If you have dealt with any international trade financing through instruments like Bank Guarantees, Documentary Credits, and Letters of Credit (LCs), you must have heard of FIN MT 798, which comes under a category 7 SWIFT code that is used to support the processing of bank guarantees and documentary credits between banks all over the world. In trade finance, we have many bank-to-bank and corporate-to-bank messaging systems which allow for the easy flow of information relating to trade finance transactions. MT 799, MT 760 and MT 798 are one of the most prolific messaging types for documentary credits, standby Letters of Credit and Bank Guarantees.
All the trade finance processes includes fragmentation, high quality and hard working labour work, and is burdened by high levels of documentation. Handling the documents and all the transactions becomes a great challenge for many clients and their subsidiaries, especially on the point where they lack standardised and automated processes. Documentary credits and bank guarantees have to be handled with local solutions, proprietary systems and different bank interfaces on a frequent basis.
Moreover, clients do not have much power on the visibility of the conditions and utilisation of their bank guarantees and documentary credits. Inadequate transparency works to prevent clients from monitoring their incoming documentary credits and using their credit lines efficiently.
What is the format of the MT 798?
Depending on the type of transaction (e.g. applying for a documentary credit, issuing an SBLC, or probably refusing a Letter of Credit), the format differs from others, and the sub-messages which are incorporated into the MT 798 will also be different.
What information is required by the financial institution?
A funder will always ask for the name of the advising bank. However, they will request more granular detail, for example the LC Number and LC Amount. This also includes the tenor or length of the draft. This will come alongside with the latest date of shipment. The funder should be aware of the company that is liable for the confirmation fee and is needed to be known along with all the information on what the products are being traded, location, port, unloading location and whether the LC is restricted for negotiation or is not.
Some of the information for an MT 798, which is required by a financial institution include:
- Unique Transaction Number
- Sub-Message Type
- Method of Issue – (How the Documentary Credit is Issued, e.g., courier and post type)
- Bank Details
- Charges Payable to the Bank
- Who pays the confirmation charges
- Transport Mode (e.g. Air, Sea, Rail, Road)
- Forward Contract Reference Numbers
- File Identification Number
- Bank Details
Smooth end-to-end integration
A huge amount is counted when it comes to counting the number of clients that are already using SWIFT's multibank communication standards in order to handle payment transactions. With the introduction of the Corporate-to-Bank SWIFT Trade message MT798, SWIFT is also offering further automation and greater efficiency around all the following Trade Finance transactions. "Through MT798, letters of credit on the import and export side, as well as guarantees, can be handled through one single communication channel,"; these are the wordings of Shivkumar Seerapu, who is the Regional Head of Trade Finance, Asia Pacific at Deutsche Bank. "This solution also helps in delivering smooth, end-to-end integration in the client's enterprise resource planning (ERP) and treasury management systems (TMS), which in turn facilitates efficient, straight-through processing workflows."
Since the implementation has been done of the Single Euro Payments Area (SEPA), the demand for automation and standardisation of cash management businesses has increased and is growing tremendously, and the focus is also increasing at a rapid rate even for Trade Finance. Deutsche Bank has been offering MT798 messaging for many previous years, supporting companies on a daily basis, whether they are considering MT798 for their trade business, working on its implementation or have already adopted this solution.
Optimising processes, increasing automation levels
"Our close collaboration with Deutsche Bank allows us to extend SWIFT agreements for our guarantee business in Germany," are the wordings of Gerald Böhm, who is the Head of Guarantees and Trade Finance at Voith Financial Services GmbH. "The complete and smooth integration into our systems enables us to optimise processes and increase automation levels."
SWIFT MT798 is supported by many treasury management systems, which makes it easy to integrate into clients’ and bank systems. In collaboration with TMS providers, Deutsche Bank is extending the cash integration solution for the Trade Finance business. In the future, this will help in enabling documentary credit and guarantee transaction which has to be handled using the SWIFT MT798 format through an existing integrated solution. This pragmatic component brings flexible benefits for Deutsche Bank’s clients, for example an increased automation and a comprehensive overview of all transactions. In addition, clients are usually only in need of a single multibank TMS, that supports global industry standards and fulfils regulatory requirements, for all their cash management and Trade Finance transactions.
What is the Scope of the message MT798
They use this message mainly in financial institutions, within their own offices, with other financial institutions and/or with corporate customers with which they have established good bilateral agreements.
They use it as an envelope which gives a specified message included in it. It basically gives a unique format for which another message type is not available or applicable. It also allows financial institutions to use message types which are awaits for the live implementation on the SWIFT system.