May 28, 2019

FSB published a report on thematic review on implementation of the Legal Entity Identifier (LEI). The review reveals that LEI coverage is too low outside the securities and derivatives markets and adoption remains uneven, with coverage concentrated in Canada, EU, and the United States. The report sets out four sets of recommendations to address the issues identified in the peer review and promote broader LEI adoption.

The report provides background on LEI, including its governance and key features. It also describes the approaches and strategies of FSB members in implementing the LEI, including regulatory and non-regulatory tools and areas of coverage. The report then examines LEI coverage in areas relevant for financial stability, describing the evolution of LEI issuance over time and the current rates of issuance by jurisdiction and across sectors. Finally, it highlights achievements and challenges in further advancing LEI adoption and identifies possible ways to address the challenges in advancing LEI adoption. The report notes that LEI has far to go to meet the objective of G20. The coverage of LEI is too low outside securities and derivatives markets to effectively support new industry or regulatory uses, or to reach a tipping point where voluntary take-up by market participants would suffice to propel further adoption. Additionally, LEI adoption remains uneven across jurisdictions, with coverage concentrated in Canada, EU, and the United States. 

FSB remains committed to a broader use of the LEI globally to meet the G20 objective. To accomplish this, and in light of the findings, the report details the following four sets of recommendations:

  • FSB jurisdictions should follow-up on CPMI-IOSCO guidance that strongly encourages authorities to require the use of the LEIs for identification of legal entities in the data reported to trade repositories, for the over-the-counter (OTC) derivatives. FSB jurisdictions should consider requiring the use and timely renewal of the LEI in reporting or disclosure frameworks. They should also explore ways to promote further LEI adoption.
  • FSB will explore the potential role of the LEI in its work—for instance, in the resolution of financial institutions and on financial innovation issues. FSB will also work with standard-setting and industry bodies to facilitate adoption of the LEI for all group entities and major counterparties of global systemically important financial institutions as well as for the clearing members of central counterparties (CCPs) and their ultimate parents. 
  • The relevant standard-setting bodies (BCBS, CPMI, IAIS, IOSCO) and international organizations (IMF, OECD, World Bank) should review and consider ways to embed or enhance references to the LEI in their work, to facilitate the implementation of relevant LEI uses for authorities and market participants. 
  • LEI ROC and GLEIF should consider enhancements to the LEI business model to lower the cost and administrative burden for entities acquiring and maintaining a LEI. LEI ROC and GLEIF should also consider data quality process enhancements to increase the reliability of the LEI data to improve its usability by market participants and regulators, including processes to encourage and monitor updates of LEI reference data. These authorities are also recommended to enhance the scope and usability of Level 2 (relationship) data by considering cost-effective and reliable ways to add relationship data and by expanding the coverage of such data.

 

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Keywords: International, Banking, Insurance, Securities, PMI, LEI, G20, Peer Review, FSB