Legal Entity Identifiers special report

ird-legal-entity-identifier-report-march2013

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Crawling Before Walking

In the Virtual Roundtable conversation on legal entity identifiers (LEIs) on page 8, the biggest remaining issues for LEI implementation that emerge are duplications, concerns about discrepancies between local operating units, and costs.

UBS's Simon Taylor says his main concerns are with duplication of entities, which causes problems for assigning CICIs, the US CFTC's interim identifier and precursor to the LEI. Taylor believes an underlying country-specific registration ID could increase the accuracy of identifiers. Scott Preiss of Cusip Global Services says National Numbering Agencies (NNAs) can improve the value of the LEI initiative with their expertise.

That points to efforts to leverage overall benefits from the LEI, about which Tony Brownlee of Kingland Systems observes, later in the conversation, that complex internal systems and processes in the largest firms could benefit from the presence of LEIs. Taylor adds that the rating agencies ought to add LEIs to issuer files, which would produce a consolidated, straightforward view of ratings.

Alacra's Tom Cosgrove sees issues with the potential variations that could result from different local operating units (LOUs) administering the LEI, and suggests that the central operating unit (COU) will have to carefully monitor them. LOU operations should be synchronized to have a single LEI database, Cosgrove says. Mark Davies of Avox notes that without a federated structure, differences between the LOUs are inevitable.

Lastly, costs. Participants in the conversation expect significant costs for systems integration, data migration, internal systems adoption, data remediation and data governance as a result of LEI implementation. Costs are to be expected, says Davies-and LEI investments can produce better risk management and reporting.

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