Creating a linchpin for financial data: Toward a universal legal entity identifier
The financial industry, like many others, is powered by information and data. While the subjects of the data (balance sheet items or counterparty information, for example) may vary dramatically, they all describe a particular financial institution or legal entity. Yet a standard way to uniquely identify one financial entity from another does not currently exist. A Social Security number distinguishes one John Smith from another John Smith, but at present no single identifier distinguishes one First National Bank from another. This paper summarizes the current environment of entity identification and the problems that are currently encountered in both the private and public sectors by the lack of an industry-wide legal entity identifier (LEI). The key components that should be incorporated into the LEI, such as uniqueness, persistence, and public availability, are explored and possible alternative approaches to solving the LEI problem evaluated. The authors support a collaborative public- and private-sector approach and highlight the need for an international solution as financial markets grow ever more interconnected across the globe.
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