The Banking Commission Executive Committee has authorized the Steering Committee of the Digitalisation Working Group to proceed with a revision of the Uniform Rules for Bank Payment Obligations (URBPO).
Under the auspices of the ICC Working Group on Digitalisation in Trade Finance, the ICC Banking Commission created a sub-stream for BPO that included three objectives:
1. Marketing and Awareness of BPO in its current state.
2. Revision of the URBPO to include the roles and responsibilities of buyers and sellers and modify it to address conditions within distributed ledger technologies (DLT) that create obligations.
3. Address in conjunction with the “standards” stream of the digitalisation working group data standards which improve the Trade Services Utility (TSU) and/or lay the framework for smart contracts and other data enablers to support DLT.
The initial aim of the second objective was to evaluate the existing URBPO in order to determine whether a revision of the rules would be required.
Rationale for revision of URBPO
As mentioned in the introduction to the URBPO rules, the scope of the rules lies solely in the bank-to-bank space as agreed in the memorandum of understanding signed between ICC and SWIFT in September 2011. The URBPO do not cover the interaction between a bank and their corporate client.
However, it was recognised at the time of drafting that, at a future indeterminate date, a ‘phase 2’ would be required in order to address incorporation of the buyer and seller into the rules (including, but not limited to, the four corner model for Supply Chain Finance). In view of the fact that many ICC National Committees had requested such an objective, the concept of a ‘phase 2’ was openly communicated at various Banking Commission plenary sessions.
In addition, with the advent of Distributed Ledger Technology (DLT) & Blockchain applications, there is a further need for a form of risk mitigation. As such, modification of the URBPO is required in order to address conditions within DLT technologies that create an obligation to pay and facilitate financing.
Provided the rules can be revised to accommodate such progress, the BPO can serve as a framework for risk mitigation in the emerging technologies.