Posts Tagged ‘G20’

Legal Entity Identifier (LEI) update: FSB global standardization efforts

April 6, 2012

I recently attended the LEI Workshop conducted by the Financial Stability Board (FSB) on March 28 in Basel, Switzerland at the offices of the Bank of International Settlements (BIS).  This workshop brought together representatives of many countries, agencies, organizations, financial institutions, and corporations from around the world.

The FSB, as directed by the last meeting of the G20, is tasked with developing a global standard for the design, administration, allocation, and dissemination of a globally unique Legal Entity Identifier for use in, ultimately, all financial transactions.  As businesses and corporations in all industries must conduct some degree of financial transactions in order to manage strategic assets or participate in currency and commodity markets, the impact and scope of the implementation of a global LEI transcends the financial industry, where the proposed use of a new global standard has obvious impact.

The FSB is in a bit of a ‘time-is-of-the-essence’ time frame window, spurred to make definitive progress on establishing a global mechanism for issuing LEIs due in part to (1) the fact that the CFTC has stipulated that swap derivatives dealers that fall under its regulatory auspices are to begin using an LEI this June and (2) the G20 has instructed that the FSB report on the formation of global LEI standards at the next meeting of the G20.

A full report on the numerous issues and alternatives that are occurring on both sides of the Atlantic with regards to converging on the business requirements and technical aspects of a global LEI system is beyond the scope of this update. I have prepared a more focused recommendation on a key aspect of the discussion regarding the use of the LEI code field and the concept of a federated approach versus a central approach to the establishment of LEI Registrars. That recommendation is attached as a PDF to this discussion topic.

I would urge you to review this proposal, as I do believe that it provides a means whereby ‘early adoption’ of putting an LEI process in motion by the CFTC can be harmonized with the FSB’s task of developing a specification and design for the implementation of a global LEI.  It is quite important that the confluence of these two developments result in a productive and additive benefit to the financial industry (and global economy for that matter), as opposed to one in which the efforts clash and end up hobbling the benefits of establishing a global LEI while the compliance costs of supporting and participating in a global LEI system would no doubt remain undiminished.

The FSB has indicated that all comments and feedback as input to its deliberations must be submitted by April 16 in order for them to have a final report by the end of the month.  I have submitted my attached recommendations to the FSB already, and I look forward to comments or questions from the community on this important subject.

Recommendation for LEI issuance via authorized federated registrars – rev 1-04