GLEIF Published the Quarterly Global LEI System Business Report Covering the Third 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 November 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 third 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 November 2018, analyses developments observed in the third quarter of 2018. It shows:
State of play of LEI issuance and LEI growth potential
At the end of the third quarter of 2018, the total LEI population exceeded 1.2 million. Approximately 56,800 LEIs were issued in the third quarter of 2018 compared to approximately 71,300 in the second quarter. This represents a quarterly growth rate of 4.8% in the third quarter (second quarter: 6.3%).
A peak in LEI issuance was observed towards the end of 2017 when market participants readied to comply with the LEI requirements established under the European Union’s revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), which took effect on 3 January 2018. Since then, average monthly issuance has stabilized at about 20,000 LEIs in 2018. This represents approximately double the number of newly issued LEIs per month compared to pre-MiFID II / MiFIR levels.
In the third consecutive quarter, India features the highest LEI growth rate at a country level (52.3%) followed by Mexico (36.5%) and Australia (22%). The increase in the LEI population in these countries is attributed primarily to regulatory action 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 country. In the third quarter of 2018, Italy, Spain, the Netherlands, the U.S. and Finland remained among the five least competitive markets in descending order. Romania, Lithuania, Portugal, Bulgaria and Malta were among the five most competitive markets in descending order.
LEI renewal rates
In the third quarter of 2018, the overall renewal rate of 69.1% 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 third quarter of 2018, 81.8% of all LEIs were in good standing. The renewal rate in both the EU (70%) and non-EU countries (52.3%) remained stable.
In the reporting period, these five countries demonstrated the highest renewal rates: Japan (90.4%), Finland (89.5%), India (87.6%), Liechtenstein (87%) and Norway (82.7%).
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 32% 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%, which impacted the overall result for this metric as indicated. This issue should be solved by the end of 2018.
Pending resolution of the matter by this LEI issuer, 76.6% of Level 1 reference data provided with the entire LEI data pool were identified as fully corroborated in the third quarter of 2018.
Statistics on the reporting of parent information by legal entities
In the second quarter of 2018, available statistics identified that approximately 1.1 million LEI registrants representing 93% of the total LEI population had reported information on direct and ultimate parents. However, Business Entity Data B.V. then informed that it had erroneously over-reported 100,000 LEIs that would have provided parent information in that quarter.
Based on adjusted information made available by Business Entity Data B.V., by the end of the third quarter of 2018, 1,081,323 LEI registrants representing 86% of the total LEI population reported information on direct and ultimate parents.
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 third quarter of 2018, Business Entity Data B.V. reported that 30.2% 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 10% 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 drops 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.