Cross border sharing of credit reports and the Legal Entity Identifier (LEI) BIIA Asia Pacific Middle East Limited (Regional Meeting) Phnom Penh, Cambodia March 14th to 15th, 2018 Michael Ritter, Deutsche Bundesbank, Head of Central Credit Register, Chair of the Regulatory Oversight Committee (ROC)
Agenda 1. Cross border sharing of credit data 2. The Legal Entity Identifier (LEI) LEI code structure LEI use cases Recent regulatory adoptions (Asia Pacific) Statistics Asia Pacific 3. The Global Legal Entity Identifier System (GLEIS) Architecture of the GLEIS 2
Cross border sharing of credit data a challenging process Ever more data on more and more entities / parties from various sources worldwide Most companies use multiple identifiers in multiple sytems Corporate registers, industry associations and utilities, exchanges, credit bureaus, customs and tax authorities and other market infrastructure players each maintain their own indentification numbers Improve data on cross-border exposures Customer Identification - Identification of parties is: Time-consuming Costly Complex 3
What is the LEI? The LEI is... a 20 digit dump number to globally identify legal entities a global public good free of charge for data users LEI data: Level 1: who is who: reference data, business card information (done) Level 2: who owns whom: relationship data (done) Level 3: who owns what: financial data (a vision) 4
The LEI is based on the ISO 17442 standard Unique 20 digit alphanumeric code based on ISO 17442 standard assigned to legal entities LEIs are issued by Local Operating Units (LOUs) LOUs supply registration, renewal and other services, and act as the primary interface for registrants for LEIs 5
LEI Use cases and benefits *(source: McKinsey paper The LEI: The value of the unique counterparty ID Capital markets Reducing costs for onboarding clients and of middle- and back-office activities LEI use throughout the lifecycle of the client relationship Reducing time spent on data correction and reconciliation Commercial credit More robust and efficient Know Your Customer (KYC) diligence on borrowers Traceability of information on borrowers from multiple sources Commercial transactions (Trade finance and e-invoicing) Faster processing of letters of credit (facilitate payments in cross-border transactions) Better identification of sellers on e-invoicing networks McKinsey White Paper suggests combined potential savings of at least US$ 650m annually just in core banking! 6
Benefits of LEI adoption for users in the private sector LEI adoption responds to business needs with regard to identification management in the following areas Know your customer utilities (KYC) Unified data management Correspondent banking (buy side and sell side) Trade finance Cash management corporates Distributed ledger solutions (e.g. Blockchain) Standard Business Reporting Asset management for (pension) funds Payment schemes Card payment schemes (merchant data) E-invoicing schemes Trading, clearing and settlement rulebooks Collateral management Credit rating Market research 7
Transparency of (financial) transactions as user requirement of the public sector Required by public authorities in the following areas: (see also Rulemaking initiatives page at www.gleif.org) Risk assessment, market surveillance and enforcement Reporting to derivatives regulators Reporting to securities regulators Reporting to insurance and pension funds regulators Reporting to Banking Supervisors Reporting to Central Banks, e.g. regarding Balance of payments reporting AML (anti money laundering), CFT (combating the financing of terrorism) and sanction regimes Other needs of the public sector Credit Reporting Reporting for statistical market research Collateral assessment and management in Central Banks Public procurement 8
Recent adoptions Regulatory use of the LEI India Introduction of the LEI for the OTC derivatives market (required since 2017) LEI mandated for large corporate borrowers of banks having total exposure of Rs 500 million and above through Directive under Banking Regulation Act (Implementation in Phases) Corporate with Total Exposure to SCB Target date for obtaining LEI Rs 10000 mn and above Mar 31, 2018 Between Rs 5000 mn and Rs 10000 mn Jun 30, 2018 Between Rs 1000 mn and Rs 5000 mn Mar 31, 2019 Between Rs 500 mn and Rs 1000 mn Dec 31, 2019 Separate roadmap to be put in place for exposures between Rs 50 million and up to Rs 500 million Malaysia Adoption (required 2018) of the LEI in the large value payment system (Real-time Electronic Transfer of Funds and Securities System - RENTAS) 9
LEI Statistics India Total No. of LEI issued by LEIL India - 2993 *(27 th Feb 2018) LEI Issued 1200 1172 1000 824 800 600 400 200 10 18 0 First Quarter 2017(Q1) Second Quarter 2017 (Q2) Third Quarter 2017(Q3) Fourth Quarter 2017 (Q4) 10
LEI Statistics Asia Pacific Issued LEIs by Country 11
Current GLEIS architecture and governance GLOBAL LEI SYSTEM HIGH LEVEL PRINCIPLES GLOBAL REGULATORY OVERSIGHT COMMITTEE CHARTER Regulatory Oversight Committee (ROC) Chair Michael Ritter, Vice-Chairs Joseph Tracy, Nanda S. Dave Secretariat Stéphane Mahieu ROC PLENARY ROC EXECUTIVE COMMITTEE MoU, ROC Chairs observers on GLEIF Board COMMITTEE ON EVALUATION AND STANDARDS (CES) GLOBAL LEI FOUNDATION (GLEIF) operating CENTRAL OPERATING UNIT (COU) BOARD OF DIRECTORS (BoD) Chair Gerard Hartsink CEO and staff CEO Stephan Wolf Master Agreement setting GLEIF accreditation and oversight role towards LOUs LOCAL OPERATING UNIT (LOU) 1 LOCAL OPERATING UNIT (LOU) 2 LOCAL OPERATING UNIT (LOU) N 12
LEI Governance the Regulatory Oversight Committee (ROC) 72 members and 18 observers from over 50 jurisdictions Open to any public sector authority, international financial institutions, international public sector bodies (e.g. Central Banks, Regulators) Chair, two Vice-Chairs and Executive Committee (regionally balanced) ROC supported by an advisory technical committee, the Committee on Evaluation and Standards (CES) Task Forces, Working Groups, Study Groups LEI Private Sector Preparatory Group Website: www.leiroc.org 13
LEI Governance - the Global LEI Foundation (GLEIF) GLEIF is a Swiss foundation (non-for-profit) inaugurated in June 2014 in Basel (Switzerland) and founded by the Financial Stability Board (FSB) Statutes and business plan approved by the ROC and FSB GLEIF Board (BoD) of 18 independent directors of 14 jurisdictions (balanced representation of industry participants from different geographic areas and sectors of the economy) Chair and one Vice-Chair CEO of the GLEIF appointed by the BoD 14
LEI Governance - the Local Operating Unit (LOU) Currently 30 accredited LOUs by the GLEIF: Various types: Business registries Stock exchanges Trade repositories Custodians of financial instruments Central banks Numbering agencies issuing e.g. International Securities Identification Numbers Some serve a given country, others offer services to entities worldwide 15
Useful links for up-to-date information 1) http://www.leiroc.org/index.htm 2) https://www.gleif.org/en/about 16
Thank you for your attention! Michael Ritter Deutsche Bundesbank Head of Central Credit Register Tel: +49 69 9566 5400 email: michael.ritter@bundesbank.de 17