Circular to the Financial Services Industry on the Legal Entity Identifier ('LEI')

[1.0] Introduction

The LEI is a unique identifier consisting of a 20-character alpha-numeric code, which allows for the identification of legally independent entities across global financial markets. The Global LEI System was a G20 commitment towards "the creation of a global legal entity identifier which uniquely identifies parties to financial transactions". The Global LEI System is therefore an international initiative and is not just limited to the European Union. LEIs are issued by Local Operating Units ('LOUs') of the Global LEI System. LOUs are the utilities endorsed by the Regulatory Oversight Committee ('ROC')1, or accredited by the Global Legal Entity Identifier Foundation ('GLEIF') under ROC oversight, to provide LEI registrations to registrants and other services.

The establishment of a Global LEI System is critical to improving measurement and monitoring of systemic risk. Furthermore, establishing a uniform system for the identification of legal entities reduces costs not only for individual companies but for the global market.

[2.0] Application of LEIs

The use of LEIs is already required or recommended under a number of European regulations such as: the European Market Infrastructure Regulation ('EMIR'), whereby counterparties falling within the scope of EMIR are required to report the details of their transactions and an LEI is required for the proper identification in this context; the Capital Requirements Regulation ('CRR'); and the Central Securities Depositories Regulation ('CSDR').

The LEI is also mentioned in the Technical Standards pertaining to the Alternative Investment Fund Managers Directive ('AIFMD'). Furthermore, the LEI will also be required under the Markets in Financial Instruments Directive and Regulation ('MiFID II'/ 'MiFIR') framework.

Annexed to this circular is a list of European regulatory activities which request or require the use of an LEI. It is appropriate to reiterate that this identifier is not limited to European legislation, but extends across the globe. For an overview of the current and proposed regulatory activities in every worldwide jurisdiction which require or request the use of the LEI please click the following link.

[3.0] Obtaining an LEI

One may apply for an LEI code through any of the LOUs which are endorsed by the ROC. More information on how to obtain an LEI code, as well as the list of endorsed LOUs can be found by clicking the following link.

[4.0] Conclusion

Considering the number of regulatory activities requiring the use of LEIs, the Authority strongly recommends that legal entities, who have not yet obtained an LEI code, apply for their LEI irrespective of or possibly in advance of any regulatory requirement. Obtaining an LEI would contribute to and facilitate many financial stability objectives, including enhanced supervisory convergence and high-quality, reliable and comparable data. It is appropriate to note that failure to obtain an LEI code may result in noncompliance with regulatory requirements, possibly leading to a regulatory breach on the part of the respective legal entity.

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Footnote

1  The Regulatory Oversight Committee is a group of over 70 public authorities from more than 40 countries established in January 2013 to coordinate and oversee a worldwide framework of legal entity identification, the Global LEI System.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.