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Global LEI initiative struggles for momentum

09 February 2017  |  5222 views  |  0 Outsourcing Strategies

US regulators have been slammed for their part in the stalling of the Legal Entity Identifier project, which last year saw more lapsed LEIs than new ones.

The global LEI project aims to ensure that every counterparty in a financial transaction is issued a unique code so that those transactions can be fully tracked across borders.

The first LEIs were issued in 2012 and by the end of January 2017 487,000 had been registered. But progress has stalled: in 2016 there were 64,000 issued but 76,000 lapsed.

According to a research note from Financial InterGroup, this failure to renew already issued LEIs may present significant problems.

The issue is likely to get worse in Europe, where from 2018 MiFID II will require all clients who trade financial products on organised markets throughout the EU to have an LEI - but the mandate allows lapsed LEIs to be used in financial transaction reporting.

Elsewhere, the blame for the lack of impetus is laid at the door of the US, where regulators, despite early enthusiasm for the project, have explicitly rejected making LEIs mandatory beyond swaps markets participants.

Financial InterGroup says that it is time for the Global Legal Entity Identifier Foundation to "exert itself", potentially withdraw its accreditation to any Local Operating Unit that does not meet minimum lapsed rate standards

In the US, it says that the Office of Financial Research and the US Treasury have to be the “product champions” to the US Congress to "recognise the significance of data standards and the LEI in fixing the plumbing of finance".

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