a longer-term agreement on dealing with the practice of nonbank-issued letters of credit. The final solution will be implemented as part of SWIFT's 2006 Standards Release.