LEI's Big Payoff

After years of following the ongoing story of the legal entity identifier (LEI) - from setting its characteristics and setting up all the administrative bodies that would administer it - the stories in this month's issue of Inside Reference Data show that positive impacts of its implementation are starting to appear.

While that implementation may not be totally complete, industry professionals are actually eager to have the regulatory mandate pushing the LEI's adoption, as reported in "Securing LEI Success." Regulatory imposition of the LEI, as industry lobby Sifma has called for, would actually ensure that more LEIs exist to enter into firms' systems, says CIBC's Allie Harris. Citi's Ari Marcus echoes that sentiment, saying regulators should require LEIs to be used in regulatory filings. This would promote adoption of the LEI and ensure that firms are compliant as long as they "follow the mandate," which would remove a lot of uncertainty and concern, Marcus says.

Although the US Internal Revenue Service recently declined to include the LEI in implementation of the Foreign Account Tax Compliance Act (Fatca), Matthew Reed of the US Treasury's Office of Financial Research held out hope that the LEI may be added as an official identifier for Fatca later. And, as Marcus says in a more detailed account of Citi's experience with the LEI, his firm has been able to adopt centralized systems, which improve its risk management.

With all the value on the horizon or already here as a result of the LEI, one wonders if Fatca or the Basel Committee on Banking Supervision's BCBS 239 risk data aggregation principles will have similar benefits and whether such benefits will be recognized. It's certainly possible with BCBS 239, as UBS's Simon Feddo says in "Stress Emphasis." Feddo recognizes benefits that the LEI had for risk data aggregation, and suggests that the BCBS 239 principles have helped spur his firm to make linkages between data on clients, accounts and trading agreements.

Certainly, when it comes to Fatca, which has become the elephant in the room for the industry as its July 1 deadline nears, the regulation has driven changes in the way data operations are conducted, as described in "Last Orders," an account of the discussion from a webcast held on May 28. Barclays' Mark Gilmartin related that data quality improvements are occurring because of the data aggregation and consolidation work being undertaken for Fatca compliance. Client onboarding operations, while not considered as crucial by respondents to a poll taken in the webcast, are also getting more funding, because the root cause of data issues relevant to Fatca compliance should be addressed from the beginning, said Informatica's Peter Ku.

Whatever the reasoning, any effort to improve data quality and make data more consistent should do more good than harm. Whether that's driven by the LEI, Fatca, BCBS 239 or something else, regulation and standards efforts are generating value in unexpected ways.