The adoption of a global, unique legal entity identifier that has no embedded logic will have the biggest impact on the data management space, according to Peter Serenita, global head of entity and account data management for Global Banking and Markets at HSBC. However, the industry will also need to take into account the wider data policies, standards and the operational process for managing these new identifiers if it is to benefit from these developments, he explains to Reference Data Review.
Serenita, who joined HSBC back in 2009 from JPMorgan, has often spoken at length about the importance of data integration and the downstream impacts of data management projects. Back in October, for example, he elaborated upon HSBC’s own data management project, which is flying under the One HSBC banner. He noted that the project is not about cost savings, it is about getting data quality right and said that the budgets for the project for 2011 had already been signed off and had doubled from the previous year, to highlight this fact.
In the seventh in our series of talking heads on the challenges surrounding entity data management in the current market, Serenita highlights the developments in the legal entity data management space more generally and his hopes for an identifier, as promised by the US Office of Financial Research (OFR) proposals.
How has the regulatory attention directed at the legal entity identification challenge in the post-Lehman environment impacted financial institutions’ practices with regards to this data?
This requirement is in line with what most financial institutions are in the process of doing for themselves. There is significant business benefit in the ability to manage client information in a consistent manner across geographies and product groups. A single client identifier is a component of that capability but you also need to consider the data policies and standards as well as the operational process for managing this data at inception in addition to the full data lifecycle.
Which regulations and compliance requirements are having the biggest impact on this area?
The definition and adoption of an industry-wide common legal entity identifier will have a largest impact. This will enhance the ability to identify and obtain data about entities across the industry. The implication is that each firm will need to access how they will obtain, utilise and manage this identifier across their businesses. This includes the examination of the implications of their operational processes and their technical platforms.
Given there is currently no industry standard legal entity identifier and the US regulator is looking at mandating its introduction as part of the OFR, what impact will this likely have on the US market? And the rest of the world?
It is really important that the legal entity identifier standard is defined and adopted consistently globally. The ideal would be that a single standard is adopted across all jurisdictions and product areas.
A number of options are on the table for such an identifier – Swift’s BIC, the S&P/Avox Cabre, a version of ISO’s IGI etc – what is your feeling for which will be selected as the most appropriate option and why?
It is hard to say without doing the proper analysis which identifier would be better suited. There are a couple of key parameters in this evaluation. The identifier needs to be globally unique and not have an embedded logic. It must persist forever, even after corporate actions, so that the identifier is not reused.
How will all of this impact the vendor community?
I believe that this offers an opportunity to vendors. They can also utilise this industry-wide identifier and they should focus their efforts on the value add they can provide. Examples include standard static data about the entity, legal hierarchies, standard documents to support client processes, such as Know Your Customer (KYC).