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Swift’s Janssens on its Bid to be the OFR Supported Legal Entity ID Registration Authority

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Swift may have backed away from pushing a reworked version of its Bank Identifier Code (BIC) as a legal entity identifier for the purposes of the US Office of Financial Research (OFR), but that does not mean it is out of the running as a standards issuer in the context of a global reference data utility. In fact, Paul Janssens, senior product manager at Swift, explains to Reference Data Review that the industry network operator is talking up its experience in the standards setting process in order to land the role of registration authority for the new global legal entity ID standards (provided the US government goes down that route, of course).

In this endeavour, Swift is therefore pitting itself against other contenders for the role of issuer such as the Association of National Numbering Agencies (ANNA) and GS1 (see commentary from Allan Grody on the barcode standards body’s intentions). In December, the Swift board approved the proposal to use the BIC as a legal entity ID, however, subsequently, ISO decided on a different approach, based on a new standard.

An ISO working group examined the various options out in the market at the time and noted that none of them, including the BIC, met the requirements as set out by the OFR in its proposals, which were published in the Federal Register at the end of last year. This prompted Swift to step away from the initiative and reconsider its future role in the space, given its tie up with partner the Depository Trust and Clearing Corporation (DTCC). Following that decision, Swift’s board has approved its bid to become the registration authority for that new standard. That approval came in the March board meeting.

Janssens indicates that the development of an entity identification standard is a priority within the ISO process, which has traditionally been rather slow, and hence a fire has been lit under the group working on the standard to produce a draft “as early as the end of March”. This will then go to first ballot over the succeeding three months, where the industry will have the opportunity to review and approve the draft.

However, given that a July deadline has been set by the OFR for the mandatory adoption of the standard by the industry, the US regulatory community will need to decide whether to directly coordinate with ISO soon. It is likely that a decision will be made by the OFR on the route to pursue in April and Janssens indicates that discussions are already going on between the European and US bodies on this very subject.

“The OFR could opt to base the standard on the draft that ISO will have produced by that point and therefore develop the standards in parallel, with a view to full convergence further down the line,” he suggests.

Swift itself is hoping to be the standards registration authority partner to DTCC’s facilities manager to the OFR. In this role, Swift would be charged with allocating and maintaining the identification codes, which Janssens explains would be ‘dummy’ codes with no embedded intelligence. There is potential for a ‘checking’ digit to be included in the code, but no other syntax is necessary for the purposes of the OFR. So, if the entity goes out of business, the code would expire (rather than be deleted) and in the case of a straight merger, a new identifier would need to be created and the older two would also expire.

However, the costs of operating as a registration authority have yet to be defined, although much reference has been made to a “cost recovery” model. Given its potential role as a monopoly provider of these codes, any registration authority and/or facilities manager will come under intense scrutiny with regards to these charges. Regulators will need to keep a close eye on developments to ensure costs are realistic.

Janssens notes that, for now at least, Swift is not looking at the instrument identification space and is limiting its bid to be a registration authority for the legal entity IDs. It is, however, likely to be scrutinising this space further down the line – just check out its work in the standing settlement instruction (SSI) space for proof of its renewed interest in reference data. Janssens also indicates that value added commercial services could potentially be built upon the basic legal entity identification database, including those related to cross referencing and classifications. Perhaps this potential will be discussed at this year’s Sibos, given the presence of a reference data head within the halls of Swift (ex-head of partner management Patrick Neutjens assumed the role earlier this year)?

In the meantime, the BIC will continue to evolve for those currently using the standard in the Swift realm. The plan is to improve on the current version of the standard to take into account corporate actions events and to alter some of its attributes to ensure costs are brought down. These changes are due in late 2011 or early 2012, according to Janssens, and will come along with a Swift new standards release.

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