Slide 1 Introduction to ISO – Universal financial industry message scheme ISO_20022_LV_v58 ISO 20022

Slide 2 Agenda  ISO 20022: –Value proposition –The standard –The actors –The registration process –The Repository  ISO registration platform  Cross industry harmonisation  Interoperability within the financial industry  Q&A ISO_20022_LV_v58

Slide 3 The ISO value proposition (1/5) Objective To enable communication interoperability between financial institutions, their market infrastructures and their end-user communities ISO_20022_LV_v58 Major obstacle Numerous overlapping standardization initiatives looking at XML financial messages: MDDL, FIX, FinXML, VRXML, RIXML, XBRL, FpML, IFX, TWIST, SWIFT, RosettaNet, EPC, OAGi, ACORD, CIDX, etc.

Slide 4 ISO_20022_LV_v58 The ISO value proposition (2/5) Proposed solution A single standardisation approach (methodology, process, repository) to be used by all financial standards initiatives ISO 20022

Slide 5 ISO_20022_LV_v58 The ISO value proposition (3/5) Convergence into ONE standard is the long term objective… … but in the interim several standards need to coexist to enable quick response to competitive pressures and regulatory demands

Slide 6 ISO_20022_LV_v58 The ISO value proposition (4/5) RosettaNet TWIST Proprietary format SWIFTIFX EDIFACT Without common building blocks: Point-to-point connection Data is mapped directly from one application to another Costly, unscalable and difficult to implement and maintain Process, routing, rules logic needs to be coded to specific message types 42 interfaces = n * (n-1 ) OAGi Source: John Mersberg, IBM Corporation Growth adds exponential complexity and expense…

Slide 7 ISO_20022_LV_v58 The ISO value proposition (5/5) SWIFT Canonical Message Model (i.e. ISO 20022) 14 interfaces = n * 2 Proprietary format RosettaNet TWIST IFX EDIFACT OAGi Canonical message model = True process integration Reduced brittleness, faster to respond to change Shared message services – single/shared parser, message independent rules engine, etc. Unified monitoring / audit trail Standardized implementation reduces cost, time to effect change and improves overall performance… ISO aims at long term convergence, while facilitating short term coexistence…

Slide 8 ISO Illustrating business modelling All institutions have their own sets of data objects …and groups them into ‘syntax- neutral’ message models, which... Order Date XML ISO … can be ‘transformed’ in message formats in the desired syntax FIX ASN.1 ISO standardizes common data objects… Account Order Date ISO_20022_LV_v58

Slide 9 The ISO recipe Main ingredients (1/2):  Modelling-based standards development –Syntax-independent business standard –Validated by the industry  Syntax-specific design rules for XML –Predictable and ‘automatable’ –Protect standard from technology evolution  Reverse engineering approach –Protect industry investment and ease interoperability –Prepare for future migration ISO_20022_LV_v58

Slide 10 The ISO recipe Main ingredients (2/2): ISO_20022_LV_v58  Development / registration process –Clearly identified activities and roles –Business experts and future users involved upfront –Technical experts involved when required  Repository on the ISO website –Business Process Catalogue & Data Dictionary –Outside of official standard (maintained by registration bodies)

Slide 11 The six parts of ISO PART 1: International Standard: Overall methodology and format specifications for inputs to and outputs for the ISO Repository PART 2: International Standard: Roles and responsibilities of the registration bodies PART 3: Technical specification: ISO modelling guidelines PART 4: Technical specification: ISO XML design rules PART 5: Technical specification: ISO reverse engineering PART 6: International Standard: Message transport characteristics ISO_20022_LV_v58 Copies can be obtained from

Slide 12 ISO 20022: The actors (1/2) ISO_20022_LV_v58 Submitting organisations Could be Communities of users or organisations that want to develop ISO compliant messages to support their financial transactions CBI Consortium Clearstream CLS EPAS EPC Euroclear FPL FpML IFX ISITC ISTH MDDL NBB OAGI Omgeo SC7/WG9 SWIFT TBG5 TWIST 4CB etc.

Slide 13 ISO_20022_LV_v58 ISO 20022: The actors (2/2)  Registration Management Group, RMG –Overall governance, court of appeal –Approve business justifications for new standards –Create Standard Evaluation Groups (SEGs)  Standards Evaluation Groups, SEGs –Represent future users in specific financial areas –Validate candidate message standards  Registration Authority, RA –Ensure compliance –Maintain and publish ISO Repository  Technical Support Group, TSG –Assist RMG, SEGs, RA and submitting organisations

Slide 14 ISO_20022_LV_v58 ISO The registration process (1/3) Submitting organisation Financial industry group or standards body Business justification Business justification RMG Project approval & allocation to a SEG Submitter & RA Development & provisional registration SEG Business validation RA Official registration and publication Repository Dictionary Catalogue Optional pilot testing or first implementers RMGmonitorsRMGmonitors Submitter & users

Slide 15 ISO_20022_LV_v58 ISO The registration process (2/3) RMGmonitorsRMGmonitors Submitting organisation Financial industry group or standards body Business justification Business justification RMG Project approval & allocation to a SEG Submitter & RA Development & provisional registration SEG Business validation RA Official registration and publication Repository Dictionary Catalogue Optional pilot testing or first implementers Submitter & users Candidate ISO messages ISO messages

Slide 16 ISO_20022_LV_v58 Registration Management Group Registration Authority Standards Evaluation Groups Securities Payments Trade services Forex Cards Business justification Business models Candidate ISO messages ISO messages ISTH FPL CLS SWIFT Euroclear EPAS ISO users ISO Financial Repository Data Dictionary Business Process Catalogue ISO The registration process (3/3)

Slide 17 ISO The Financial Repository  Data Dictionary –Business Concepts –Message Concepts –Data Types  Business Process Catalogue –Financial business process models –Financial business transactions, including messages –XML message schemas ISO_20022_LV_v58

Slide 18 ISO ISO Registration Platform ISO_20022_LV_v58 Continuing with today’s agenda…

Slide 19 ISO The Deployment  Approval of the international standard  Selection of the Registration Authority  Set-up of the  Creation of Registration Management Group  Creation of the first Standards Evaluation Groups  Registration and publication of first ‘ISO messages’ ISO_20022_LV_v58 Ongoing: promotion to developers (standardizers, industry bodies) and users (vendors, end-users)

Slide 20 ISO How does it fit into the ISO structure? ISO_20022_LV_v58 ISO Technical Committee TC68 Financial Services ISO RMG SEG Payments SEG Securities RA SEG FX RMG members nominated by P-member countries and A- liaison organisations TSG & SEG members nominated by all member countries and liaison organisations SC7 Banking SC4 Securities SC2 Security WG4 ISO Review SEG Trade Services TSG SEG Cards

Slide 21 ISO Registration Management Group (RMG)  Members - 69 senior managers from: –21 countries: AT, AU, BR, CA, CH, CN, DE, DK, FI, FR, GB, IT, JP, KR, LU, NL, NO, RU, SE, US, ZA. –12 liaison organisations: Clearstream, ECB, Euroclear, FISD, FPL, FpML, IFX, ISITC, SWIFT, TWIST, UN/CEFACT/TBG5, VISA  Convener: Gerard Hartsink, ABN Amro (NL); Vice- convener: Bob Blair, JPMorgan Chase (US); Secretary: Cynthia Fuller, X9 (US)  Meetings: twice a year  Key decisions : – Creation of five SEGs: Payments and Securities in 2005, Trade Services and Forex in 2006, Cards & Related Retail Financial Services in 2008 – Approval of 40 development projects ISO_20022_LV_v58

Slide 22 ISO – The Payments SEG (1/3)  Members – 55 experts –17 countries: AT, AU, CH, DE, DK, FI, FR, GB, IT, JP, KR, NL, NO, RU, SE, US, ZA –6 liaison organisations: Euroclear, IFX, ISITC, SWIFT, TWIST, UN/CEFACT/TBG5  Convener: vacant; Vice-convener: Bob Blair, JP Morgan Chase (US); Secretary: Deb Hjortland, FRB (US)  Approved: C2B payment initiation (SWIFT/ISTH), Interbank credit transfers and direct debits (SWIFT), Exceptions and investigations (SWIFT), B2C advice & statement (ISTH/ISITC), Mandates (SWIFT), Change/verify account identification (GUF), Bank account management (SWIFT)  Under evaluation: Creditor payment activation request (CBI Consortium), Cash account reporting request and notification (SWIFT)  Next: Cash management (SWIFT), Cash lodgement and withdrawal (NBB) ISO_20022_LV_v58

Slide 23 ISO – The Payments SEG (2/3) ISO_20022_LV_v58 Payments Credit transfers Covering instruments such as: Direct debits Cheques Covering actors such as: Private & corporate customers Financial institutions Central banks Clearing houses & RTG systems

Slide 24 ISO_20022_LV_v58 Payments Including business areas such as: Communications between the ordering customer and its bank, etc. Interbank transfers via correspondent banking or ACHs, high value payments, low value bulk payments, RTGS, etc. Account opening, standing orders, transaction and account information, advices & statements from … Payment initiation Clearing & settlement...the account servicing institutions to account owners, including reporting from the financial institution… …to the ordering & beneficiary customers, reconciliation, exceptions & investigations handling. ISO – The Payments SEG (3/3) Cash Management between various actors:

Slide 25 ISO – The Securities SEG (1/3)  Members – 72 experts –19 countries: AU, BR, CA, CH, DE, DK, FI, FR, GB, IE, JP, LU, NL, NO, RU, SE, TR, US, ZA –8 liaison organisations: Clearstream, ECB, Euroclear, ISDA/FpML, ISITC, FISD, FPL, SWIFT  Convener: Kevin Wooldridge, Standard Logic (UK); Vice-convener: Didier Hermans, Euroclear; Secretary: Chad Spitler, BGI  Approved: Investment funds (SWIFT), Transaction regulatory reporting (SWIFT), Proxy voting (SWIFT), Issuer’s agents communication for CA (Euroclear), FPP report (SWIFT), Corporate actions (SWIFT), Settlement & reconciliation (SWIFT)  Under evaluation: Pre-trade/trade (SWIFT/FPL)  Next: Total portfolio valuation statement (ISITC), Post-trade (SWIFT/Omgeo), Registration & holder identification (Euroclear), Market claims & automatic transformations (Euroclear), Securities issuance (Euroclear), Triparty collateral management (SWIFT), Alternative funds (SWIFT), Modification/replace & allegement response (SWIFT), Target2-Securities (SWIFT/Bundesbank on behalf of 4CB), CCP Clearing (FPL/SWIFT) ISO_20022_LV_v58

Slide 26 ISO – The Securities SEG (2/3) ISO_20022_LV_v58 Securities Equities Covering instruments such as: Funds Fixed income Covering actors such as: Investment managers, distributors, transfer agents, fund administrators Broker / dealers Regulators Stock exchanges, ETC providers Deriva- tives Clearing houses, CCPs CSDs, ICSDs Market Data Providers Custodians Service bureaux

Slide 27 ISO – The Securities SEG (3/3) ISO_20022_LV_v58 Including business areas such as: Account opening, standing orders, transaction and account information, advices & statements, queries & investigations Income, corporate actions, market data, proxy voting Collateral, repos, securities lending & borrowing Custody Collateral management Trade Initiation, pre- trade Trade, post- trade Clearing & settlement Securities Securities Issuance

Slide 28 Looking at the advantages ISO brings over ISO ISO 20022:  Builds on the ISO data dictionary concept and registration infrastructure, but strengthens the monitoring by the industry  Uses a more robust, syntax independent development methodology based on UML modelling of business processes and transactions  Uses XML as the syntax for the actual physical messages  Has a wider scope than ISO 15022, which is only for securities messages  Is in line with directions taken by other industries (UN/CEFACT) ISO_20022_LV_v58 Syntax independent business modelling is key to the ISO standard !

Slide 29  Members – 32 experts –14 countries: AU, CA, CH, DE, FI, FR, GB, NL, NO, RU, SE, TR, US, ZA –4 liaison organisations: FISD, FPL, ISITC, SWIFT  Convener: Ludy Limburg, ABN Amro (NL); Vice- convener: Tony Smith, JP Morgan Chase (UK); Secretary: vacant  Kick-off meeting: in September 2006  Approved: Forex notifications (CLS) ISO_20022_LV_v58 ISO – The FX SEG (1/3)

Slide 30 ISO – The FX SEG (2/3) ISO_20022_LV_v58 Foreign eXchange Spot Covering instruments such as: Forward Swaps Covering actors such as: Investment managers Hedge funds Dealers Custodians CLS and CLS settlement members Currency Options Industry associations (ISDA) Application providers Money brokers Trading portals, matching services providers

Slide 31 ISO_20022_LV_v58 ISO – The FX SEG (3/3) Including business areas such as: Clearing and Settlement, including netting and related reporting Post-trade: confirmation, matching, assignment, novation, etc. Notification of trades to third parties Pre- trade: IOI, quotes, etc. Trigger events, option exercises Trade: order, execution, allocation, affirmation, etc. Foreign eXchange

Slide 32  Members – 28 experts –14 countries: AU, CA, CH, DE, DK, FI, FR, GB, IS, IT, JP, NL, US, ZA –2 liaison organisations: ISITC, SWIFT  Convener: Tapani Turunen, Tieto (FI) Vice-convener: Peter Potgieser, ABN Amro (NL); Secretary: Jim Wills, SWIFT  Kick-off meeting: in September 2006  Approved: Invoice Financing Request (CBI Consortium), Trade Services Management (SWIFT)  Next: e-Invoice (UN/CEFACT/TBG5) ISO_20022_LV_v58 ISO The Trade Services SEG (1/3)

Slide 33 ISO The Trade Services SEG (2/3) ISO_20022_LV_v58 Trade Services Documentary credit …and services such as: Open Account Trading Reconciliation (A/R, A/P), remittance data Purchase order, transport documents Guarantee Invoice financing e-Invoicing EBPP Covering products… Collection Letter of credit

Slide 34 ISO The Trade Services SEG (3/3) ISO_20022_LV_v58 Including actors such as: Trade facilitators: chambers of commerce, insurance co, freight forwarders, carriers, customs, factoring co Associations providing rules and master agreements (eg IFSA, ICC) Private and corporate customers (treasurers) Application providers Financial Institutions Trade Services Risk management entities

Slide 35 ISO – The Cards & Related Retail Financial Services SEG (1/3)  Members – 29 experts –13 countries: AT, AU, CH, DE, FI, FR, GB, JP, KR, RU, SE, US, ZA –4 liaison organisations: IFX, Mastercard, SWIFT, VISA  Convener: Chris Starr, APACS (GB); Vice-convener: William Vanobberghen, Groupement des Cartes Bancaires (FR); Secretary: Reinhard Herwig, SRC (DE)  Kick-off meeting: on October 2008  Under evaluation: Card payments exchanges (EPAS Consortium)  Next: Acquirer to Issuer Card Messages (TC68/SC7/WG9), ATM interface for transaction processing and ATM management (IFX Forum) ISO_20022_LV_v58

Slide 36 ISO – The Cards & Related Retail Financial Services SEG (2/3) ISO_20022_LV_v58 Card issuer Cards and Retail Covering instruments… …and actors such as: Card holder Acceptor (merchant, retailer) Acquirer Intermediary agent Card scheme Hard- and Software providers Debit card Prepaid card Charge and credit card

Slide 37 ISO – The Cards & Related Retail Financial Services SEG (3/3) ISO_20022_LV_v58 Including business areas such as: POI messages for payments, administrative and device related services Similar messages transacted on internet or from mobiles or other personal devices Transactions between acquirers and card issuers ATM processes such as authorization, processing, ATM management and inventory Transactions between merchants and acquirers, and cardholders and issuers that support authorization, clearing, reversal, chargeback, dispute processing, etc.

Slide 38 ISO – Technical Support Group  Members – 29 experts –11 countries: BR, CN, FI, FR, GB, JP, KR, NL, RU, US, ZA –5 liaison organisations: Euroclear, FPL, Mastercard, SWIFT, VISA  Convener: Derek Lasalle, JP Morgan Chase (US); Vice- convener: Paul Hojka, APACS (GB); Secretary: Kris Ketels, SWIFT  Kick-off meeting: on October 2008  Mission: help RMG, RA, SEGs and Submitting Organisations with technical matters ISO_20022_LV_v58

Slide 39 Continuing with today’s agenda… ISO_20022_LV_v58 ISO Cross-industry harmonisation

Slide 40 ISO_20022_LV_v58 Harmonising across all industries with UN/CEFACT  Created in 1997 to improve world-wide co-ordination of trade facilitation across all industries  Focusing on international standards for electronic transactions (e.g., ebXML venture with OASIS)  Promoting technology neutral business modelling and a central library of core components Goal is to establish interoperability between ISO and UN/CEFACT repositories United Nations/CEFACT – Centre for trade facilitation and e-business

Slide 41  2004: TC68, TBG5 and SWIFT sign a MoU to investigate harmonisation  2005: Trial submission from ISO to UN/CEFACT  2006: ISO TC68/WG4 takes over technological alignment  2007: –First official submission from ISO to UN/CEFACT –Project of submission from UN/CEFACT to ISO  2008: Customer-to-bank payment components harmonised and accepted in UN/CEFACT core component library  2009: The cooperation is placed under the umbrella of the ‘MoU on e- Business’ ISO_20022_LV_v58 Harmonisation between ISO and UN/CEFACT

Slide 42 ISO_20022_LV_v58 ISO Registration Management Group ISO Registration Authority ISO Standards Evaluation Groups Securities Payments Trade services Forex Cards TBG5 Finance and TBG17 Harmo- nisation ISTH Omgeo CLS SWIFT Euroclear CBI ISO users ISO Financial Repository Data Dictionary Business Process Catalogue A single ISO-UN/CEFACT approach UN/CEFACT Registry/Repository Core Component Library Common Business Processes UN / CEFACT (all industries) Business models Candidate ISO messages

Slide 43 ISO_20022_LV_v58 Continuing with today’s agenda Interoperability within the financial industry ISO 20022

Slide 44 All institutions have their own sets of data objects …and groups them into ‘syntax- neutral’ message models, which... Order Date ASN.1 FpML … can be ‘transformed’ in message formats in the desired syntax FIX ISO ISO standardizes common data objects… Account Order Date ISO_20022_LV_v58 Using ISO modelling to reach interoperability

Slide 45 ISO_20022_LV_v58 Card payments ISO compliance at model level Repository Dictionary Catalogue Payments clearing & settlement ISO message models ISO Dictionary ASN.1 syntax ISO XML syntax physical message representation

Slide 46 ISO_20022_LV_v58 Card payments Repository Dictionary Catalogue Payments clearing & settlement ISO message models ISO Dictionary ASN.1 syntax ISO syntax ISO compliant ‘using a domain specific syntax’ physical message representation ISO compliant ISO compliance at model level

Slide 47 Securities industry “Investment Roadmap” FIX, ISO, FpML syntax Cash Equities & Fixed Income ForexListed Derivatives OTC Derivatives Funds Pre-Trade Trade Post-Trade Clearing / Pre-Settlement Asset Servicing N/A Settlement Pricing / Risk / Reporting FIX, ISOISO, FpML FIXISOFpML ISO_20022_LV_v58 The Investment Roadmap will be updated and expanded to include new business areas supported by FISD and XBRL

Slide 48 Interoperability in the customer-to-bank payment domain ISO_20022_LV_v58 Let us look at a concrete example from payments area: a customer may need to adapt to the format of the banks… Customer A Bank A Bank B Bank C Proprietary format SWIFT MT 101 IFX format

Slide 49 ISO_20022_LV_v58 …or banks may need to accept many formats… Bank A Proprietary format IFX format Customer ACustomer CCustomer B SWIFT MT 101 Interoperability in the customer-to-bank payment domain

Slide 50 ISO_20022_LV_v58 SWIFT MT The reverse engineering produces a canonical ISO message model Proprietary TWIST OAGi IFX Interoperability in the customer-to-bank payment domain ISO Core Payment Kernel model

Slide 51 ISO_20022_LV_v58 Adopting ISO facilitates convergence and co-existence IFX MT 101 Interoperability in the customer-to-bank payment domain ISO Core Payment Kernel Core Payment Kernel IFX MT 101

Slide 52 ISO_20022_LV_v58 & & uestions A nswers