GLEIF Published the Quarterly Global LEI System Business Report Covering the Fourth Quarter of 2018
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: 7 minutes
In February 2019, the Global Legal Entity Identifier Foundation (GLEIF) published the latest 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. Since July 2017, we also deliver statistics on direct and ultimate parent information provided by legal entities.
To download the ‘Global LEI System Business Report’ which covers the fourth quarter of 2018, refer to the ‘related links’ below.
This blog post summarizes the main findings of the latest report. Sources cited are included in the ‘related links’ below.
Main findings of the latest Global LEI System Business Report
The Global LEI System Business Report, which was published in February 2019, analyses developments observed in the fourth quarter of 2018. It shows:
LEI issuance and LEI growth potential: State of play
At the end of the fourth quarter of 2018, the total LEI population exceeded 1.3 million. Approximately 55,000 LEIs were issued in the fourth quarter of 2018 compared to approximately 57,000 in the third quarter. This represents a quarterly growth rate of 4.4% in the fourth quarter (third quarter: 4.8%).
In the fourth quarter, India featured the highest LEI growth rate at a jurisdiction level (30.3%) followed by Estonia (9.7%) and United Arab Emirates (9.6%). India has spearheaded 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.
Competition in the Global LEI System
The report identifies the least and most competitive markets of those with more than 1,000 LEIs, based on the number of LEI issuers providing services in the jurisdiction. In the fourth quarter of 2018, Italy, Netherlands, Spain, Finland and Czech Republic were the five least competitive markets in descending order. Lithuania, Romania, Portugal, Bulgaria and Malta were the five most competitive markets in descending order.
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 per year. The Global LEI System is unique in providing absolute transparency on the timeframe when data has last been verified.
In the fourth quarter of 2018, the overall renewal rate of 70.1% remained essentially unchanged compared to the previous quarter (69.1%). (This includes jurisdictions with at least 1,000 LEIs in total at the previous quarter-end date.) At the end of the fourth quarter of 2018, 76% of all LEIs were in good standing (third quarter: 81.8%).
It is worth noting that more than 386,000 LEIs were issued in the fourth quarter of 2017, due to the impact of the revised EU Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), which took effect on 3 January 2018. Over 72% of these, which were due for renewal in the fourth quarter of 2018, were renewed on time.
The renewal rate in the EU remained stable (70%). It improved significantly in non-EU jurisdictions to 57.6% (third quarter: 52.3%). 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. Brazil (58.6%), the United States (54.5%), the United Kingdom (47.6%), the Russian Federation (47.4%) and Canada (44.1%) were the top five jurisdictions demonstrating the highest non-renewal rates in descending order.
Level 1 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 Level 1 data is considered fully corroborated if, based on the validation procedures in use by the LEI issuer, there is sufficient information contained in authoritative public sources to corroborate 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 second quarter of 2018, the percentage of fully corroborated Level 1 reference data within the entire LEI population decreased from 84.6% to 76.1%. This was triggered by the fact that the largest LEI issuer, Business Entity Data B.V., had suddenly adjusted the status of a significant number of historic LEIs under its management from ‘fully corroborated’ to ‘entity-supplied only’. Business Entity Data B.V. currently manages about 31% of the entire LEI population. Specifically, in the second quarter of 2018, the percentage of fully corroborated Level 1 reference data for LEIs managed by Business Entity Data B.V. dropped sharply from 84.5% to 59.1%. Business Entity Data B.V. is in the process of remediating this issue gradually. As of the fourth quarter, Business Entity Data B.V. reported 64.8% of Level 1 reference data for LEIs under its management to be fully corroborated.
In the fourth quarter, the percentage of fully corroborated Level 1 reference data within the entire LEI population increased again 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 registrants representing 91.2% of the total LEI population had reported information on direct and ultimate parents. 99.9 % of LEI registrants who obtained a newly issued LEI or renewed an existing LEI in this quarter reported parent information.
The overall percentage of legal entities that cited legal obstacles preventing them from providing or publishing parent information (‘opt-out’) increased substantially from 4% to 19% in the second quarter. This was due to a change in reporting by Business Entity Data B.V.
In the fourth quarter of 2018, Business Entity Data B.V. reported that 28.7% of LEIs under its management would have opted out from providing parent information. As a result of reporting by this one LEI issuer, statistics for the entire LEI population indicate that 9.6% of legal entities would have cited legal obstacles preventing them from providing or publishing parent information.
It should be noted however, that the opt-out rate regarding the reporting of parent information for the LEI population excluding the Business Entity Data B.V. portfolio fell to only 2.5%.
The quarterly reports refer to concepts and definitions unique to the Global LEI System. To facilitate an easy understanding of the reports, we have summarized relevant concepts in the document ‘Background Information on Global LEI System Business Report’.
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.