The Office of Financial Research (OFR) has called for collective action on global implementation of the Legal Entity Identifier (LEI) and named US regulators as the drag that is slowing down adoption of the identifier.
The OFR reviews development of the Global LEI System (GLEIS) in a briefing document titled Collective Action: Toward Solving a Vexing Problem to Build a Global Infrastructure for Financial Information and authored by Matthew Reed, former chairman of the LEI’s Regulatory Oversight Committee (ROC), and its two former vice chairmen, Bertrand Couillault of Banque de France and Jun Mizuguchi of the Financial Services Agency of Japan.
In a blog talking about the document, Richard Berner, director of the OFR, states: “During early development of the LEI system, US financial regulators articulated requirements for an LEI system, including four that were core. The LEI would need to be persistent, unique, ubiquitous and freely available. To date, the LEI system has issued about a half-million LEIs across the world, but that’s not enough progress toward the ubiquity needed to yield the full array of benefits. To accelerate adoption, regulators must require broader use of the LEI in regulatory reporting. Authorities in Europe have required it, but our fellow US regulators have been slower to respond. They need to step up and do more.”
The briefing document describes the introduction of the LEI, development of the GLEIS, establishment of the Global LEI Foundation, and the set up of Local Operating Units (LOUs) within the global system and LOU contracts designed to protect the cooperative spirit of the LEI initiative, while preventing the development of a cartel of issuers. It also notes a 98% total data quality score for LEI data in 2016, but adds: “Challenges remain. Although regulatory compulsion has led to rapid adoption and largely solved counterparty identification for our global swaps markets, the pace of adoption has slowed. Also, fewer firms than expected are renewing their codes – important both for quality control and the funding mechanism. In addition, some expected regulations that would mandate LEI adoption have not materialized. We must overcome these challenges.”