ESRB published a recommendation regarding identification of legal entities (ESRB/2020/12). The recommendation seeks the introduction of an EU legal framework to uniquely identify legal entities engaged in financial transactions by legal entity identifiers (LEIs) and to make the use of the LEI more systematic in respect of supervisory reporting and public disclosure. Taking into account the timeframe for the adoption of such a framework, ESRB recommends that relevant authorities pursue and systematize their efforts to promote the adoption and use of the LEI by making use of the various regulatory or supervisory powers that they have been granted by national or EU law.
The recommendation is intended to contribute to the prevention and mitigation of systemic risks to financial stability through the establishment of systematic use of the LEI by entities engaged in financial transactions. Toward the introduction of a framework on the use of the legal entity identifier, EC is recommended to propose that EU legislation:
- Incorporate a common Union legal framework governing the identification of legal entities established in the Union that are involved in financial transactions by way of a LEI, paying due regard to the principle of proportionality
- Impose an obligation on legal entities to report financial information include the obligation to identify by way of an LEI the legal entity subject to the reporting obligation and any other legal entity about which information must be reported and which has an LEI.
- Incorporate an obligation on authorities to identify by way of its LEI any legal entity about which they publicly disclose information and which has an LEI, paying due regard to the principle of proportionality
For the use of LEI until the possible introduction of EU legislation, the recommendation is for the relevant authorities to:
- Require or, where applicable, continue to require, all legal entities involved in financial transactions under their supervisory remit to have an LEI
- Continue to include, an obligation (when drafting, imposing, or amending financial reporting obligations, or where applicable) to identify by way of a LEI the legal entity subject to the reporting obligation and any other legal entity about which information must be reported and which has an LEI
- Identify or, where applicable, continue to identify, by way of its LEI, any legal entity about which they publicly disclose information and which has an LEI
Related Link: Recommendation (PDF)
Keywords: Europe, EU, Banking, Insurance, Securities, PMI, LEI, Legal Framework, Reporting Disclosure, Systemic Risk, ESRB
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
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