Building a Global System for LEI s: Arthur B. Kennickell

Transcription

1 Building a Global System for LEI s: Arthur B. Kennickell ISITC September 2015 Industry Forum & Working Groups September 13-15, 2015

2 Building a Global System for LEIs Arthur Kennickell Federal Reserve Board September 14, 2015 ISITC Meeting 2

3 Opinions expressed are those of the presenter and they do not necessarily reflect the views of the Federal Reserve Board or the LEI Regulatory Oversight Committee. 3

4 We have come a long way November 2011 request to the Financial Stability Board to develop recommendations for a legal entity identifier (LEI) Financial Crisis amplified the need to understand the identity of market participants Significant informational failures Fragmentation and key dark spots Crisis, uncertainty, desire not to repeat 4

5 Identification Central concept in finance What uniquely identifies an entity? Names and other text-based attributes slippery Many identifiers, but lack persistence/uniqueness and often proprietary LEI is purely about identification as a public good Not-for-profit system 5

6 Unfolding the GLEIS Medium term issues Longer term Plan of talk 6

7 Standard + Implementation ISO 17442: the DNA of the LEI By intent, does not address implementation Following series of G20 mandates/endorsements, LEI Regulatory Oversight Committee (ROC) established in January 2012 Charged with unfolding a governance structure, oversight of the Global LEI System (GLEIS), and setting policies and standards in the public interest Charter-based organization 7

8 Local Operating Units (LOUs) CFTC rules under Dodd-Frank required LEIs for swaps counterparties ESMA, other regulators followed Need to establish the GLEIS registrars: LOUs Need for globally acceptable identifiers Interim system of LOUs operating under ROC endorsement Currently, 26 operating LOUs Over 380,000 LEIs validated and 8 issued

9 Growth of LEIs issued 9

10 LOU portfolio: local, regional and global presence * A legal entity in a jurisdiction can use the registration services of any LOU that is accredited and qualified to validate LEI registrations in the jurisdiction. 10

11 LEIs per country (as of Q2: 2015) 11

12 Number of LOUs serving a country (Q2: 2015) 12

13 Unfolding the governance structure Global LEI Foundation (GLEIF) established in Switzerland, June 2014 Transition from interim system Formal transition framework agreed Principal remaining issue the Master Agreement between GLEIF and LOUs Will set global standards covering data quality and service level Final step in elaborating the governance structure 13

14 Medium-term issues for the ROC Definition of scope International branches Treated as distinct entities for some purposes Individuals acting in a business capacity ISO explicitly rules out only natural persons ROC has no intention to create a system of personal registration Sole traders in some jurisdictions subject to same rules as legal entities Information on organizational structure For some, the entire point of building the GLEIS On-going consultation ( Please respond Defined in terms of accounting consolidation concepts of parents LEI reference data history and entity history Role of corporate actions 14

15 Why doesn t everyone rush to participate? Substantial benefits for all in a comprehensive GLEIS Collective action problem: 2 stages Stage 1: create the GLEIS Fear of dominant player, network benefits but local costs Public sector through ROC, addressed this stage in creating the GLEIS Stage 2: increase coverage Still network benefits but local costs Very unlikely to come entirely from regulatory 15 compulsion

16 Thanks! I welcome your comments and questions. Arthur.Kennickell@frb.gov 16