The Financial Stability Board (FSB), the global regulatory coordinator, has requested that the International Organisation for Standardisation (ISO) remove the role of Registration Authority (RA) from the ISO standard 17442. Removing the RA function from the ISO standard is intended to simplify the governance model of the global Legal Entity Identifier (LEI) system and eliminate potential conflicts between two separate governance systems (ISO and FSB).
The FSB is expected to define the governance and operational model for the global LEI system which will involve the creation of a central utility to oversee the roll-out, allocation and ongoing management of legal entity identifiers (LEIs) for use in financial transactions.
This combines the previously separate roles of registration authority and facilities manager for which the ISO Technical Committee had nominated SWIFT in partnership with DTCC, the US post-trade utility.
The FSBs Expert Group is making their recommendations following consultations throughout the spring with its industry advisory panel, consisting around 30 organisations representing the financial industry and beyond, including SWIFT and DTCC.
The FSB Expert Group recommendations will be submitted to the FSB Plenary before the end of May and, if approved, a governance and operating model for use of LEIs will be submitted at the upcoming G-20 summit in Mexico on 19 June.
The requirement for a means of unambiguously identifying an entitys counterparty exposures has been evident in the financial sector for many years, but efforts to implement a global system for LEIs was given impetus by the collapse of Lehman Brothers and subsequent events during the global financial crisis.
The approach proposed by the FSB will establish a simplified governance model for the global LEI system, said Paul Janssens, LEI programme director at SWIFT.
This is a change in terminology rather than functionality and not a reflection of SWIFT or its capabilities; the tasks of allocating LEIs, and validating and distributing data do not change, said Janssens. SWIFT has confirmed its commitment to play a role in the allocation of LEIs. We continue the development of our proposed solution in full collaboration with the DTCC.
In practical terms, the new framework could mean that a firm that wanted to register an LEI could apply via a national registrars, which would then submit the request to the central global utility for the assignment of the LEI.
Janssens said that the previous support of the ISO Technical Committee for SWIFT as registration authority for LEIs put it in a strong position to play a similar role as part of the FSBs central utility.
The fact that the FSB is taking the lead on LEIs is a positive step. LEIs are now well on the way to becoming the equivalent of the passport in the financial world, he added.
LEIs will use a 20-digit code as defined in ISO standard 17442. Currently, fewer than 1 % of ISO standards function without a registration authority. ISO is now submitting a revised draft standard to its members for a 30 days ballot.
Under US domestic legislation, i.e. the Dodd-Frank Act, a new reporting regime for OTC derivatives is due to commence on 16 July. US derivatives regulator the Commodities Futures Trading Commission (CFTC) has started a process to define a CFTC interim compliant identifier for which the solution providers will be announced at end of May. This interim solution will migrate into LEI when the global system is defined.
by Chris Hall – www.thetradenews.com – an Asset International publication