Legal Entity Identification
A more widespread adoption of Legal Entity Identifiers could have changed the outcome of the 2008 financial crisis, according to an Inside Reference Data webcast on Tuesday. But the major players were not using these proverbial data fingerprints, so no one could be sure exactly what types of financial products they had bought and sold, said Matthew Bastian, director of Market and Business Development at CUSIP Global Services.
From the decade-old debate over LEIs to today’s imperative action, the hour-long “Legal Entity Identification” webcast traced the need for a unique system to recognize legal entities worldwide in order to help mitigate risk. Where attempts to implement LEIs have failed in the past, newfound regulatory support and widespread awareness of the issue make these measures more likely to succeed in the near future.
Still local implementation of LEIs by early adopting countries could spell long-term trouble if these geographies do not plan for later execution on a global scale, according to Bastian. Regions might entrench themselves in their own way of doing things, inadvertently placing translation concerns, as well as governance, hierarchy, funding and other obstacles in the way of a worldwide LEI regime.
Panelists recommended that market participants stay abreast of the LEI debate, budget for changes in 2012 and gain familiarity with ISO/DIS 17442, especially its 20-character code for legal entities. Perhaps most importantly, don’t wait for the final decision from regulators.
Though a plurality of the webcast’s viewers indicated they do not expect to see a globally adopted LEI system until 2013 or so (inset), firms should start testing the waters now. The new pool rules could be on deck sooner than we think, though generating them for so many types of swimmers is a complex calculation.
The daunting task of making something so intricate work across multiple geographies is why those creating the global LEI system require input from regions, users, local regulators and others, according to Mark Davies, head of Reference Data for The Royal Bank of Scotland. This concept is familiar to Trading & Risk Technology blog readers.
Other topics addressed in the webcast included items on the LEI agenda for next year and how firms can prepare for change. Click here for the replay.
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