Users: Change in Firms' Internal Practices Required for Improved Standardization

LONDON - Firms are increasingly re-thinking the approach to industry-wide business entity standards, but they need to change internal practices before the level of standardization will improve, according to speakers at the Marcus Evans Reference Data in Banking conference in London in February.

Firms currently use internal proprietary identifiers, and there has typically been a lack of willingness to change existing practices. This could now change following the financial crisis. London-based Sean Taylor, director at Deutsche Bank Private Wealth Management, said he has already noticed a change of attitude in the past year. "I think now that when you talk about an operational challenge there needs to be a change in behavior," he said.

David Thomas, global head of client data at ABN Amro, said: "People now understand that wrong data will have implications downstream, and internally that has been one of the drivers that has helped people change their attitude." Basel II and know your customer (KYC) have also been quite a big assistance, he suggested.

However, many remain reluctant to adopt new identifiers, and there is a need for larger firms to take leadership in this space. Philippe Rozental, co-head of asset servicing, Societe Generale Securities Services, said while it may be easier to convince the bigger names to standardize, when it comes to the smaller firms or investment managers, it is more complex. Standardizing the output of their system is a tough job because they may not have the interest or capabilities to do so, said Rozental.

Yet, it is still uncertain if standardization will emerge as a top priority in the current market. ABN Amro's Thomas said the BEI would bring benefits across the board but drivers would be hard to find, as standards are currently not raised by clients as a significant issue. "We have all set up our own golden copies or our own equivalents within systems ... it might not be perfect and there are areas and problems associated with it we are all aware of, but it does work, and the question is what is the driver that is going to force us down this route," said Thomas.

"We are still up against a barrier of certain users that are used to always using the same code," said Vinay Pampapathi, executive director in the technology division at Daiwa Securities SMBC Europe, adding that the firm has added all the identifiers their clients require in their database to facilitate the mapping process.

At the moment, many firms solve the standardization issue by taking mapping services from vendors that cater for all possible identifiers. Donald Roll, managing director, Europe at software provider and mapping specialist Alacra, said his company has to adapt to the clients. "In the case of mapping the credit pricing data from a credit agency, for example, we would take in the price, map it to our warehouse and provide the client with the file and format they can use," said Roll.