The first meeting of the Legal Entity Identifier (LEI) Private Sector Preparatory Group (PSPG) initiated by the Financial Stability Board (FSB) and held in New York last week consulted on the development and use of a global LEI system, concluding that any system should ultimately extend beyond financial markets to cover the global financial services sector. The meeting also confirmed that the system should not be locked-in with a particular service provider for any key system functions and set a schedule for next steps activity.
About 170 delegates registered to attend the 25 July LEI PSPG meeting, with 120 attending on the day. As expected by the FSB when it called for interest in the group earlier this month, the meeting was populated by a mix of representation from financial institutions, regulators, standards setters, vendors, consultancies and academics. Global representation was strong, although many countries, including most in Latin America and Europe, failed to field representatives. Some joined with little knowledge of the LEI and the scope of its implementation, while others, according to delegates at the meeting, continued to propose alternative solutions to the federated approach for a global LEI system recommended by the FSB and endorsed by the G20 in June.
While the meeting followed a consultative process it did alight on some specific issues. For example, discussion of the Central Operating Unit (COU), which will report to the Regulatory Oversight Committee (ROC) and be responsible for the correct functioning of Local Operating Units, considered whether the COU should be a technology driver in the LEI system. Some delegates argued that it should hold a central database of LEIs – a tilt towards the centralised system that has already been rejected by the FSB – while others said it should not run key technology and could instead be an organisation that defines and vets LOUs – a more federated view of the end system. The location of the ROC was also discussed as it must be placed where local law will allow it to play its role on a global basis.
Despite the Commodity Futures Trading Commission’s (CFTC) designation on the day before the FSB’s LEI PSPG meeting of DTCC and Swift as the providers of CFTC Interim Compliant Identifiers (CICIs) for the US swaps market, and despite DTCC and Swift’s undoubted ongoing desire to act as a central registration authority for the LEI, the FSB meeting maintained its intent to pursue a federated system. Delegates did, however, acknowledge DTCC’s first mover advantage and potential to become an LOU in the US and other jurisdictions where it has presence.
The meeting split into four work groups to discuss development of the LEI system, before agreeing a tight schedule for the next steps of the programme that will focus on work streams covering governance, operations and ownership data. Participants at the New York meeting last week must confirm their areas of interest by today, Monday 30 July, and volunteers to coordinate working groups – there will be multiple groups for the work streams – must raise their hands on the same date. Working groups including an LEI Implementation Group facilitator will then be created between 1 and 3 August, and will set up introductory working group calls between 6 and 10 August.
An intense period of work will follow, with another face-to-face LEI PSPG meeting scheduled for 15 and 16 October, potentially at the FSB’s headquarters in Basel. This is expected to deliver a charter for the LEI ROC that will be put before the next G20 meeting in November. If it is approved, leadership of the LEI development will be handed over from the LEI Implementation Group to the ROC in December 2012 or January 2013 with a view to meeting the G20 endorsed March 2013 go live deadline for a global LEI system.