Regulators and financial firms globally have been exploring ways to overcome the current fragmented system of firm identifiers and creating a common identifier for financial institutions. The importance of creating a global system of identifiers has been recognised by the G20, the Committee on Payment and Settlement Systems, the Technical Committee of the International Organisation of Securities Commissions, and is currently being addressed by the Financial Stability Board (FSB). Through a coordinated initiative between GFMA and other trade associations, the industry has been working to ensure development of a global system for the accurate and unambiguous identification of legal entities engaged in financial transactions.
A unique ID associated with a single legal entity, LEIs allow for consistent identification of parties to financial transactions, facilitating a consistent and integrated view of exposures. The establishment of an LEI system is a foundational and critically important element towards the improved measurement and monitoring of systemic risk. A global, standardised LEI will enable organisations to more effectively measure and manage counterparty exposure, while providing substantial operational efficiencies and customer service improvements to the industry.
Significant progress has been made on the FSB's global LEI initiative. The foundation of LEI reporting is underway: the LEI Regulatory Oversight Committee (ROC), established by the FSB, has endorsed 12 utilities to date to issue pre-LEIs that firms can utilise now as work on the global system is finalised. There is a regulatory mandate for pre-LEI reporting in the U.S. through the Commodity Futures Trading Commission's swaps recordkeeping rules; the European Banking Authority (EBA) recently published its Recommendation on LEIs; the EMIR deadline for pre-LEI reporting is today; and regulators around the world in places such as Canada, Australia, and Hong Kong have embraced the LEI concept.
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