IGTA Journal - Winter 2020/2021

Delivered by Ingenta IP: 193.129.26.79 On: Tue, 28 Jan 2020 14:32:43 Copyright: Henry Stewart Publications Page 324 must notify their LOU of any changes in the LEI reference data. The LOU has to review and revalidate the reference data of the registered legal entity at least once a year to ensure that LEI data are maintained to a high quality. GLEIF publishes reports on the quality of the data in an LEI Issuer Data Quality Report and validates that the LOUs con tinue to meet all the requirements set out in the Master Agreement. 9 Growth in LEI usage in financial market reporting Since the establishment of GLEIF in June 2014, over 1.4 million legal entities in over 200 jurisdictions 10 have registered for an LEI (see Figure 1). According to the FSB, regulatory requirements have been the main trigger for LEI issuances. 11 For the Europe Union, this includes the Markets in Financial Instruments Directive and Regu lation (MiFID II and MiFIR) for reporting of f inancial transactions and issuance of securities, and the European Market Infra structure Regulation on derivatives trade reporting. A substantial number of the 48,000 listed companies that have registered for the LEI have done so both for the listed legal entity and many of their subsidiaries. In addition, some listed companies, such as Citigroup Inc (13 direct children and 686 ultimate chil dren), Nestle S.A (61 direct children and 95 ultimate children), Total SA (22 children and 119 ultimate children) and A.P. Moller- Maersk AS (56 children and 56 ultimate children), 12 - have decided to obtain LEIs because they see the value of the LEI pro gramme for the business processes of their subsidiaries in terms of the automatic deliv ery of high-quality services (documentation) to their customers or suppliers. Nevertheless to date, the vast majority of companies that have obtained LEIs have been prompted by their activities in f inancial markets, and take-up for other uses has been low. 1400000 1200000 1000000 800000 600000 400000 200000 0 2013 2014 2015 2016 2017 2018 Number of LEIs issued Figure 1: Global LEIs issued over time Source: GLEIF, Annual Reports, www.gleif.org Globally LEIs have been issued to 1,469,605 legal entities. About 70 per cent of LEIs have been issued in FSB countries. Table 1 sets out the breakdown by FSB jurisdiction. BENEFITS OF THE LEI The LEI offers a unique opportunity to pro vide a consistent, concise, transparent and verif ied means to identify/cite any corporate entity involved in any economic transaction. It provides a valuable tool for market partic ipants to be able to realise benef its in a range of areas. For end users, the benef its include the following: ● Improved risk management and liquidity man agement: The LEI enables risk managers to have a consolidated overview of all the pos itions they hold with their counterparties and trading partners. This includes being able to readily calculate the overall position against a set of different but related entities within the same corporate group. ● Screening and onboarding of customers: LEIs can make it easier to reliably identify customers across multiple systems and processes. 13 LEIs are included in the Wolfsberg Group’s Correspondent Bank ing Due Diligence Questionnaire. Anal ysis from McKinsey & Company and - - - - - - - - - - - The value of the LEI for the payments industry IGTA eJournal | Winter 2020/21 | 40