Legal Entity Identifier

In June 2012, with the backing of the G20, the Financial Stability Board was tasked with driving forward the LEI initiative to create a universal numbering system to uniquely identify parties to financial transactions.

The initiative promises to deliver a global registry of unique identification numbers. Initially proposed as 20 characters (18 alphanumeric + 2 numeric) to ISO standard 17442, the FSB has concluded that a structured number offers the best approach:

  • Characters 1-4: A four character prefix allocated uniquely to each Local Operating Unit (LOU)
  • Characters 5-6: Two reserved characters set to zero
  • Characters 7-18: Entity-specific part of the code generated and assigned by LOUs according to transparent, sound and robust allocation policies
  • Characters 19-20: Two check digits as described in the ISO 17442 standard
  • In addition to the minimum entity data, such as name and address, there are plans to extend entity identification to reflect ownership and hierarchies between entities allowing the LEI to be used to support risk aggregation and consolidation.

    Born out of the financial crisis the regulators want the LEI to:

  • improve crisis reporting
  • improve sanction monitoring
  • provide a holistic view of counterparty and issuer risks
  • ease data aggregation, modeling and analysis
  • better service firms operating cross-border and firms overseen by multiple regulators
  • The use of the LEI promises firms stronger risk controls as a result of improvements in data clean-up and mapping functions.

    A governance structure has emerged with a Regulatory Oversight Committee (ROC), Central Operating Unit (COU) and LOUs in a federal model.

    The LEI ROC is established according to the Charter set out by the FSB and G20 in November 2012. The ROC has responsibility to uphold the governance principles of, and to oversee, the Global LEI System. This System has the objective of introducing unique identification of parties to financial transactions across the globe, in accordance with the High Level Principles and recommendations set out in the June 2012 FSB report endorsed by the G20.

    The DTCC, in partnership with SWIFT (assisted by the Association of National Numbering Agencies, or ANNA), a potential front runner for the role of COU (or LOU in the US) launched their portal in August 2012 for assigning CFTC interim compliant identifiers (CICIs) required by swap dealers and major swap participants for the US swap reporting and record-keeping rules that came into effect in October 2012. This portal utility, now known as the Global Markets Entity Identifier utility (GMEI), supports the global assignment of legal entity identifiers for use in regulatory reporting.

    The inaugural meeting of the ROC was hosted by the Ontario Securities Commission in Toronto on 24th and 25th January 2013. Authorities from over 50 countries and jurisdictions around the world participated in the meeting, at which the ROC took over full responsibility for the leadership of the initiative from the FSB and the decision was taken to form the Global LEI foundation (GLEIF) operating the COU as a foundation in Switzerland, to take forward the necessary work. Together with the federated LOUs providing registration and other services, the foundation operating the COU will form the operational component of the Global LEI System (GLEIS).

    On July 27 2013, the ROC published a series of principles that pre-LOUs, such as the GMEI/CICI utility, must comply with to integrate with the interim global LEI system. The principles provide additional details about the use of the ISO 17442 standard, the process for registering for pre-LEIs and measures for ensuring records are unique. A standard file format exists for pre-LEI reference data and all pre-LOUs are expected to use this file format to publish pre-LEIs and their reference data.

    As requirements for use of the LEI grow (e.g. Transaction Reporting under MiFID II) the ROC Secretariat continues to allocate a 4 digit random number prefix to each sponsored pre-LOU solution meeting the specified conditions. A growing list of the pre-LOUs, which includes the Irish Stock Exchange and the London Stock Exchange, is published on the LEI ROC website. As full operational management of the GLEIS gets underway, the interim pre-LOUs will transition to full GLEIF management during 2015.

    Last updated 20th October 2014

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