01.31.2012
By Terry Flanagan

Industry Coalition Tackles LEIs

DTCC to be facilities manager for reference data project.

Development of a global system for uniquely identifying counterparties to financial transactions is taking place through a coalition of industry service providers and international standard-setting bodies.

Legal Entity Identifier (LEI) is a global program designed to create and assign unique identifiers to every financial organization that engages in a financial transaction. Regulators need LEIs to better gauge systemic risk, and risk managers at financial institutions need LEIs to better understand and aggregate counterparty exposures and risk.

As the financial industry’s selected facilities manager for the project, Depository Trust & Clearing Corporation (DTCC) has responsibility for gathering, validating, storing and distributing various data on each legal entity. The other organizations involved include the International Organization for Standards (ISO), the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and the Association of National Numbering Agencies (ANNA).

“LEIs emanated out of the Dodd-Frank Act and other global regulations around reducing systemic risk,” Ronald Jordan, managing director and chief data officer at DTCC, told Markets Media. “Until now, a key piece of reference data had been missing, namely LEIs, which made it difficult for regulators to have a clear picture of the exposures that financial institutions have to each other.”

The need for accurate counterparty exposure measurement and food data to support such measurements has been recognized by international regulators such as the Financial Stability Board and the G20.

“Every type of regulatory body requires information around customers and legal identities,” Mark Davies, vice president of data business development at DTCC, told Markets Media. “Regulations such as Dodd-Frank and MiFID all include requirements for identifying legal entities.”

Davies, who is based in London, is spearheading DTCC’s involvement in the LEI program in Europe. That will include participating in the development of a distribution strategy, serving as a subject matter expert on the LEI business with regulators and industry committees and representing DTCC in customer meetings, customer forums and regulatory meetings.

“LEI is a global project, and DTCC have been looking to establish a presence in London to coordinate with market participants’ in Europe,” said Davies.

Davies joined DTCC from the Royal Bank of Scotland (RBS), where as head of reference data he managed the legal entity database for RBS across divisions. He also managed all datasets required for reporting in the group risk platform, and set strategy for reference data involving legal entities and risk data.

DTCC and SWIFT, along with DTCC’s subsidiary Avox Ltd., will operate the core LEI utility as the central point for data collection, data maintenance, and LEI assignment.

DTCC, as facilities manager, will collect requirements for new LEIs to be created, validate the information by leveraging Avox’s capabilities, maintain and store reference data associated with each LEI, and maintain public distribution of the LEI database.

ANNA, though its network of local national numbering agencies, will act as the “local face” of the LEI utility in home markets.

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