15 Feb Legal Entity Identifiers in 2019: What to look forward to?
The Global Legal Entity Identifier Foundation (GLEIF) publishes reports quarterly on how the 20 digits alpha-numeric code based on the ISO 17442 standard.
LEI connects to important reference information that enables definite and unique identification of legal entities participating in financial transactions.
One such quarterly report was released in February which highlights fundamental developments relevant to the adoption of the Legal Entity Identifier (LEI).
Here is what the report says and how it is helpful to the investors:
LEI Growth This Quarter
At the end of the fourth quarter of 2018, the total LEI population exceeded 1.3 million, and approximately 55,000 LEIs were issued in the fourth quarter of 2018. India featured the highest LEI growth rate at a jurisdiction level (30.3%) followed by Estonia and the United Arab Emirates.
India has created LEI growth at a jurisdiction level throughout 2018. This is attributed primarily to various regulatory initiatives implemented by the Reserve Bank of India mandating the use of the LEI. This trend is expected to continue in the coming quarters of the year 2019.
LEI renewal rates
The annual renewal process ensures that the legal entity and the LEI issuing organization review and re-validate the legal entity reference data at least once a year.
At the end of the fourth quarter of 2018, 76% of all LEIs were in good standing. Which means, the annual renewal process happens regularly and is expected to continue so. This also makes sure that when LEI search happens, the data is authentic.
In the reporting period, these five jurisdictions demonstrated the highest renewal rates: Finland (94%), India (92.8%), Japan (92.2%), Liechtenstein (88.5%) and Estonia (81.7%) in descending order.
Reference data corroboration- L1
The business card information available with the LEI reference data, for example, the official name of a legal entity and its registered address, is referred to as ‘Level 1’ data. It provides the answer to the question of who is who.
The Level 1 data is considered fully established if, based on the validation procedures in use by the LEI issuer, there is sufficient information included in reliable public sources to verify the information that the legal entity has provided for the record. If this is not the case, the business card information available with an LEI record is classified as entity-supplied only.
In the fourth quarter, the percentage of fully established Level 1 reference data within the entire LEI population increased to 78.2%. It is expected that it will further increase over the next quarters.
Statistics on the reporting of parent information by legal entities
In the fourth quarter of 2018, approximately 1,140,000 LEI registered entities representing 91.2% of the total LEI population had announced information on direct and latest parents.
The 99.9 % of LEI registrants who obtained a newly issued LEI or renewed an existing LEI in this quarter reported parent information.
As the global LEI becomes more widely used, it is expected to cut costs and improve risk management by individual firms and across the system. These savings will come primarily from operational efficiencies such as reducing the volume of transaction failures; lowering data reconciliation, cleaning, and aggregation costs; and reducing regulatory reporting costs.
A global LEI system will provide long-term benefits to companies by clearly identifying their counterparties and customers and improving internal risk management.
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