FSB Explores Options to Promote LEI Adoption in Cross-Border Payments
The Financial Stability Board (FSB) is seeking feedback, until July 31, 2022, on the key performance indicators for measuring progress toward the G20 cross-border payments targets. FSB also published a report exploring options to improve the adoption of the Legal Entity Identifier (LEI) for use in cross-border payments.
The report on cross-border payments targets provides preliminary recommendations about the key performance indicators (KPIs) that could be used to monitor progress over time and identifies existing and potential sources of data for calculating these KPIs. FSB is making recommendations for the three main segments of the market: wholesale, retail, and remittances. For the wholesale segment; thus, FSB views private-sector network providers as the most promising data sources for monitoring speed and access while the use of surveys and proxies are being evaluated for monitoring progress toward meeting the transparency target. The retail payments segment is highly varied in terms of end-users, service providers, and payment mechanisms; thus, FSB proposes differentiated KPIs for the various use-cases, which would allow a better understanding of how progress toward meeting the targets differs among those use-cases. The enormous variety of end-users and payment service providers in this segment make collecting comprehensive data infeasible. The FSB is, therefore, evaluating the feasibility of collecting representative samples, for instance from private-sector data aggregators. For the remittances segment, the public sector’s long-standing goal of improving conditions in this segment has led to the establishment of multiple high-quality databases, most notably the World Bank’s Remittance Prices Worldwide database and Global Findex database; thus, FSB is proposing to leverage these, and similar, public-sector databases to calculate KPIs. Feedback on the FSB proposals will help to inform the FSB’s report in October 2022 to the G20 setting out further details of the implementation approach and the KPIs.
The report on LEI explores options to promote broader adoption of the LEI in cross-border payments and this will depend on promoting uptake of LEI among non-financial corporates as well as financial institutions. The report explores the benefits that could accrue from the use of the LEI in cross-border payment transactions and sets out recommendations and options to promote broader LEI adoption to assist in achieving the goals of the G20 roadmap to enhance cross-border payments. FSB will review the progress in implementing the recommendations and publish a progress report by the end of 2024, along with a review of progress in implementing the recommendations of the LEI peer review. The report also provides use cases to highlight the potential benefits of the LEI in supporting straight through processing and contributing to the Know-Your-Customer (KYC) process. Finally, the report sets out the specific options for encouraging use of the LEI in cross-border payments to assist in achieving the goals of the G20 roadmap, based on the inputs gathered from national authorities, the LEI Regulatory Oversight Committee (ROC), the Global Legal Identifier Foundation (GLEIF), market participants, and other stakeholders. Below are the key options set out in the report:
- GLEIF’s efforts to reduce obstacles to LEI adoption, including the validation agent model and digital strategy, are initiatives that can address certain obstacles to the adoption of the LEI (costs, administrative burden, perceived lack of benefits) and can create incentives to timely updates of the LEI, when necessary.
- ROC, GLEIF, and national authorities should continue efforts to promote the quality of LEI reference data, including keeping the attributed information up to date. In this context, FSB Cross-border Payments Data and Identifiers Group (CPDI) may contribute to explore which attributes are essential for LEI use in cross-border payments.
- The use of LEI for the onboarding process and, possibly, for the purpose of strong customer authentication could be explored by public- and private-sector stakeholders.
- Public communication and promotion to raise the visibility of the LEI, particularly among non-financial sectors involved in cross-border payments, which would involve developing and publishing use cases in cross-border payments for non-financial corporates and ways in which they can directly benefit from adopting the LEI.
- FSB members could consider linkage of LEI to domestic identifiers in their digital infrastructures, to promote interoperability of LEI and other identifiers to facilitate automated reconciliation and validation.
- Press Release on Cross-Border Payments Targets
- Report on Cross-Border Payments Targets (PDF)
- Press Release on LEI Adoption
- Report on LEI Adoption (PDF)
Keywords: International, Banking, Securities, Basel, Cross-Border Payments, G20 Roadmap, Regtech, LEI, Data Collection, Data Gaps, GLEIF, FSB
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