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GLEIF Published the Quarterly Global LEI System Business Report Covering the Second 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: 5 minutes
In August 2018, 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 second 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 August 2018, analyses developments observed in the second quarter of 2018. It shows:
State of play of LEI issuance and LEI growth potential
At the end of the second quarter of 2018, the total LEI population neared 1.2 million. Approximately 71,300 LEIs were issued in the second quarter of 2018 compared to approximately 167,000 in the first quarter. This represents a growth rate of 6.3 percent in the second quarter (first quarter: 17.8 percent).
LEI issuance in the second quarter of 2018 confirms that the market is well prepared to comply with the LEI requirements established under the European Union revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), which took effect on 3 January 2018. According to MiFIR, investment firms should obtain LEIs from their clients before providing services which would trigger related reporting obligations.
Reflecting this development, the European Securities and Markets Authority (ESMA) confirmed on 20 June 2018 that transitional arrangements relevant to the LEI requirements under MiFID II / MiFIR introduced in December 2017 “will not be further extended”. The six-month temporary period “will last until the 2nd July 2018, including.” (On 20 December 2017, ESMA had stated that it allowed for a “period of six months that investment firms may provide a service triggering the obligation to submit a transaction report to the client, from which it did not previously obtain an LEI code, under the condition that before providing such service the investment firm obtains the necessary documentation from this client to apply for an LEI code on his behalf.”) ESMA and national competent authorities “have concluded that there is no need to extend the initial six month period granted to support the smooth introduction of the LEI requirements under MiFIR.”
India features the highest LEI growth rate at country level in both the first and the second quarter of 2018 (100.5 percent in Q2 2018). This trend could be attributed to the Reserve Bank of India’s adoption of the LEI for large corporate borrowers.
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 country. In the second quarter of 2018, Italy, Spain, the Netherlands and the U.S. remained among the five least competitive markets. Bulgaria, Portugal, Malta, and South Africa were among the five most competitive markets.
LEI renewal rates
In the second quarter of 2018, the overall renewal rate of 66.6 percent remained essentially unchanged compared to the previous two quarters. (This includes countries with at least 1,000 LEIs in total at the previous quarter-end date.) At the end of the second quarter of 2018, 84 percent of all LEIs were in good standing (no change compared to the previous quarter). In the reporting period, these five countries demonstrated the highest renewal rates: Japan (90.1 percent), Finland (85.8 percent), Austria (79.9 percent), Switzerland (76.5 percent) and Norway (76.0 percent).
Transfer of LEIs
Following the accreditation of GS1 AISBL by GLEIF as an LEI issuer, GS1 Germany GmbH transferred all LEIs under its management to GS1 AISBL. Going forward, GS1 Germany GmbH will operate as a Registration Agent. (A Registration Agent helps legal entities to access the network of LEI issuing organizations responsible for performing LEI issuance and related services.)
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 responsible for managing an LEI record, 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 decreased to 76.1 percent (first quarter: 84.6 percent). This change reflects the fact that the largest LEI issuer, Business Entity Data B.V, adjusted the status of a significant number of historic LEIs under its management from ‘fully corroborated’ to ‘entity-supplied only’. GLEIF is investigating the matter.
Statistics on the reporting of parent information by legal entities
By the end of the second quarter of 2018, about 1.1 million LEI registrants representing 93 percent of the total LEI population reported information on direct and ultimate parents (previous quarter: 75 percent). The percentage of legal entities that cited legal obstacles preventing them from providing or publishing parent information increased substantially from 4 percent to 19 percent. This is due to a change in reporting by one LEI issuer, Business Entity Data B.V. This change in reporting is erroneous and is expected to be remediated during the third quarter of 2018.
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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.