Mark Davies, head of Avox, discusses why unchecked reference data records may pose a threat to efficient reporting as well as robust internal risk management.
Regulatory reporting under the European Market
Infrastructure Regulation will begin phased implementation in
February 2014, but one area that has still not received due
care and attention relates to the internal records institutions
hold about their counterparties.
The amount of attention that has been given to the topic of
risk mitigation since the global financial crisis may have,
inadvertently, led to an expectation that financial
institutions have an accurate understanding of exactly who
their counterparties and clients are.
In theory, this should be the case because all institutions
do hold internal records containing legal entity information
such as corporate name, address, ownership hierarchy and
Some financial institutions are (rightly) obsessive about
keeping these records clean and up-to-date, but looking
globally, these institutions are still the minority.
This is because continually checking and updating the
internal records for, potentially, hundreds of thousands of
counterparties, has become a painstaking task, and, for most
institutions, too overwhelming and complex to manage.
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