Ahead of this year’s Sibos in Toronto and in light of its involvement in the Office of Financial Research’s (OFR) legal entity identification (LEI) standards project, Reference Data Review is speaking to a range of industry participants about Swift’s involvement in the entity ID space. Chris Errington, CEO of Gresham Computing, explains that the network provider is facing a long road in terms of implementation and warns that global buy in from the industry is needed for these efforts to make a real impact.
With regards to its bid to work with the Depository Trust and Clearing Corporation (DTCC) on legal entity identification (LEI), Errington is confident that Swift is the right market player to achieve this. “I think the concept of common standard LEIs is a good one, in my view having many and varied benefits to a corporate (an entity). An LEI from say a customer (a payer) included in the payment message would really help in at least identifying who the payment came from in the world; if it’s unique then you get the certainty you need,” he explains.
According to the recent decision by the industry group in charge of providing feedback to the OFR, Swift and DTCC (especially its Avox subsidiary) should act as key partners to operate the core LEI utility as the central point for data collection, data maintenance, LEI assignment and quality assurance. Swift will therefore register and assist entities with self-registration, whereas DTCC will collect requests for new LEIs to be created, validate the information provided by leveraging Avox’s capabilities, maintain and store the reference data associated with each LEI, and maintain the public distribution of the LEI database.
However, Errington accepts that moving from concept to reality is harder than it looks in this endeavour: “So, LEIs are sensible and a good idea but, as with many things, since it hasn’t happened as of today is it ever likely to?”
He reckons that if the intention is to specifically solve a banking related issue by the introduction of LEIs, then the approach is probably right, although he notes that it’s going to be a long road for all involved. “However, the LEI itself will most likely be redundant for other important applications such as taxation, company registration, contracts unless there is buy in from the other users of such identifiers around the world. Not sure the last time I ever identified my company with a bank reference to our stakeholders or those same stakeholders really cared what others thoughts. Every day of the week we use VAT number, PAYE/NIC number, corporation tax number, company number and the list goes on (and they are all, infuriatingly, different numbers),” he adds. The goal of a single identifier for an entity is therefore a long way off being realised.
“With considerable effort and elapsed time, I suspect we could achieve an LEI for use in banking. As for a wider use outside of banking, I suspect entities have far more pressing matters to worry about and their other stakeholders will continue with their wide variety of unique identifiers for their own important purpose,” he continues.
In terms of Swift acting as the LEI issuer, Errington reckons it will face its greatest challenges in articulating the benefits to all parties, beyond just the banking community. “I suspect that convincing a corporate and their stakeholders that an LEI has benefit and is more than another banking idea will be tough. It sounds like another change that will need to be made to operations when less regulation (and regularity) is often perceived as better,” he contends.
From a regional/national perspective, he says: “For those in the UK, international bank account numbers (IBANs) came along and led to us having to undertake a whole lot of changes in the business for what seemed like no benefit. And worse, they didn’t turn out to be that ‘international’ either. Maybe European bank account numbers (EBANs) but not IBANs – ‘European’ that is not international. OK, so I can actually see the wider benefit in such things as standard IBANs but life for non-banks (corporates) isn’t all about banking. Now, standardising the way that tax is applied and paid globally with common identifiers – there’s something I’d subscribe to!”