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Attendees Cover Old Ground Regarding the BIC at Swift’s LEI Meeting

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This morning’s discussions at Swift’s London HQ indicate that some corners of the industry are not willing to give up on the notion of a reworked version of the Bank Identifier Code (BIC) becoming a legal entity identifier for the purposes of the global regulatory community. Swift itself may have moved on (and is now keen to be selected as the registration authority for the Office of Financial Research (OFR)), but some of its network participants are hopeful that ISO will reconsider the decision to develop an entirely new standard for legal entity identification, citing the high costs of such a move as the primary reason to go down the BIC route instead.

One attendee to the meeting asked whether ISO might reconsider the decision, bearing in mind the current coverage of systemically important financial institutions (SIFIs) in the BIC database and that of the Depository Trust and Clearing Corporation (DTCC). “Has the door finally closed on the BIC? It would be a lot less of a headache for firms if the regulators opted for the BIC because our systems are already set up to use the standard, rather than waiting for investment in and implementation of a new standard,” he contended.

Support for the BIC as an entity identifier beyond the realms of the Swift network is nothing new. As indicated by the feedback to the OFR earlier this year, some industry participants have supported this notion right from the outset. The appeal is obvious, after all, given that many have already invested in being able to accommodate the BIC for regulatory reporting purposes – transaction reporting under MiFID being one such example. In fact, the UK Financial Services Authority (FSA) has recently reiterated its commitment to require firms that do not currently have BIC codes to contact Swift and obtain them in order to meet their transaction reporting requirements.

This ostensible lack of coordination between Europe and the US seems to have caused some confusion amongst industry participants. Even if coordination is happening between regulators, associations and others behind the scenes, this may not be clear to those on the outside looking in. Obviously, concerns about the cost of building or adapting systems to be able to consume and process the new entity standard are also prevalent at this point and this uncertainty of outcomes is exacerbating these anxieties.

The political instability within the US at the moment is another concern, given the aggressive deadlines for change that have been established in line with Dodd Frank. Swift’s senior product manager Paul Janssens noted that more changes could be ahead and that the BIC could come back on the table in the future; nothing, as yet, has been ruled out completely.

Obviously, many industry participants are not keen for the BIC to be chosen as a legal entity ID and are therefore likely to reiterate their previously voiced concerns about embedded intelligence and coverage with regards to the Swift network ID. Given the timelines, this argument could be a potential waste of time and opportunity.

However, for now, Swift’s focus is on bidding for the registration authority role, pitting itself against other contenders such as the Association of National Numbering Agencies (ANNA). Janssens indicated the network operator is aiming to prove its suitability for the role before the end of month deadline for a decision on the subject. He noted that the easiest starting point for Swift and DTCC, should they be chosen and given their coverage of the markets already, would be to provide the new legal entity IDs to the firms already present within their databases.

The vote on the proposed ISO legal entity identifier is due at the end of June, although a draft has already been drawn up including syntax, rules and criteria for the operation of the registration authority. The process of revisions could take anywhere between one and six months to complete, indicating that the entity identifier is unlikely to be ready for adoption until the start of next year.

Decisions still need to be made with regards to details such as whether ‘address’ refers to the location of the firm’s operations or its registered address and whether ‘electronic address’ refers to a website domain name or email (or even another form of electronic reference). The registration process is also a contentious issue, given some are in favour of self registration, whereas others feel this should be centralised and led by the utility. Expect many of the issues to be deliberated in the coming weeks.

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