The Financial Stability Board (FSB) is encouraging greater adoption of the Legal Entity Identifier (LEI) in a report exploring its potential in cross-border payments. No implementation mandates are suggested, although the report does identify how the LEI could be a useful addition to payment transactions. The LEI is currently mandated for use in OTC derivatives and securities markets.
Following the 2008 financial crisis, in 2012, G20 leaders encouraged global adoption of the LEI to support authorities and market participants in identifying and managing financial risks. The latest FSB report examines how the LEI could be used and the benefits it could deliver in cross-border payment transactions. It also sets out recommendations and options to promote broader LEI adoption in order to assist in achieving the goals of the G20 roadmap to enhance cross-border payments.
The roadmap has introduced several initiatives to reduce friction in data processes, including use of common message formats, data exchange protocols, conversion and mapping approaches from legacy formats, and standardised data. To address data handling issues and improve compliance processes, it is considering the scope for a global unique identifier such as the LEI that links to account information in payment transactions. This could facilitate straight-through processing, reduce costs, enhance accuracy, and increase the speed of transactions.
Implementation of the LEI could also help market participants meet KYC requirements.
The report was produced in coordination with the Global LEI Foundation (GLEIF), the LEI Regulatory Oversight Committee (ROC) and national authorities, The FSB will review implementation of its recommendations and publish a progress report by the end of 2024.
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