LEI, and variations thereof, have been discussed and debated across the industry for many years. It’s now time for the industry to get moving and take the proposed standards from the ivory towers of Brussels and board meeting agendas across the globe to an executable standard that will in practical terms help the industry get a better handle on counterparty risk.
The good news is that the Financial Stability Board (FSB) has already committed to this by assembling an LEI Industry Advisory Panel. The even better news is that the FSB has included within this group a broader pool of market participants so that operational, data management and security, funding and implementation experts will be joining regulation and compliance professionals to ensure the most effective and efficient LEI solution is established. At Asset Control we find the broad remit of the Advisory Panel extremely encouraging as we believe the need to involve those already fighting the daily battle to understand counterparty risk is vital for LEI to have a shot at being successful.
The number of factors the Advisory Panel must consider when setting the standards, implementation timescales and measurement methodologies could be overwhelming. A clear and consistent framework that covers the practical implications across the whole investment management transaction lifecycle is required. Remembering the law of unintended consequences will also be key – for example, analysing how might the proposed standards effect commissions, soft dollar reporting or omnibus account structures to name just a few…?
It’s clear there is a pressing need to get LEI right, if not it will simply become just another number for the industry to contend with. The FSB and the Advisory Panel have given themselves the best possible chances of doing so by calling on expertise from a broad range of industry professionals. It must ensure all of the above areas are considered appropriately and in combination with one another to stay on the right track.
We look forward to the workshop in March to learn more about the Advisory Panel’s progress in securing the future of what has become a fundamental industry standard.