The Financial Stability Board wants a universal Legal Entity Identifiers (LEI) system to start operating by the end of 2012, and on a self-standing basis by March 2013. The LEI is designed to create and apply a single universal standard identifier to any organisation or firm involved in a financial transaction internationally.
In June 2012, global regulators, including South Africa, agreed at the G-20 meeting to adopt this global identifier where the identification standard was recommended by both leaders of the G-20 and by the International Organisation for Standardisation (ISO).
ISO has also created a new standard for LEIs, which has been approved by the Financial Stability Board. The new standard, ISO 17442:2012, describes a 20-character alphanumeric code, as well as additional elements for reference data attributes.
Improved risk management and data accuracy
In a report, the Financial Stability Board highlights how such a system “would provide a valuable building block to contribute to and facilitate many financial stability objectives.” These objectives include improved risk management and higher quality and accuracy of financial data.
Furthermore, the Financial Stability Board reiterates that a high quality LEI offers substantial benefits to financial companies and market participants that currently spend large amounts of money on reconciling and validating counterparty information, as well as to regulators and risk managers.
In its report, the Financial Stability Board states:
The ultimate aim is to put in place a system that could deliver unique identifiers to all legal entities participating in the financial markets across the globe.”
As the launch of this universal LEI draws near, a number of key industry stakeholders from across the globe have said the financial services industry needs to be ready.
Global rollout of LEI system
Corporates in the financial markets arena will have to review all of their data, processes, and systems, and capture the necessary changes prior to the global rollout.
Based on a study, it was found that a large amount of organisations have yet to embark on the gearing up process, and even though organisations may be aware of the changes that need to be made, few have embarked on the journey to ensure compliance prior to the LEI system roll out.
Since early 2012, Strate has collaborated with one of the industry’s largest financial utilities globally, Avox®, to provide reliable entity reference data to businesses in Africa.
This has helped customers ensure they are already working with business intelligence that is accurate, transparent data; from issuers to end investors; that is always independently verified by Avox®, allowing customers to prepare for and be ready to run with the LEI system once it’s launched.
For more on Avox®, please contact Leigh Bevis on email@example.com or 011 759 5466.