A coalition of financial services firms and trade associations (the “Trade Associations” [i]), in coordination with the Global Financial Markets Association (ASIFMA/AFME/SIFMA, collectively known as GFMA), has presented to regulators a recommendation for the organizations that it believes are best suited to operate a global legal entity identifier (LEI) system to aid regulators and industry in monitoring systemic risk. The recommendation document can be found here: www.sifma.org/LEI-Recommendation-Process/.
The recommendation is the culmination of several months of work by the Trade Associations and GFMA as a first step in developing a global industry consensus on the requirements and standards for a viable, uniform and global LEI solution.
The Trade Associations, working through GFMA, now intend to consult further with the international regulatory community, as well as the recommended organizations and other parties, to understand fully the requirements that could make the global implementation and adoption of the LEI solution possible. This includes, as a top priority, working cooperatively with these parties in defining and establishing the LEI governance structure.
The recommended firms are:
• Standards body- The International Organization for Standardization, i.e., ISO’s new standard, ISO 17442, is recommended for use as the new, authoritative legal entity identification standard.
• Core Issuing and Facilities Manager – The Depository Trust & Clearing Corporation (DTCC) and the Society for Worldwide Interbank Financial Telecommunications (SWIFT), along with DTCC’s wholly-owned subsidiary AVOX Limited, are recommended as key partners to operate the core LEI utility as the central point for data collection, data maintenance, LEI assignment, and quality assurance.
• Federated Registration – ANNA, through its network of local national numbering agencies (NNAs), is recommended as a key partner in the solution for registering, validating and maintaining LEIs for issuers, obligors, and other relevant parties in their home markets. The NNAs are envisioned to serve as the “face” of the LEI Utility to those markets while leveraging the functionality of the centralized LEI Utility for the assignment, further validation and global distribution of LEIs.
• The Trade Associations expect several of the other organizations who responded to the proposal to participate in complementary roles.
“GFMA is pleased to have ISO, DTCC, SWIFT and ANNA as the recommended LEI solution providers. These groups together possess the strong scope, scale and experience necessary to meet the global financial services industry’s requirements and make a global LEI solution successful,” said Tim Ryan, GFMA chief executive officer. “An international standard for an LEI solution would enable regulators and individual firms to better monitor systemic risk. GFMA, through its work with global market participants, has developed a framework for a globally viable solution that will be available to regulators around the world.”
The work of the Trade Associations included the development of a comprehensive set of requirements for an LEI solution which were published on May 3, 2011. It also involved a rigorous eight-week solicitation and evaluation process. An open and inclusive approach was employed throughout the process whereby input was solicited from policymakers and other interested parties around the globe. The requirements and solicitation of interest documents can be found here: www.sifma.org/Legal-Entity-Identifier/Activity.
An LEI is a unique ID associated with a single legal entity allowing for consistent identification of parties to financial transactions. Currently, there is no one global standard identification system for such parties.
Throughout this initiative, The Trade Associations’ objective has been to develop a global, consensus based solution for the accurate and unambiguous identification of legal entities engaged in financial transactions. Establishment of an LEI system is a foundational and critically important element towards the improved measurement and monitoring of systemic risk. The release of this recommendation is an important step forward in achieving this long standing objective. As stated by the Financial Stability Board [ii], “Indeed, the recent crisis has reaffirmed an old lesson-good data and good analysis are the lifeblood of effective surveillance and policy responses at both the national and international levels.”
