• BVI hosts representatives from international supervisory authorities and the financial sector
• Large-scale digital project for Legal Entity Identifier (LEI) closes transparency gap world-wide
• Fund industry expects lower reporting costs
• Frankfurt being considered as location for operative branch office
In the opinion of the German Investment Funds Association BVI, the global barcode system “Legal Entity Identifier” (LEI) will make the financial markets safer and more stable. “The LEI will close a transparency gap in the financial market and help to better identify systemic risks in the financial system”, said Thomas Richter, CEO of the BVI, at an event hosted by the Global Legal Entity Identifier Foundation (GLEIF) on 23 September. Swissbased GLEIF invited around 120 high-ranking representatives of international supervisory authorities, central banks and the financial industry to the BVI premises to discuss questions surrounding the introduction of the LEI.
The German fund industry has been involved in the development of the global LEI system from the onset, anticipating improvements in the operative business in addition to a greater level of transparency. “If the code is used, as planned, as the universal identification number across the entire reporting system, the multitude of differing identifiers that are currently being used would become obsolete in one single stroke”, added Thomas Richter. “This would make reporting to the supervisory authorities much more stream-lined and cost-efficient.”
The LEI is a global barcode system for the financial markets, based on a 20-digit identification code assigned to all financial market participants on the initiative of the G20 countries and the Financial Stability Board (FSB). The character sequence is similar to that of barcodes used at the cash register of supermarkets. Just like the trade channels of each bottle of milk can be precisely tracked via this code, each party to a financial transaction will in future be identifiable by their individual number. This applies to exchange transactions as well as the so-called OTC market in which securities are traded off-exchange. In this way, whether bank, insurer, credit rating agency or investment management company, all companies around the globe will leave a digital “fingerprint” on the market.
The barcodes will be assigned by the official local allocation agencies in the countries of domicile of the respective financial market players. GLEIF monitors the global network of allocation agencies, sets standards and ensures data quality. The plan is that, going forward, a GLEIF branch office will carry out the operative tasks, with Frankfurt being considered as its location. Thomas Richter continued: “The fund industry supports the establishment of the GLEIF branch office in Frankfurt. Following the ECB and the European insurance supervisor EIOPA, this would be the third international financial organisation to base itself in Frankfurt. This move will further enhance Frankfurt’s position as a financial hub for the international capital markets.”
