Carla Mangado: Looking to Raise a Glass?

Carla Mangado, Inside Reference Data

Nowadays it seems impossible to attend a data management conference or industry gathering without discussing one of the industry’s most acute challenges: legal entity identification (LEI). This is understandable. After years of not making it onto the regulators’ radar, the need for a viable, global LEI has become part of the greater financial services agenda.

Times are good in the data management space. Back in November last year, the US Treasury’s Office of Financial Research’s (OFR’s) Statement on Legal Entity Identification for Financial Contracts paved the way for the industry to discuss what an ideal LEI would have to look like and the likely path it would need to take in order to get there. Even US senators, European Central Bank president Jean-Claude Trichet, and, more recently, European Commissioner Michel Barnier, have been vocal in stating the need for a unified approach to achieve a common system of identification in the industry.

But let’s not raise the glass before crossing the proverbial finish line. We should not forget that while no one disputes the benefits legal entity identification would bring to data management, the road ahead remains long and bumpy. And the industry is well aware of the challenge ahead, especially considering the fact that questions regarding what the ideal identifier would look like, and perhaps more importantly, the perennial questions of costs and maintenance, remain unanswered.

But one thing is for sure: The data challenge will not be resolved overnight. While looking ahead is necessary for the progression of the industry and there is definitely enthusiasm around the prospect of change, there is still a large number of participants quick to articulate their cynicism until they see a viable, practical and global identifier in place.

In fact, it’s pretty much business as usual for data experts until the LEI materializes, although business as usual in this space does not come challenge-free. Experts have claimed cross-referencing—a well-established reference data challenge—has recently become a more challenging hurdle for firms to negotiate. The need to store clients’ proprietary identifiers in their own master databases seems to be an increasing requirement for many.

And it may just be that this is one of the many reasons why market participants remain cautiously optimistic when it comes to assessing the extent to which the LEI would resolve some of these challenges, as JPMorgan’s Ludwig D’Angelo claimed at the recent FISD Europe event in Madrid.

Back to Basics
The underlying concern regarding the real data challenges firms face remains as strong as ever, despite the hopes of change that industry participants expect to accompany the introduction of an LEI. It seems the regulatory push, as expected, has further emphasized many of the real pitfalls firms have had to grapple with on a day-to-day basis. And many of these hurdles are here to stay, with or without an LEI in place.

Well-established data challenges, and in many cases eternally open questions such as who really owns the data within organizations and how can firms really find out where they stand when it comes to data quality without benchmarking, have arisen once again at industry events after a period of hibernation. But perhaps the most important questions data teams should be asking themselves is who is really leading them though regulatory change, and who takes ultimate responsibility for data management in their organizations? Are chief data officers solely accountable? At a recent meeting a contact told me that he thought the industry needs people willing to take a risk, make a difference, and put themselves on the line. This may just be what data management needs to turn discussions into action. Any candidates?

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