GLEIF Published the First Quarterly Global LEI System Business Report
The Global LEI System Business Reports highlight main trends relevant to the adoption of the LEI and provide in-depth analysis of the LEI data pool
Author: Stephan Wolf
Estimated Reading Time: 9 minutes
In April 2017, the Global Legal Entity Identifier Foundation (GLEIF) published the first quarterly report, which highlights key developments relevant to the adoption of the Legal Entity Identifier (LEI). Specifically, the reports assess annual growth and renewal expectations, evaluate the level of competition between LEI issuing organizations operating in the Global LEI System and analyze LEI renewal rates and reference data corroboration. To download the first ‘Global LEI System Business Report’ which covers the first quarter of 2017, refer to the ‘related links’ below.
This blog post summarizes the main findings of the first Global LEI System Business Report and provides background information on the data included with the report. Sources cited are included in the ‘related links’ below.
Main findings of the first Global LEI System Business Report
The first Global LEI System Business Report, which analyzes developments observed in the first quarter of 2017, shows:
As of the end of the first quarter of 2017, there are over 481,000 active LEIs managed by 30 LEI issuers. These LEIs represent legal entities in 199 jurisdictions. The United States remained the top market comprising 25 percent of overall LEI issuance to date.
The top five and top ten jurisdictions comprise 56 percent and 76 percent of active LEIs in the Global LEI System respectively.
Overall, the quarterly LEI growth rate remained at 4 percent, resulting in an annualized growth rate of 13 percent in Europe and 19 percent in the rest of the world. GLEIF forecasts that the European continent will achieve an annual growth rate of 23 percent largely due to the implementation of the European Union revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR) which is scheduled for January 2018. GLEIF forecasts 551,000 active LEIs at the end of 2017.
The average LEI renewal rate by jurisdiction is 66 percent, with minimum of 36 percent and maximum of 89 percent. Non-renewal activities are slightly increasing, notably in the United States. This impacts the overall trend given this jurisdiction also accounts for a quarter of the active LEI population.
Through stronger messaging on the importance of renewals in collaboration with the LEI Regulatory Oversight Committee, GLEIF predicts the LEI system will achieve an overall renewal rate of 75 percent by year end.
The ranking of LEI issuers by managed active LEIs remained unchanged in the first quarter of 2017. The top five LEI issuers demonstrate different business models with three LEI issuers managing LEI portfolios representing legal entities from more than 195 jurisdictions globally and two LEI issuers focused largely on their national market.
The jurisdictions with high numbers of LEIs tend to be least competitive (most concentrated) and vice versa. North America has the most concentrated markets as opposed to Norway, Slovakia, Portugal, Ireland or Luxembourg where LEI issuers have had a greater opportunity to introduce their services.
The number of LEIs being fully corroborated by the LEI issuer increased significantly from the fourth quarter of 2015 (73 percent) and has plateaued since the third quarter of 2016 (89 percent). The conversion to the LEI Common Data File (CDF) format 2.0 should help to increase transparency in LEI issuer reference data corroboration as a result of changes in reporting format, specifically the introduction of a standardized code for the validation source.
Background information on the data included with the Global LEI System Business Reports
The reports are derived from the Global LEI Index, which contains historical and up-to-date LEI records including related reference data in one authoritative source. The reference data provides information on a legal entity identifiable with an LEI. The Global LEI Index is the only global online source that offers open, standardized and high-quality legal entity reference data. Interested parties can access and search the complete LEI data pool using the web-based LEI search tool developed by GLEIF.
State of play of LEI issuance and LEI growth potential: GLEIF, in partnership with the LEI Regulatory Oversight Committee and the LEI issuing organizations, is on a journey to increase the rate of LEI adoption so that in the future, the Global LEI Index will capture an increasing number of entities engaging in financial transactions globally, providing a 360-degree view. The quarterly Global LEI System Business Reports detail:
Total number of LEIs issued globally and recent issuance trends.
Jurisdictions with the most LEIs and high rates of new LEI issuance.
Important activity by LEI issuers.
Overall LEI growth expectation for the year.
Competition in the Global LEI System: LEI issuers – also referred to as Local Operating Units (LOUs) – supply registration, renewal and other services, and act as the primary interface for legal entities wishing to obtain an LEI. A legal entity is not limited to using an LEI issuer headquartered in its own country; instead, it can use the registration services of any LOU that is accredited and qualified to validate LEI registrations within its authorized jurisdiction(s). The Global LEI System is designed to encourage competition between LEI issuers to the benefit of legal entities seeking to obtain an LEI. The fees charged for the issuance and maintenance of an LEI are entirely a matter for the LEI issuing organizations and must be cost-based. The quarterly Global LEI System Business Reports detail:
Least competitive markets with more than 1,000 LEIs based on the number of LEI issuers providing services in this jurisdiction.
Most competitive markets with more than 1,000 LEIs based on the number of LEI issuers providing services in this jurisdiction.
LEI renewal rates: Renewal means that the reference data connected to an LEI is re-validated annually by the managing LEI issuer against a third party source. Legal entities that have obtained an LEI are obliged to renew it regularly. This is a key feature that distinguishes the LEI from other identifiers for the following reasons: Firstly, the principle of renewal is essential to ensure that the information available on a legal entity with an LEI is accurate and up to date. No other global and open entity identification system has committed to a comparable strict regime of regular data verification. Secondly, the users of the data are aware of whether the information related to a specific LEI has been re-validated recently or not. The Global LEI System is unique in providing absolute transparency on the timeframe when data has last been verified. If a legal entity fails to renew and re-certify its LEI registration by the ‘Next Renewal Date’ stated with its LEI reference data, then the registration status of this LEI will be set from ‘issued’ to ‘lapsed’. The quarterly Global LEI System Business Reports detail:
Total number of LEIs duly renewed versus the total number of LEIs issued globally.
Jurisdictions with more than 1,000 LEIs featuring the highest renewal rates.
Jurisdictions with the highest rates of lapsed LEIs.
Reference data corroboration: The business card information available with the LEI reference data, e.g. 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 LEI-CDF format defines how LEI issuing organizations report their LEI and Level 1 reference data. The CDF format specifies the field ‘ValidationSources’. If the value included with this field in the publicly available LEI data record states ‘Fully Corroborated LEI’, this means: Based on the validation procedures in use by the LEI issuer responsible for managing this LEI record, there is sufficient information contained in authoritative public sources to corroborate the information that the legal entity has provided for the record. The quarterly Global LEI System Business Reports detail:
Percentage of total LEIs issued that are fully corroborated by the LEI issuer.
GLEIF also makes available the ‘Business Reporting Dictionary’, which defines formulas and algorithms used to report on the LEI activity highlighted with the quarterly reports.
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Stephan Wolf is the CEO of the Global Legal Entity Identifier Foundation (GLEIF). Since January 2017, Mr. Wolf is Co-convener of the International Organization for Standardization Technical Committee 68 FinTech Technical Advisory Group (ISO TC 68 FinTech TAG). In January 2017, Mr. Wolf was named one of the Top 100 Leaders in Identity by One World Identity. He has extensive experience in establishing data operations and global implementation strategy. He has led the advancement of key business and product development strategies throughout his career. Mr. Wolf co-founded IS Innovative Software GmbH in 1989 and served first as its managing director. He was later named spokesman of the executive board of its successor IS.Teledata AG. This company ultimately became part of Interactive Data Corporation where Mr. Wolf held the role of CTO.