The report provides an overview of progress achieved in 2016 and highlights future strategic priorities
Author: Gerard Hartsink
Estimated Reading Time: 8 minutes
In May 2017, the Global Legal Entity Identifier Foundation (GLEIF) published its third annual report (see ‘related links’ below), which highlights: the status of GLEIF operations; the statements of financial condition; and the independent auditor’s report for the period from 1 January to 31 December 2016.
In 2016, a gross revenue of US$ 6.5 million was generated, with a net surplus of US$ 14.7 thousand, which will be added to the retained surplus of GLEIF. This financial result is in line with the objectives of GLEIF as a not-for-profit organization. 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. GLEIF currently receives US$ 19 per issued or renewed LEI from the LEI issuers. The LEI fee was maintained at US$ 19 for the approved budget of 2017.
LEI issuer participation in the Global LEI System, as well as LEI adoption by users, increased further. The growth rate in terms of LEI adoption was 17% and there were 479,000 registered LEIs globally at the end of 2016. Throughout the past year, a trend of diversification of LEI issuance worldwide could be observed.
Dialog with partners in the Global LEI System and stakeholders
Engaging in an intensive dialog with the Global LEI System partners was decisive in bringing forward priority projects for GLEIF. The GLEIF Board of Directors held regular meetings with the Executive Committee of the LEI Regulatory Oversight Committee (LEI ROC), representing public authorities from around the globe. Feedback from the LEI ROC and the LEI issuers contributed to the further optimization of GLEIF services.
In addition, GLEIF increased engagement with market participants from a broad range of industry sectors. Synergization efforts with partners have included the planned LEI-to-Business Identifier Code (BIC) mapping project in collaboration with SWIFT, as well as the planned LEI-to-International Securities Identification Number (ISIN) mapping project together with the Association of National Numbering Agencies (ANNA). These were both initiated in 2016 as first examples of ‘who owns what’ GLEIF services.
Further expansion of GLEIF services
The latest annual report also provides an overview of GLEIF activities and progress achieved in 2016, which proved to be another dynamic year: GLEIF operational performance remained strong and the Foundation further expanded its services to benefit users of the LEI data. As a result, the LEI remains the industry standard best suited to providing open and reliable data for unique legal entity identification management.
Specifically, in 2016 GLEIF focused on driving forward the following services:
Accreditation of LEI issuers: In its role as accreditation agency, GLEIF evaluates the suitability of organizations seeking to operate as issuers of LEIs. LEI issuers supply registration, renewal and other services, and act as the primary interface for legal entities wishing to obtain an LEI. Accreditation is a rigorous evaluation process carried out by GLEIF. In 2016, three organizations were accredited by GLEIF.
Data quality management: The data quality management program, introduced by GLEIF in 2016, optimizes the integrity of the LEI data pool. Based on a set of clearly defined criteria, the program allows the quality of the LEI data pool to be monitored, assessed and further optimized. The monthly reports issued by GLEIF reflect the very high level of data quality already achieved in the Global LEI System.
Collecting data on direct and ultimate parents: 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’. Going forward, the LEI data pool will be gradually enhanced to include the ‘Level 2’ data that answers the question of ‘who owns whom’. In March 2016, the LEI ROC published the policy document entitled ‘Collecting data on direct and ultimate parents of legal entities in the Global LEI System – Phase 1’. GLEIF is responsible for carrying out the project management and developing the organizational and technical standards required by the LEI issuing organizations to collect the parent information. In December 2016, GLEIF and five ‘first mover’ LEI issuing organizations successfully concluded a prototype exercise to test the end-to-end process of collecting and validating data on the direct and ultimate parents of legal entities that have an LEI. (In May 2017, the process of enhancing the LEI data pool, by including Level 2 data to answer the question of who owns whom, began.)
Strategic projects and promotion: Positioning the LEI in identification management
In 2016, the GLEIF Board of Directors approved the GLEIF Strategy 2020 for the private sector. It includes full coverage of the capital and money markets, strategic projects in adjacent markets, the research project Global LEI System 2.0 (which includes guidance on dealing with challenges related to ‘know-your-customer’ or ‘KYC’) and distributed ledger technology (DLT).
The positioning of the LEI in identification management is crucial for global LEI adoption. The Board of Directors believes in the capabilities of GLEIF to drive innovation in the private sector, in a way that is suitable for the demands of the digital age. Those demands are increasingly becoming a reality within the public and private sector for a growing number of digital government-to-government (G2G), business-to-government (B2G) and business-to-business (B2B) processes of the digital ecosystem. The Board of Directors and the LEI ROC concluded that all Members of the Board of Directors and all the LEI ROC Members should act as ambassadors for the promotion of the value of the LEI in their jurisdiction and/or industry.
Monitoring the regulatory landscape
The regulatory community is an important driver for LEI adoption. By requiring the LEI for entity identification in rulemaking, regulators strengthen the Global LEI System. The forthcoming European Union (EU) revised Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), which will come into effect on 3 January 2018, will require an LEI for all participants of a trade conducted in the EU, e.g. investment firms, their clients and issuers of traded instruments, to fulfil the reporting obligations. Public authorities across the G20 jurisdictions and beyond may be able to use the free of charge LEI high-quality financial data for statistical research and as an early-warning measure to better identify systemic risks in global financial markets. Joint concerted actions will be needed to spread the use of the LEI not only in the public sector, but also in the private sector to ensure that the LEI indeed becomes a broad public good.
In 2017, GLEIF plans to complete the certification of more than 20 LEI issuer candidates and to implement the ‘Who owns Whom’ Project in close cooperation with LEI issuers. In addition, GLEIF will implement its Strategy 2020 for the private sector as approved by the Board of Directors. The Board supports a fruitful dialog with the partners and stakeholders of the LEI system for all future endeavors.
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Gerard Hartsink was appointed by the Financial Stability Board as Chairman of the GLEIF Board. The profiles of Gerard Hartsink and all other members of the GLEIF Board of Directors are available on the GLEIF website.