A number of advances have been made with Legal Entity Identifiers (LEIs) since September that will change the way companies do business in the near future.
The LEI system will depend on self-identification and self-registration, according to the Financial Stability Board. The Financial Stability Board responded in late October to requests for early clarity and guidance on the number allocation scheme for the global LEI system. Experts explored the advantages and disadvantages of different schemes.
Schemes to improve the LEI Code
It said that while there is a range of different schemes to manage the issue of identifiers that fit the characteristics of the 20-digit code (including two check digits) approach outlined in the ISO 17442 standard, for simplicity those schemes can be categorised into two general groups:
- An unstructured numbering system – one where an 18 character unique identifier fills the whole numbering spectrum;
- A structured numbering system – one where subsets of the spectrum of possible codes are partitioned for efficient allocation according to a structural guideline. For instance, an N digit prefix could be assigned to each local operating unit for its exclusive use.
The Financial Stability Board concluded that the best approach and required method would be to use a four-character prefix allocated uniquely to each local operating unit for characters 1- 4, followed by two reserved characters set to zero for characters 5-6. Characters 7-18 will include the entity-specific part of the code generated and assigned by local operating units according to transparent, sound and robust allocation policies and characters 19-20 will have two check digits as described in the ISO 17442 standards.
The Financial Stability Board’s Implementation Group, in collaboration with a number of vested parties, will prepare a comprehensive legal and operational analysis, standards and protocols in the coming weeks. This will support the rapid operational implementation of the global LEI system. It had been waiting for the Regulatory Oversight Committee (ROC) to be formed and the global LEI foundation operating the Central Operating Unit to be in place. The G-20 Finance Ministers and Central Bank Governors endorsed the Charter of the ROC for the Global LEI System on 5 November 2012.
Strate will keep you updated with future developments relating to the LEI code …
