WASHINGTON Jan 29 A U.S. official will head a worldwide group tasked with launching a unique identifier for banks and other financial operators, to give regulators a better view of their exposure and prevent the next crisis.
Matthew Reed, chief counsel at the U.S. Office of Financial Research (OFR) would head the Regulatory Oversight Committee (ROC), a new group that works under the auspices of the G20 group of the world's biggest economies.
The ROC would be tasked with implementing the so-called Legal Entity Identifier (LEI), an ID tag for counterparties to financial transactions that is the same across the world.
"The LEI should provide financial companies and global financial regulators a better view of true exposures and counterparty risks across the world's financial system," said the U.S. Treasury, of which the OFR is a part.
Regulators are rewriting the rules for global finance after the 2007-09 crisis brought to light faults that pushed the banking system to the brink of collapse, and better data is a central part of their effort.
The near-collapse of insurance giant American International Group in 2008, for instance, came as an almost complete surprise to its now defunct supervisor - the Office of Thrift Supervision - because the damage was done in a poorly understood London unit.
"During the crisis, neither financial institutions nor regulators were able to assess accurately exposures to troubled companies," the U.S. Treasury said.
The ROC, which held its inaugural meeting last week, was established under a charter by the G20 and the Financial Stability Board, a G20 oversight group.
The FSB has been preparing the LEI since Nov. 2010, and the system is now scheduled to launch by March 2013. The ROC will oversee the system from now.
As one example of the new global rules, trading data for swaps - derivative instruments that are used to speculate but also to hedge risk - are being reported into public databases as of the beginning of this year.
The $650 trillion derivatives market was unregulated before the crisis, but in the United States has been brought under the oversight of the Commodity Futures Trading Commission, traditionally the futures regulator.
The swaps market is dominated by large banks such as Bank of America, JPMorgan and Citigroup.