Rebuilding financial industry infrastructure

Allan D. Grody
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Allan D. Grody: President, Financial InterGroup Advisors, USA

Journal of Risk Management in Financial Institutions, 2018, vol. 11, issue 1, 34-46

Abstract: Setting proprietary standards for elemental data components of financial transactions, once the province of market participants and intermediaries, their sovereign regulators, and software and data vendors, has evolved into a global open source standards requirement. Global data standards initiatives are now seeking to eliminate unnecessary infrastructure costs and risks arising from use of proprietary data and interoperability standards and processes. Data standards have taken on new meaning and urgency as they have also become a prerequisite to securing financial networks from cyberattacks and enabling new technologies of the digital age. A new generation of innovation led by distributed ledger technology (DLT), a supportive database technology of the Blockchain, is being actively pursued by financial institutions and their financial market utilities. It is also of interest to many financial market regulators who are requesting access to more granular standardised transactional data. It has tremendous potential to eliminate reconciliation processes at financial institutions and refocus many of the hundreds of data intermediaries and financial market utilities that play a significant role in reconciling risk prone and costly non-standard data. This paper argues that the components of a sustainable financial industry infrastructure rebuild are coming into existence, but uncoordinated efforts across the globe will stifle the effectiveness of these changes. Therefore, this paper proposes a new global industry/ government partnership to coordinate implementation of data identification standards, accelerate data harmonisation initiatives and sponsor a secure financial-sector DLT protocol standard.

Keywords: standards; distributed ledger; data management; risk management; financial crisis; Financial Stability Board (FSB); Office of Financial Research (OFR); Global Legal Entity Identification Foundation (GLEIF) (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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