SIFMA Advocates for U.S. Regulation to Require LEIs

The Securities Industry and Financial Markets Association (SIFMA) has submitted a letter encouraging U.S. Treasury Secretary Jacob Lew to leverage his role as Financial Stability Oversight Council (FSOC) Chairperson to push for broader U.S. adoption of the Legal Entity Identifier (LEI).
By Jake Safane(2147484770)
The Securities Industry and Financial Markets Association (SIFMA) has submitted a letter encouraging U.S. Treasury Secretary Jacob Lew to leverage his role as Financial Stability Oversight Council (FSOC) Chairperson to push for broader U.S. adoption of the Legal Entity Identifier (LEI).

In its letter, SIFMA notes that Dodd-Frank specifically recognizes the need for improved data and information supported by an LEI standard. Having this identifier, the association says, will lead to a more a stable financial system, as regulators, supervisors, researchers and firms can better measure and monitor systemic risk and counterparty exposure, as well as and improve operational efficiencies with an LEI.

SIFMA says that “significant progress” has been made so far in establishing global LEIs (GLEIS), though this should be expanded through regulation. In the U.S., the CFTC’s Swap Data Recordkeeping and Reporting Requirements has been the only regulation that requires the use of an LEI, and as such U.S. entities only represent about 28% of the nearly 238,000 LEIs issued globally. In contrast, European institutions account for nearly 60% of LEI registrations, driven by requirements such as the European Market Infrastructure Regulation (EMIR) and new requirements from The European Banking Authority (EBA) for reporting purposes.

Plus, the EU’s Markets in Financial Investments Regulation (MiFIR) Article 23 Transaction Reporting will require use of the LEI in reporting of securities and other transactions, which SIFMA says “will be a powerful catalyst to the development of the GLEIS.” Regulators in other countries such as Canada, Australia, Singapore and Hong Kong have also promoted the use of an LEI for reporting requirements and other supervisory activities.

“Consequently, we believe the FSOC and its members can and should play a key role in expanding the U.S. adoption of the LEI and its related benefits by requiring LEIs to be used broadly in U.S. regulatory reporting and other supervisory practices,” SIFMA says in the letter to Lew. “This would be consistent with the Office of Financial Research’s (OFR) Policy Statement of November 2010, ‘If a LEI is established to the satisfaction of the Office by July 15, 2011, the Office, in consultation with the Chairperson of the Council, plans to issue a regulation mandating the use of such a standard for data reported to the Office.’ More recently, OFR Director Richard Berner testified before the Congress and indicated the OFR will work with FSOC member agencies to mandate the use of LEI through rulemaking. This is an initiative the industry greatly supports.”

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