OPS ALERT:
3-Tier System Recommended for Issuing Global Identifiers
June 8, 2012
The Financial Stability Board will recommend to the G-20 industrial nations that a three-tier structure involving local registration authorities be established for registering and issuing 20-character codes that will identify participants in financial transactions, worldwide.
In a report released Friday morning, the FSB said it will recommend that national financial authorities set up a system that gives overall responsibility to a Regulatory Oversight Committee, creation, integration and maintenance of a unified databased of the codes to a Central Operating Unit, and registration of legal entities to receive the codes to Local Operating Units .
A central database of the identifiers is seen as fundamental to helping regulators watch for risks to the global financial system. A 20-character code has been set out as the basis for the code, known as a Legal Entity Identifier, by the International Organization for Standardization; and, backed by the FSB, which has been established to coordinate at the international level the work of national financial authorities and international standard setting bodies.
Legal Entity Identification and Code
A number of different technology and communications organizations are expected to vie to operate the Central Operating Unit.
The Securities Industry and Financial Markets Association and 16 other trade associations have put their weight behind the Depository Trust and Clearing Corporation and the Society for Worldwide Interbank Telecommunications as the “dream team” assembled for creating the technology and operations that would act as the “linchpin” as SIFMA executive vice president Randy Snook puts it for managing and regulating financial system risk, globally.
Also in the hunt is a New York financial industry consultancy, Financial InterGroup, which has proposed a “federated” approach to the issuance of the codes. That would involve allowing nations to set up their own registration authorities, that would feed the codes into the centralized database.
The three-tiered structure, which includes both centralized and localized operations, will be proposed 10 days from now to leaders of the G-20 industrial nations. They are holding a summit in Los Cabos, Mexico, from June 18 to 20.
“This system would be a ‘building block’ for many financial stability and regulatory objectives, and it would deliver substantial benefits to financial firms,” FSB Chairman Mark Carney said.
The Central Operating Unit will create “ global operational standards and protocols that deliver: global uniqueness of the LEI; seamless, open access to the global LEI and to high quality reference data for users (with the depth of access controlled by appropriate access rights1); as well as protocols and methods for how local systems can connect” to the central unit.
Local Operating Units would be handle local registration, validation, and maintenance of reference data and protect information that must be stored locally.
The FSB plan calls for the system to start operating by the end of this year and operate on a self-standing basis by March 2013.
Download the FSB's 35 Recommendations Here
