GLEIF Begins a New Decade in Growth Mode

The Global Legal Identifier Foundation (GLEIF) enters its second decade this month with its novel system of identifiers for everything from companies and their financial instruments to real assets fast becoming a global standard.

The boost that would propel the vLEI into global awareness could come with the European Banking Authority’s (EBA) implementation of its data centralisation project, the so-called Pillar 3 Data Hub (P3DH), due this year. GLEIF’s vLEI has been tested as the means of validating and signing reports submitted to the open-source hub, which will be the EU’s repository of all commercial prudential data disclosures. The hub will be freely accessible by financial institutions.

Following proof-of-concept testing of vLEIs, the EBA has concluded that the system “effectively meets the fundamental Pillar 3 reporting requirements” and a decision on its adoption is expected soon.

“We are in the early stage, clearly, in terms of adoption,” GLEIF chief executive Alexandre Kech told Data Management Insight. He added that he thinks “that in 2025 we will start seeing not only adoption, but live adoption. Today, it’s mostly pilots and proof of concepts – but it has the potential to be a hockey stick-like [growth curve] in terms of live adoption over the years.”

Cost Savings

Kech took the helm of GLEIF in the spring of last year and has seen the LEI’s use grow in that time. The Basel, Switzerland-based not-for-profit’s LEIs are now used in capital markets to enable the matching of instrument data and other information to listed and private companies. LEIs are also widely used by many other industries, including the financial sector, as an aid in regulatory compliance processes.

A recent report by McKinzie on behalf of the organisation found that adoption of LEIs in the banking sector alone has saved US$2.4 billion annually just in onboarding costs. The report recommended that banks use the system in all parts of their operations.

Kech said he has made the further expansion of LEIs into new industries and applications a priority.

“The next five years will be about multiplying use cases and promoting the value of the LEI itself for legal entities through collaborations with, as we do today, industry associations and players in the trade finance, ESG, and cross-border payment and payment spaces,” he said.

GLEIF’s geographical focus will be the Middle East, Africa and South America, in which it hasn’t has as much penetration as Europe, North America and, recently, the Asia Pacific. Growth in the latter was seen amid a concerted effort by the foundation, and made strong inroads into China, India and Australia.

Industry Adoption

Kech said that GLEIF’s greatest successes have come in capital markets, where its LEIs are being used to help investors in their portfolio and risk management planning. But the system is being considered within a broad swathe of allied industries, including cross-border payments, global trade and trade finance.

The International Chamber of Commerce wrote in a recent report that LEIs could be key to preventing trade and financial fraud by making it difficult for criminals to access the data they need to impersonate vendors and divert funds.

And just last week GLEIF said it had struck a deal with the UK’s Companies House, the registry for all businesses that operate in the country, to embed a direct web link to corporate LEI records in the institution, making it easier for organisations to conduct KYC and KYS due diligence.

“Depending on the industry [in which LEIs are used], the level of maturity is different,” Kech said. “Our objective is to grow that level of maturity and usage in the industries where we are on our way to becoming an established standard.”

Global Standard

GLEIF doesn’t operate the only globally used system of entity identifiers. A host of others exist, including Dun & Bradstreet’s D-U-N-S Number, which is being adopted by about 580 million private companies around the world, as well as thousands more publicly traded firms.

Generally, investors prefer simplicity when it comes to standards; the fewer the better because it reduces the complexity of data management when it comes to mapping, say, financial instrument information to specific issuers. While LEIs’ rapid adoption has set the system on the path to becoming a global standard, Kech doesn’t expect it to operate in isolation.

He says that LEIs, being freely issued by the foundation through Validation Agents (vLEIs are similarly assigned by Qualified vLEI Issuers, or QVIs) have a cost benefit over other methods, which charge a subscription fee. However, he sees benefits in GLEIF existing alongside other standards.

“We believe that there is no real competition between identifiers, but more complementarity between them,” he said. “That’s the message I always have when I talk to organisations that have identifiers: ‘We’re not there to replace you – you have value in some areas, we have value in other areas of other use cases. Let’s work together’.”

Kech especially sees no rivalry between GLEIF and Dun & Bradstreet.

“You always had those perceptions of competition, which in my view are not meaningful because Dun & Bradstreet provide way more information that we would be providing.

“My call for action would really be to work together in order to support the entities themselves and the industries that use those identifiers.”