GLEIF Published the Quarterly Global LEI System Business Report Covering the Second Quarter of 2020
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
In July 2020, 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 2020, 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 impact of the COVID-19 pandemic on GLEIF and its Legal Entity Identifier (LEI) issuing partners is limited to date. Particularly in Q2 2020, new LEI issuance returned to pre-pandemic trends, and the overall renewal rate started to recover. These trends are explained further in the following report. Overall, the business activity of the Global LEI System in the second quarter of 2020 outperformed GLEIF’s forecast, as shown in Fig. 5. Additionally, more legal entities merged or retired during second quarter 2020. Over 7,000 legal entities became inactive, compared to 4,000 in the last quarter, a possible effect of the global pandemic. The Global LEI System was built to provide greater transparency for governments and industries around the world, particularly during times of crisis, and GLEIF is committed to offering our full support during this time.
LEI issuance and LEI growth potential: State of play
At the end of the second quarter of 2020, the total LEI population was over 1.6 million. Over 61,000 LEIs were issued during this quarter, compared to approximately 76,000 in the previous quarter. This represents a quarterly growth rate of 4% (previous quarter: 5.2%). The significant growth of newly issued LEIs in the first quarter of 2020 was primarily triggered by the Securities Financing Transaction Regulation (SFTR) reporting in the EU. Quarterly LEI growth returned to its pre-pandemic trend in Q2 2020. While there was a drop in new LEI issuance in the final weeks of the first quarter, the overall impact of the COVID-19 on new issuance was moderate.
In the second quarter, China had the highest quarterly LEI growth rate at a jurisdiction level (24.5%), followed by Turkey (8.9%), Estonia (8.9%), Latvia (7.1%) and Norway (6.9%). It is worth noting that China has led the growth in four consecutive quarters, primarily driven by regulatory implementations.
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 second quarter of 2020, China, the Netherlands, Italy, Spain and the Czech Republic were the five least competitive markets in descending order. The five most competitive, also in descending order, were Lithuania, Romania, Portugal, Latvia and Malta. There is no change in either ranking from Q1 2020.
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 was last verified.
In the second quarter of 2020, the overall renewal rate of 64.2% was higher than the previous quarter (62.5%). At the end of the quarter, 68% of all LEIs were in good standing (last quarter: 68%).
The renewal rate in the EU increased slightly to 66.2% (previous quarter 65.9%). In non-EU jurisdictions, it was slightly lower at 55.9% (previous quarter: 56.1%). In the reporting period, Germany (80.7%) entered the ranking of the five jurisdictions which demonstrated the highest renewal rates. Other jurisdictions in the top five are Finland (91.4%), Liechtenstein (90.8%), Japan (89.1%) and Switzerland (79.8%).
Renewal rates in China grew (56.8% compared to 45.8% in Q1 2020) and it is no longer one of the five jurisdictions with the highest non- renewal rates. This ranking includes Brazil (59.1%), the United States (56%), the United Kingdom (55.6%), the Russian Federation (54.5%) and Thailand (52.2%).
While the COVID-19 pandemic appeared to impact renewal activities in the first quarter of 2020, the overall renewal rate improved in the second quarter. Although overall, the renewal rate is still below the pre-pandemic level, GLEIF believes that it will recover over the course of the year, and there will be no significant long-term effect on renewal activities.
LEI transfers among LEI Issuers
In the second quarter of 2020, GLEIF welcomed a new accredited LEI issuer, Xerius. The transfer statistics demonstrate that it received a bulk transfer of over 3,000 LEIs during second quarter.
Level 1 reference data corroboration
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 defines ‘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 provided by the legal entity for the record. If this is not the case, or the legal entity is not required to file with a local register (e.g. fund or trust), the business card information available with an LEI record is classified as ‘entity-supplied only’.
In the second quarter of 2020, the percentage of fully corroborated Level 1 reference data within the entire LEI population increased slightly to 81.4% from 81.1% in the previous quarter.
Statistics on the reporting of parent information by legal entities
In the second quarter of 2020, approximately 1.46 million LEI registrants (previous quarter: 1.41 million) representing 91% of the total LEI population had reported information on direct and ultimate parents. 99.9% of those LEI registrants who obtained a newly issued LEI, or renewed an existing LEI, in this quarter reported parent information.
In the reporting period, the percentage of legal entities reporting a direct parent that has an LEI was 6%. 5% of legal entities reported a direct parent that does not have an LEI. 81% of legal entities reported no direct parent according to the definition used. 8% of legal entities cited legal obstacles preventing them from providing or publishing direct parent information. The share of all four categories have remained stable over the past four quarters. The pattern is almost identical for ultimate parent reporting.
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.