Historically banks have built business and operations in silos, and over decades, despite numerous mergers and purchases creating the proverbial one stop shop, the typical bank still maintains a vertical business and operation model. This was not the plan but it’s the one that has been allowed to exist.

Nowadays, the problems of banking silos are not restricted to just expensive, risky and costly operations, but severe weaknesses in management and regulatory reporting. Current disasters over the last ten years or more are testament enough to the inadequacies of banking institutions in tackling the fundamental problems. Black holes in management and systems are the manifestation of a financial services industry, which has been reluctant to invest in technology and business architecture that has a primary focus on client servicing.

Now, all the pigeons are coming home to roost, with regulators demanding information that is difficult, if not impossible to access and turn into meaningful reports. This is both an in-house management problem and an external regulatory reporting issue, but they are very similar.

With many boards unwilling to make changes to their operational structure, the problems of disparate data and expensive and risky silos, operations will meander along, until the next disaster. Even then excuses will be found as to why financial services firms did not tackle once and for all, the real problems of disparate legacy systems and operations.

But there may be a ray of sunlight amongst the gloom, which could provide the stimulus for the financial industry to shake itself out of this legacy thinking, helping it change to the Industry that society wants and needs today; the provision of a secure, high quality, financial services for corporates of all sizes, to the consumer struggling to make ends meet; Legal Entity Identifiers (LEIs).

An LEI project can tie together payments, securities with legal and regulatory reporting. The benefits of streamlining corporate identity management as a single project, linking operations across all business and system silos bring to mind the phrase “Don’t dig up the road more than once”.

Now I know that LEI does not go down to consumer level, but it could be to fund account level. It would be a first step towards an eventual uniformed accounting system, recognised worldwide and across all financial products. The result would bring new levels of efficiency in business and operations by utilising effectively a single corporate relationship and create a close mesh for legal and regulatory reporting, making it very difficult to commit money laundering and fraud, and finally bring the possibility of simultaneous delivery vs. payments, reducing risks.

LEIs are a far more important project than the financial services industry has ever undertaken. The problem is how many people and organisations in this sector are not fully aware of the opportunity being created and there is a huge need for all financial services firms to engage in the development. Your future business prosperity could rely on it.

All this and more will be debated at the Next Post Trade Forum on the morning of the 25th September.