GLEIF proposes using the Legal Entity Identifier for passporting under...

GLEIF proposes using the Legal Entity Identifier for passporting under Article 28 (5) of PSD2

17 March 16

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The Financial Stability Board (FSB - an international body that monitors and makes recommendations about the global financial system) reiterated that global adoption of the Legal Entity Identifier (LEI) underpins “multiple financial stability objectives” such as, for example, improved risk management in firms. As a result, it promotes market integrity while containing market abuse and financial fraud. In short, the LEI is a public good that provides open and reliable data for unique identification management free of charge to users.

The LEI is a 20-digit, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO). It connects to key reference information that enables clear and unique identification of legal entities* participating in financial transactions. The reference data provides the information on a legal entity identifiable with an LEI. Simply put, the publicly available LEI data pool can be regarded as a global directory, which greatly enhances transparency in financial markets and with regard to financial transactions. More than 420,000 LEIs have been issued to date.

The Global LEI System is composed of three tiers:

  • LEI Regulatory Oversight Committee: A group of over 70 public authorities from more than 40 countries established in January 2013 to oversee the Global LEI System.
  • Global LEI Foundation (GLEIF): Founded by the FSB in June 2014, GLEIF is a not-for-profit organisation created to support the implementation and use of the LEI. GLEIF manages a network of partners, i.e. the LEI issuing organisations, to provide trusted services and open, reliable data for unique legal entity identification.
  • LEI issuing organisations: LEI issuers supply registration, renewal and other services, and act as the primary interface for legal entities wishing to obtain an LEI.

It is the prerogative of the authorities acting in individual jurisdictions to mandate the use of LEIs. GLEIF therefore closely monitors initiatives relevant to legal entity identification in regulatory reporting and supervision.

European Banking Authority consultation on the exchange of information between competent authorities for passporting under Article 28 (5) of

In December 2015, the European Banking Authority ( ) launched a consultation on its draft technical standards on the framework for cooperation and exchange of information between competent authorities for passporting under Article 28 (5) of the revised Payment Services Directive ( ). The technical standards will ensure that information about those payment institutions that carry out business in one or more European Union ( ) Member States is exchanged consistently between the national authorities of the home and host Member States. The consultation closed on 11 March 2016.

As stated by , “requires coordination, cooperation and information exchanges between competent authorities of different Member States. Article 28, in particular, foresees that an authorised payment institution wishing to provide payment services for the first time in one or more Member States other than its home Member State shall inform the competent authorities of its home Member State accordingly. To that end, Article 28 (5) confers a mandate on the to develop draft regulatory technical standards ( ), specifying method, means and details of the cross-border cooperation between competent authorities in the context of passport notifications of payment institutions.”

Respondents to the consultation were asked, among other things, to indicate whether they agree with “the format of the relevant unique identification number in each Member State set out in Annex 1” to the consultation paper. To date, only Spain proposes using the LEI as the relevant unique global identification number while all other Member States opt for different national identifiers.

has recognised in January 2014 the benefits of the LEI by requiring its use in supervisory reporting in the . Keeping in mind the objective to establish “a harmonised framework that is aimed at providing clarity to payment institutions about regulatory requirements”, as stated in the ’s consultation paper, GLEIF suggests consistently using the LEI for the exchange of information between competent authorities for passporting under Article 28 (5) of .

Taking advantage of open and reliable data for unique identification management: firms are encouraged to get their own LEI

To maximise the benefits of entity identification across financial markets and beyond, firms are encouraged to engage in the process and get their own LEI. Obtaining an LEI is easy. Registrants simply contact their preferred business partner from the list of LEI issuing organisations available on the GLEIF website.

The publicly available LEI data pool is a unique key to standardised information on legal entities globally. To facilitate fast and easy access to the entire LEI population, GLEIF makes available the Global LEI Index. It provides information, updated daily, on all LEIs issued to date. Any interested party can easily access and search the complete LEI data pool free of charge on the GLEIF website. Accessing the data supports a multitude of applications in, for example, risk management, compliance, client relationship management and data management. For detailed information on the benefits of deploying the LEI in the payments industry, refer to this EPC Newsletter article.

* The term ‘legal entities’ includes, but is not limited to, unique parties that are legally or financially responsible for the performance of financial transactions or have the legal right in their jurisdiction to enter independently into legal contracts, regardless of whether they are incorporated or constituted in some other way (e.g. trust, partnership, contractual). It excludes natural persons, but includes governmental organisations and supranationals. (Source: International Organization for Standardization). Individuals acting in a business capacity are eligible to an LEI under certain conditions described by the LEI Regulatory Oversight Committee on 30 September 2015.

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