Semantic Data Is Key
Banks have long been built on data, but as they continue to accumulate massive amounts of internal information along with an ever-growing pool of unstructured data, managing that data will become an increasingly difficult task. Traditional data storage and management systems are being stretched thin, but an answer to these problems may come in the form of semantic databases, says David Saul (pictured at right), chief scientist for Boston-based State Street Corp. ($222 billion in assets).
Saul's responsibilities with State Street are to propose and assess new advanced technologies for the organization as well as to evaluate technologies already in use at State Street and their likely evolution in order to reinforce the organization's leadership position in financial services.
Saul, who prefers the term "smart data" as opposed to "big data," explains that the semantic data model associates a meaning with each piece of data to allow for better analysis. Given their ability to analyze relationships, he adds, semantic databases are particularly well-suited to the financial services industry.
State Street began experimenting with semantic databases last year and has moved from proof-of-concept demonstrations to pilot programs using the semantic data model. These programs are helpful in producing better information for State Street's clients to optimize their investment strategies, and for the bank internally in doing regulatory reporting and risk calculation, says Saul.
On that front, Saul believes semantic data can be very helpful, particularly for complying with the Legal Entity Identification standard mandated by the Dodd-Frank Act. The LEI is a unique identification associated with an individual corporate entity. The purpose of this standard, according to regulators, is to help financial firms develop a consistent and integrated view of their exposures, such as in the case of default of a counterparty. There currently isn't a standard ID system for financial counterparties.
State Street has been working on taking a semantic approach to LEI data, and Saul says its ability to link different kinds of data and create equivalency could prove invaluable to banks in their efforts to comply with this new standard. "If you can automate this process (with semantic databases) rather than have to do it manually, it saves a lot of time," he notes.
While the adoption of semantic technology is happening slowly, Saul says that it's beginning to increase and more tools for creating these databases are becoming available. He also believes the continued development of standards will move it forward. "The combination of technology, process and standards is really coming together," he says. -- B.Y.
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio