Business Solutions

One topic has been the new proposed ISO standard for legal entity identifiers.  The need to monitor and regulate risks in the market has pushed this forward quickly.  The initiative is less about creating a unique entity identifier and more about creating a new utility service that will help market regulators and financial institutions to see where risks exist and how they are impacted by the relationships between and the hierarchy of different legal entities.  For example, where risks exist in multiple entities that are all in fact owned by another one, the overall risk can accumulate to a dangerous or even catastrophic level without being easily visible.  It costs financial institutions billions to try to deal with this and manage their own risks, and it’s pretty much impossible for any individual regulator to have a clear overview of all of the firms that it has to regulate.
 

At this stage it seems likely that this new utility service will have to work in addition to existing national systems for identifying legal entities, which are often run by departments of national governments.  That would mean that operational costs would need to go up initially before the new utility service generates the benefits in terms of risk management that help to bring down the industry’s costs in the longer term.  How the business model will work for the new utility services is still being discussed.  One important question is – will the financial institutions being regulated pay for this new service , or will their clients be expected to pay for it?