Recent regulations in the US and EU have been driving the adoption of identifiers to make it easier to spot the forest from the trees. But as we move forward it is becoming increasingly obvious the same labels are being tasked to determine risk, enhance transparency and create accountability. One need not look much further than the global legal entity identifiers (LEI).
The LEI has seen a massive uptake in use since its 2012 debut and with it an increase in the number of concerns. As the need for standardized counterparty details increased with Dodd-Frank and EMIR, so did the number of registered local operating units (LOUs), jurisdictional prefixes, and standalone public repositories to support them. The precision of LEI values in each repository is commonly subject to negative affirmation (i.e. correct until proven otherwise) and the upkeep often controlled by the contributors themselves.
The focus could now be shifting from adoption to accuracy. Firms would be wise to embrace any initiative that would help aggregate and manage these labels or perhaps risk getting caught in a regulatory identity crisis.