Light and Shade In LEI Outlook

Some new wrinkles emerge this month in the long-running story of the legal entity identifier (LEI). In May, it seemed the end of the story could be in sight. That seems less certain now, especially when considering our top story, “ROC Rule Changes Force Purge of CICIs.”

The Regulatory Oversight Committee (ROC), which administers the global LEI, issued its principles for pre-LOUs (local operating units) in late July. In the US, however, the rules set out for CICIs (the CFTC’s Interim Compliant Identifier), were not in sync with what the global authority had in mind. So more than 20% of the 86,000 CICI-registered entities will be stripped of their identifier and removed from the CICI utility administered by Swift and the Depository Trust & Clearing Corporation.

The LEI has always been championed by the US, against resistance from the rest of the world. It appears the push and pull between the US and other countries over just what the parameters of the LEI will be, is still playing out, now on the field of the administrative bodies set up to govern its use.

There are some bright spots, however. A pre-LEI portal consolidating and coordinating the existing pre-LEIs—CICI, Germany’s GEI, France’s LEIFR and the UK’s IEI—has launched, which should put identifier data into a consistent format for the markets. It’s interesting that it took an outside organization, rather than an regulatory or administrative body, to possibly realize the promise and purpose the LEI’s creators intended or expected.

The UK became the fourth country to emerge with its own pre-LEI, the London Stock Exchange’s Interim Entity Identifier (IEI). More countries issuing their own identifiers might seem to run counter to getting global consistency, but the LSE is promising portability of pre-LEI records between LOUs, and says the IEI complies with ROC guidelines.

Compliance with European Market Infrastructure Regulation (EMIR) means firms will have to be able to access a wide range of data, HSBC’s Chris Johnson tells us. So no matter what is done or not done with compatibility of national pre-LEIs or LEIs, the integrity of the identifiers and data must be there, he adds.

We’ve noted before that the LEI must also be coordinated with other securities identifiers. This month, Inside Reference Data also looks at development of another key standardization project, the Single Euro Payments Area (SEPA) initiative project. SEPA contains changes to credit transfer and debit standards and establishes the International Bank Account Number (IBAN) as a payment account identifier. SEPA is designed to standardize fees for payments within Europe. It’s not a global effort, but is meant to eliminate differences between European nations’ jurisdictions. This looks like a step in the right direction, although different IBAN generation rules in different countries remain a challenge.