This report sets out the conclusions from a peer review of the implementation of the Legal Entity Identifier (LEI). Since its endorsement by the G20 in 2012, the Global LEI System has been successfully brought into operation, with over 1.4 million entities uniquely identified by an LEI in more than 200 countries. Most FSB jurisdictions have implemented rules mandating LEI use in at least one area. Adoption has been most successful when the LEI has been mandated by regulators as part of an international standard-setting effort or across multiple market segments. Widespread coverage has already been achieved in over-the-counter (OTC) derivatives and securities markets. In these areas, the LEI has come the closest to meeting the G20’s objective to “encourage global adoption of the LEI to support authorities and market participants in identifying and managing financial risks”.
The regulatory uses of the LEI are multiple and the benefits can be substantial. The LEI standardises identification of legal entities at the global level, to support the management and analysis of large datasets. Its implementation enhances regulators’ surveillance by tracking market abuse across institutions, products and jurisdictions. The LEI can also assist regulators’ and market participants’ aggregation and more flexible retrieval of granular data on entities from multiple sources, as well as the analysis of counterparty risks, interconnectedness and complex group structures. Many in the financial industry are supportive of the LEI, citing substantial existing and potential benefits from its use.
Notwithstanding this progress, the LEI has far to go to meet the G20’s objective. Coverage is too low outside securities and derivatives markets to encourage new industry or regulatory uses, or to reach a tipping point where voluntary take-up by market participants would suffice to propel further adoption. LEI adoption also remains uneven across jurisdictions, with coverage concentrated in Canada, the EU and the United States. More efforts should be made both at national and international levels to promote LEI adoption and enhance the benefits to authorities and market participants from its use by addressing identified obstacles.
The report sets out four sets of recommendations to address the issues identified in the peer review and promote broader LEI adoption. The recommendations are targeted at FSB member jurisdictions, the FSB, relevant standard-setting bodies and international organisations, the LEI Regulatory Oversight Committee and the Global LEI Foundation.