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 326 being introduced as a ‘grouping identifier’ in the ECB’s Centralised Securities Data base (CSDB) to group securities under the same issuing entity. The CSDB supports analysis and policy work of a number of central bank functions. ● Facilitation of orderly resolution : Having a unique identifier across entities, products and geographies supports a more com prehensive and faster analysis of contagion risks, and also a more timely analysis of the quality of the assets of the failed institution. ● Improve quality and accuracy of financial data: The LEI can improve data quality and analysis as it can help support the manage ment of large datasets and facilitate aggre gation and linking to different data sets. Importantly, there are positive network externalities from adoption. If adoption of LEIs increased among the non-f inancial corporate sector, this could enable further innovation, delivering wider economic benef its for the corporate end users of f inan cial services. 16 A potential UK example of this is the concept of a ‘portable credit f ile’ to help small and medium enterprises (SMEs) to harness the power of their data to give greater access to more diverse and competitive f inancing options, including for global trade. 17 By way of illustration, the Bank of England’s response to the Huw van Steenis Future of Finance review, noted that because of poor information, many SMEs struggle to access the f inance they need. Survey evi dence suggests that more than 50 per cent of SMEs consider only one provider when seeking a loan and that six in ten of those who would like to borrow resort to per sonal funds rather than corporate f inance. If adopted widely, the LEI could vastly increase the value of data for companies by enabling the identif ication of their busi nesses and verif ication of their data. The LEI could be linked to a ‘portable credit f ile’ for SMEs into which businesses could pull their data and shop around for f inancial services, giving them greater choice and better access to productive f inance. Further, because the LEI is globally recognised, it will help businesses access f inance for cross-border trade. In turn, this could help to close the £22bn funding gap for SMEs in the UK. 18 POTENTIAL USES AND BENEFITS OF THE LEI IN PAYMENTS Every payment system requires a messag ing standard, ie a common set of rules for exchanging relevant payment information in order to enable eff icient communication with participants and related infrastructures. When included in payment messages, LEIs can provide clear and eff icient identif ication of the parties in a transaction. The world of payments is changing rap idly. On the demand side, households, companies and f inancial intermediaries are demanding ever faster, simpler, cheaper and more f lexible ways to pay and sup port a more-digitised and online economy; meanwhile on the supply side, major changes are underway in many domestic and international payments systems. Most major high-value payment system (HVPS) operators have either moved or are in the process of moving to a common inter national payment messaging standard, ISO 20022. First published in 2004 by ISO, ISO 20022 is a globally-agreed and managed method for creating f inancial messaging standards. ISO 20022 is capable of carrying a much richer data set than many of the legacy formats that it replaces. LEIs can play an integral part in the new payment landscape. Names and addresses often lack a single and consistent form or convention — particularly across different jurisdictions with languages with different characters, thus hampering eff icient pro cessing. Confusion can arise where entities have similar names — both where the - - - - - - - - - - - - - The value of the LEI for the payments industry IGTA eJournal | Winter 2020/21 | 42