IBOS – DZero Master Agreement Refresh
Master Tracker - October 2024 Update
DZero Today/Tomorrow: Master Agreement Refresh
• Premise
• DZero Service is a valued service by IBOS clients
• DZero Service is not offered by all IBOS Banks
• Technology barriers
• Contractual barriers
• DZero Framework dated (drafted and executed back in 2000) but still functional and valid
• Impending changes in the payments landscape will create gaps current Master Agreement
• ISO20022, Instant payments 24/7, Open Finance, etc.
• There is a need to supplement the contract with additional features and terms
• Reinforce an exit bank obligations
• Underscore that DZero as currently offered is intellectual property of IBOS
• Build in escalation processes and contingency arrangements for service arrangement
• Other
• Opportunities exist to enhance the service making it more appealing to other IBOS Bank not currently offering DZero and to potential new IBOS Banks in the new membership campaign pipeline
• The attempt made in 2020 to review and update the DZero contract was not successful
DZero Today/Tomorrow: Master Agreement Refresh
• Proposed working method
• The setting up of an agile Working Group in IBOS to drive the exercise
• WG Composed of the four DZero IBOS banks plus any other IBOS banks which wish to participate as observers
• Resources to be made available by each Bank:
• Point person made available by each DZero Bank to collaborate with the Working Group
• Additional internal specialized resources made available “on demand”; Depending on how each bank is organized the areas and competencies to be covered:
• Functional Cash Pooling processes
• Technical messaging facilities
• Bank payment and reconciliation processes
• Credit and Operational Risk
• Legal
• Operations and business continuity
• Other
• Proposed duration for the overall review process to last 6 months
• Support from Knight to facilitate the review exercise
• General paralegal support
• IBOS’s interests review
• UK law review
DZero Today/Tomorrow: Master Agreement Refresh Bank’s required input
Project management proposal:
• 30 day blocks focusing on specific areas
• Two monthly calls for each block
• Written feedback to be provided at close of each block
Individual Bank internal buy in, Formation of the Working Group General Assessment of current Master Agreement
Operational Service Assesment (Set up, Service Variance, BCP)
DZero General Assessment of the current Master Agreement Context
and Background
• Developed as an original service of IBOS
• Agreement dates back to 2000
• Limited information is available on how it was drafted
DZero General Assessment of the current Master Agreement
Brief Overview of the Structure of the Master Agreement
• Premise
• Part I: Definitions and Interpretations
• Part II: General Conditions
• Part III: Service Level Agreements
• Schedules
DZero General Assessment of the current Master Agreement
Premise Key highlights:
Mandates by the customer of the AHB to transfer credit balances in the Concentration Accounts to HB
by the Target customer of the HB to transfer funds from the Master Account to cover debit balances at AHB
DZero General Assessment of the current Master Agreement
Part I: Definitions and Interpretation
Key highlights:
Terminology
Examples: Concentration Accounts, Target Accounts, Master Accounts, Coverage limits, Confirmation, Customer, Customer Group, HB Vostro Account, holding company, subsidiary, balance, etc.
Market Practices and Standards
Examples: Eoina, , SWIFT, etc.
DZero General Assessment of the current Master Agreement
Part II: General Conditions
Key highlights:
Non-Exclusivity clause (legal, antitrust focus)
Confidentiality (legal and compliance focus)
Withdrawal Clauses (operational focus)
Bank withdrawal from DZero with notice (20 days prenotice)
Bank withdrawal from DZero with immediate effect
Ceasing to be a member of IBOS
AHB Client driven termination (10 days prenotice)
Client driven termination (immediate)
Credit Driven
Client dependent
Bank dependent
HB Client driven (immediate)
DZero General Assessment of the current Master Agreement
Part II: General Conditions
(cont’d)
Key highlights:
Termination related to a confirmation (not less than 20 days; not less within 10 days) and application thereof (operational)
Suspension (not exceed 60 days) and application there off (operational focus)
Indemnification (legal focus)
Representations and Warranties (legal focus)
Information (operational focus)
Proof of DZero mandate
Proof of “arrangements” including aggregate coverage limits Fees (operational, commercial focus)
Collection as agent by the HB
Miscellaneous (operational and legal focus)
Communications
Notices
DZero General Assessment of the current Master Agreement Part III: Service Level Agreement
Key highlights:
HB Vostro Account dedicated to only to DZero (operational focus)
Account opening procedures and timing (within 5 days)
Terms and Conditions of the HB Vostro Account
Settlement procedure (i.e. debit/credit balance > Euro 2 mln brought back to -0- settled through EBA/Target2)
Conditions paid or charged on the HB Vostro Account
Eonia flat
Operation of Accounts and of the Coverage Limits
Intraday line
DZero General Assessment of the current Master Agreement
Part III: Service Level Agreement (cont’d)
Key highlights:
Contingency (operational focus)
Reporting and failure thereof (operational focus)
Central Bank Reporting and applicability there off (legal/compliance focus
Same day reporting concerning both the Concentration/Master Account/HB Vostro Account (operational focus)
References in SWIFT MT 950/MT940 (operational focus)
DZero General Assessment of the current Master Agreement Schedules
• SCHEDULE 1 CONDITIONS PRECEDENT TO THIS AGREEMENT
• SCHEDULE 2 CONDITIONS PRECEDENT TO EACH CONFIRMATION
• SCHEDULE 3 CONFIRMATION
• SCHEDULE 4 REPORTING
• SCHEDULE 5 DEED OF ACCESSION
• SCHEDULE 6 ADDRESSES FOR NOTICES
• SCHEDULE 7 NOTICE OF WITHDRAWAL FROM AGREEMENT
• SCHEDULE 8 NOTICE OF TERMINATION OF SERVICES RELATING TO A CONFIRMATION
• SCHEDULE 9 NOTICE OF SUSPENSION OF SERVICES RELATING TO A CONFIRMATION
• SCHEDULE 10 NOTICE TO RESUME SERVICES RELATING TO A CONFIRMATION FOLLOWING SUSPENSION
• SCHEDULE 11 FORM OF REQUEST TO INCREASE COVERAGE LIMIT
• SCHEDULE 12 FORM OF REPLY TO REQUEST TO INCREASE COVERAGE LIMIT
DZero General Assessment of the current Master Agreement
Next Steps
Suggested Analysis Approach to be performed for each Part and section focusing on functions and processes
Validity test
Do the terms actually reflect current market practice, bank procedures (internal, external), client interactions, deadlines, etc.?
If not, can the terms with minor modifications be resolved?
Does the term actually add value to the validity of the contract? (in other words, if eliminated could the overall DZero Master Agreement be simplified?)
In accordance with the Part and Section, agile off line and internal check points to be organized within the next 45 days.
DZero General Assessment of the current Master Agreement
Next Steps
(cont’t)
IBOS DZero Working Group Kick Off Scheduled for 26 July
DZero Banks as well as “Observer Banks” will participate
Sharing of approach and method to be used both for the internal assessment to be performed by each bank and external discussion of the output as the work progresses
Alignment on when the external legal firm Knights will be involved for both paralegal and legal support
DZero General Assessment of the current Master Agreement
October 6th 2023 Update
Following up our July Kick Off sharing of approach and method to be used both for the internal assessment to be performed by each bank and external discussion of the output as the work progresses:
feedback has been received from ISP, KBC, Santander Spain and Santander Portugal
the feedback is being consolidated in a grid to allow further analysis to take place and if required proposals for modification of specific wording
Next Steps:
Circulation of each banks’ observations
Collection of feedback by the end of October 2023 (TBC)
Confirmation by each bank for the “intermediate” freezing of current text or any mutually agreed modified text before first handover to Knights by Nov 10th (TBC) either offline or through a to be scheduled Teams meeting.
Progress made during May 2024
• The Master Services Agreement went through a series of legal and business reviews and was updated internally within IBOS
• The key areas of the MSA that were updated were:
• Signatures – giving the option to opt-out of manual signatures and choose to digitally sign documents
• Non-Euro DZero service
• Call out mechanisms from the MSA to the IBOS portal have been made where further information and guidance can be found. The IBOS portal will provide DZero service information on the following:
• Authorised Signatures
• Host Bank Vostro Account Opening
• Account Holding Bank Fees
• Contingency and Reporting Arrangements
• Exit Strategy and Withdrawal
• A Bank Survey has been produced on functions of the DZero service to understand current readiness and identify any potential issues with the service when going live June 2024 – Next Steps
• Re-engage IBOS DZero banks to provide an update on the status and explain the Survey to them
• Issue DZero Survey to Banks with a completion time of 4-weeks, (12th July)
• Prepare MSA document to be handed over to Knights for updates to the Withdrawal/Exit section
Update – October 2024
• Knights have reviewed and updated the MSA
• The following are Knights proposals prepared based on IBOS’s indications:
• IBOS is a party but with rights to enforce and not a Party for the purposes of obligations
• The Dzero Intellectual property notion has been reinforced for the benefit of IBOS and the Dzero banks
• IBOS role and responsibility has been defined and limited to managing the DZero section of the Portal; IBOS will hence also be a counterpart to the MSA
• Introduction of an incentive mechanism to proactively off-board an exiting DZero bank’s clients - this will require the execution of the definitive MSA by non-DZero IBOS banks
• Updated in accordance with current Data Protection Regulations and confidentiality standards.
• Indemnification clause has been made clearer
• Management of an opt-out mechanism to be managed by the IBOS Portal for identifying situations where electronic signatures can be used bi-laterally between DZero banks for notifications, communications as foreseen by the MSA and its Schedules
• Management of a call-out mechanism to allow for information to be transparently exposed by one Dzero Bank to other Dzero Banks on the following items:
• Host Bank Vostro Account Opening procedure (process, documentation to be provided, fees, Benchmark Interest rate if not ESTER, etc.)
• AHB ISO capabilities during the “Swift MT/MX coexistence” period)
• Incident management and Business Contingency arrangements affecting a respective HB or AHB
• Provision of non Euro Dzero capabilities by a respective HB and AHB
• As an execution strategy for signing the agreement once the definitive draft is identified: MSA Knights proposes “amendment” approach as opposed to a ‘terminate and replace’ approach
• With regards to the opt-out/call-out mechanisms to be displayed on the Dzero Section of the Portal, initial conceptual designs have been identified for how the information will be displayed (see Attached)
Update – October 2024 – Next Steps
• IBOS would like the DZero banks to review Knights proposal to identify any fatal flaws and additional necessary modifications considering all of the work which has been previously performed. As requested when the Project kick off, within each Dzero Banks organisation, we suggest that review should consider the same perspectives involved previously:
• Functional Cash Pooling processes
• Technical messaging facilities
• Bank payment and reconciliation processes
• Credit and Operational Risk
• Legal
• Operations and business continuity
• Other
• Feedback should be received by the 15th December
• We would like the DZero banks to participate in an information session to be organised in mid-November where we will collaborate together to go through the designs to collect additional feedback on how to develop this additional functionality. This functionality will be developed an made available in the IBOS portal after the MSA has been finalised.
