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A-Team Analysis: Future of IBEI in Question as Eight Countries Vote it Down; Could the BIC Be the Answer?

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The results of the second ballot among national markets on ISO 16372 International Business Entity Identifier (IBEI) are in – and with eight countries voting against and six for (plus three abstentions and four no votes), the future’s not looking very bright for the standard. That said, as one industry observer puts it, “it’s not dead until a stake is driven through its heart!” The plan now is to discuss the vote and the extensive comments provided by the national markets at the ISO TC68 SC4 plenary meeting in South Africa in November, so the story continues.

The reasons given by the against countries – which include the US and the UK – are essentially that the cost of introducing the standard would be prohibitive and that it is redundant because the industry already has the BIC to serve this function. The lack of a Registration Authority for the standard also gets a couple of mentions, as an indicator that while IBEI is a nice idea in theory, the lack of a willing RA is proof that it doesn’t make much practical sense. Though the cost angle can’t be denied, the other reasons given are arguable with: the shortcomings of the BIC (lack of uniqueness, the fact that it is really an address code not an identifier et cetera, et cetera) are well-known, as is the history of the search for an RA: the industry wants Swift to step up to the plate, but it’s not historically been keen to take on the mammoth task of identifying all corporates. The co-operative’s views could be changing however – of which more later.

But it has to be said that the fairly resounding no from the international community does seemingly prove right those detractors of the ISO process who say developing standards in a vacuum, without sufficient input from the markets themselves, doesn’t work. We can testify to the difficulty of getting hold of the information about the vote, for example: what is the earthly sense of making the process of developing and agreeing standards so opaque?

There are some fairly firm yeses as well, to be fair – notably Switzerland which is profoundly in favour of the IBEI. Though to complicate matters, it likes the approach taken by some of the national numbering agencies – Telekurs, the London Stock Exchange and WMDatenservice for example – to issue their “own” IBEIs. This approach continues to cause controversy. Market practitioners are still confused about the implications for transaction reporting under MiFID, for example. For starters, the UK’s Financial Services Authority has mandated the use of FSA Reference Number, BIC or consistent internal code in transaction reports under MiFID – making no mention of the LSE’s IBEI. And firms in London are asking whether, if they transaction report in Germany, they would have to cross-reference the German IBEI with the FSA code.

Whatever happens now with IBEI, it seems pretty clear it’s not going to happen very quickly. Which is presumably why the pragmatic approach of making do with the BIC – which Swift is cleaning up and extending, so far to investment funds, using what it’s calling CIVICs – looks to be winning the day at the moment. The buzz at Swift’s Sibos conference in Boston earlier this month had it that Swift is essentially building up to making the BIC a universal identifier, despite its protestations in the past that it did not want to be the RA for IBEI. Indeed, sources suggest Swift has just such a programme on standby should the industry decide it does want to go with the BIC. Has Swift deliberately sought to scupper IBEI to make way for the BIC/CIVIC initiative? It seems more likely that it was genuinely put off by the size of the task of issuing and maintaining identifiers for all companies. Since its partnership with counterparty data specialist Avox for the BIC clean-up, it may feel more confident it has the necessary resources to draw on to create a universal standard identifier. Work is also under way between Swift, Avox and a group of banks to define a roadmap for the CIVIC initiative, though this is on a “goodwill basis” – Avox doesn’t yet have a contract for the CIVIC job in the bag, and a newly-appointed head of information products within the products group of Swift – Paolo Bernini – is reportedly still in “information gathering” mode on this front.

Either way, Bernini was also asking data vendors at Sibos whether they could/would carry the BIC directory as part of their reference data offerings – which certainly suggests the co-operative’s plans for the BIC in the future may be getting bigger.

Swift – which is of course renowned for being anything but – might well take its time with the BIC extension, and in fact it’s an open question whether a BIC-based universal identification solution will be any quicker in coming than a revivified ISO solution, assuming that’s the way things develop on the IBEI front. However, some observers suggest the timing could be just about right. Firms all understand that they have to address the problem of consistent entity identification in their own shops, and that is where they’ll start, settling on a solution that works for them for entity data in the same way as they have done for instrument data. Then the next phase will be addressing entity identification for external communication, at which point there might just be some kind of internationally accepted standard to map to. Maybe.

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