Another Word For It Patrick Durusau on Topic Maps and Semantic Diversity

April 29, 2012

Legal Entity Identifier – Preparing for the Inevitable

Filed under: Identifiers,Law,Legal Entity Identifier (LEI),Legal Informatics — Patrick Durusau @ 2:04 pm

Legal Entity Identifier – Preparing for the Inevitable by Peter Ku.

From the post:

Most of the buzz around the water cooler for those responsible for enterprise reference data in financial services has been around the recent G20 meeting in Switzerland on the details of the proposed Legal Entity Identifier (LEI). The LEI is designed to help regulators manage and monitor systemic risk in the financial markets by creating a unique ID to recognize legal entities/counterparties shared by the global financial companies and government regulators. Agreement to adoption is expected to be decided at the G20 leaders’ summit coming up in June in Mexico as regulators decide the details as to the administration, implementation and enforcement of the standard. Will the new LEI solve the issues that led to the recent financial crisis?

Looking back at history, this is not the first time the financial industry has attempted to create a unique ID system for legal entities, remember the Data Universal Numbering System (DUNS) identifier as an example? What is different from the past is that the new LEI standard is set at a global vs. regional level which had caused past attempts to fail. Unfortunately, the LEI standard will not replace existing IDs that firms deal with every day. Instead, it creates further challenges requiring companies to map existing IDs to the new LEI, reconciling naming differences, maintain legal hierarchy relationships between parent and subsidiary entities from ongoing corporate actions, and also link it to the securities and loans to the legal entities.

….

While many within the industry are waiting to see what the regulators decide in June, existing issues related to the quality, consistency, and delivery of counterparty reference data and the downstream impact on managing risk needs to be dealt with regardless if LEI is passed. In the same report, I shared the challenges firms will face incorporating the LEI including:

  • Accessing, reconciling, and relating existing counterparty information and IDs to the new LEI
  • Effectively identifying and resolving data quality issues from external and internal systems
  • Accurately identifying legal hierarchy relationships which LEI will not maintain in its first instantiation.
  • Cross referencing legal entities with financial and securities instruments
  • Extending both counterparty and securities instruments to downstream front, mid, and back office systems.

As a topic map person, do any of these issues sound familiar to you?

In particular creating a new identifier to solve problems with resolving multiple “old” ones?

Being mindful that all data systems are capable of and/or contain errors, intentional (dishonest) and otherwise.

Presuming perfect records, and perfect data in those records, not only guarantees failure, but avenues for abuse.

Peter cites resources you will need to read.

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