Regulatory: Global overview of LEI regulations (2024)

The Global Legal Entity Identifier Foundation, overseeing the LEI system, continuously works on enhancing the utility and adoption of LEIs across various sectors. Future initiatives may include integrating LEIs into digital identity solutions. This blog explores upcoming regulations surrounding LEI usage under various frameworks, including EMIR Refit in the European Union, the Digital Operational Resilience Act (“DORA“) in the EU, CHAPS in the UK, and directives from the Reserve Bank of India (“RBI“), and The Australian Securities and Investments Commission (“ASIC“) in Australia.

EMIR refit: Enhancing transparency in the EU

The European Market Infrastructure Regulation (“EMIR”), introduced in 2012 (Regulation (EU) No 648/2012), is a key regulatory framework established by the European Union to increase transparency and reduce the risks associated with the over-the-counter (“OTC”) derivatives market. EMIR aims to mitigate systemic risk, improve market efficiency, and protect against market abuse. The regulation imposes several obligations on entities dealing with derivatives, including clearing, reporting, and risk mitigation requirements. EMIR Refit (Regulation (EU) 2019/834), effective from April 24, 2024, introduces several amendments to streamline the regulation and reduce compliance burdens for smaller entities while maintaining its core objectives.

A crucial update under EMIR Refit is that all entities involved in reportable derivatives transactions must obtain an LEI. This requirement extends to both financial counterparties (FCs) and non-financial counterparties (“NFCs“). The LEI must be included in transaction reports submitted to trade repositories, ensuring that each counterparty is uniquely and unambiguously identified.

Digital Operational Resilience Act 2025: Strengthening digital resilience in the EU

DORA is a significant piece of legislation adopted by the European Union to strengthen the IT security of financial entities and ensure their operational resilience. DORA aims to create a unified framework for managing and mitigating digital risks within the financial sector.

DORA incorporates LEI to fortify the operational resilience of financial entities, particularly concerning ICT third-party risk. Under DORA, both financial entities (“Fes”) and ICT third-party service providers (“TPPs”) are required to maintain a valid LEI. This requirement aims to enhance supervisory capabilities, allowing authorities to trace service dependencies and manage associated risks effectively across jurisdictions, thereby promoting a more resilient digital infrastructure within the financial sector.

*The templates included in the draft ITS aim to identify unambiguously and consistently the ICT third-party service providers, and the FEs, by using the LEI, to enable an efficient aggregation of relevant information" (DORA LEI_JC_2023_85 - Final report on draft ITS on Register of Information, p. 6).

Bank of England CHAPS and RTGS Migration to ISO 20022 in the UK

Clearing House Automated Payment System (“CHAPS“) is a high-value payment system in the United Kingdom, operated by the Bank of England. It facilitates same-day electronic transfers of funds between participating financial institutions and is primarily used for large-value and time-critical payments.

The migration of CHAPS to the ISO 20022 messaging standard includes the integration of LEIs in payment messages, mandated by the Bank of England starting November 2024. This change aims to enrich payment data and enhance global interoperability, making LEIs pivotal in risk management and compliance processes within the UK's financial system.

RBI’s Approach to LEI in India

The RBI has implemented LEI mandates for participants in the OTC derivative markets and large corporate borrowers. This initiative is part of a broader strategy to enhance counterparty risk management and promote financial stability, illustrating the RBI's commitment to leveraging global standards to ensure greater transparency and control within India's financial sector.

ASIC Derivative Transaction Rules Australia 2024

The LEI has been a preferred identifier of ASIC since 2013, when they first introduced the ASIC Derivative Transaction (Reporting) Rules. In these rules, counterparties to OTC derivatives are mandated to use an LEI identifier.

From October 21 2024, all Risk Management Facility clients who partake in OTC derivatives will require a LEI code to trade and comply with ASIC Derivative Transaction Rules (Reporting) 2024.

This change applies to all Australian financial institutions, not just Rabobank, aligning with global initiatives that will help strengthen financial regulation in Australia.

Conclusion

The implementation of LEI regulations across various jurisdictions represents a significant move towards a more transparent and risk-aware global financial environment. Whether under EMIR Refit, DORA, CHAPS, or RBI directives, the LEI is proving to be an essential tool in the global effort to enhance financial transparency and reduce systemic risks.

As these regulations come into force, compliance with LEI mandates will be crucial for institutions to meet regulatory expectations and benefit from enhanced data quality and transparency in financial transactions.

How can we help?

We are committed to delivering the highest standards of compliance and operational excellence to our clients. Our partnership with LEI Worldwide, a leading provider LEI services, is a testament to this commitment.

By leveraging LEI Worldwide’s state-of-the-art, cloud-based, API-powered solutions, we have streamlined the process of obtaining, managing, and distributing LEIs across our global client base. This partnership ensures that our clients benefit from the most efficient and reliable LEI management services available, enhancing their compliance and operational capabilities in various trading markets.

We invite you to learn more about how our collaboration with LEI Worldwide can benefit your business. For detailed information or to discuss your specific needs, please get in touch with our team. We look forward to assisting you in achieving your compliance goals and supporting your growth.

Regulatory: Global overview of LEI regulations (2024)

FAQs

What is the regulatory use of the LEI? ›

The LEI is designed to be a linchpin for financial data — the first global and unique entity identifier enabling risk managers and regulators to identify parties to financial transactions instantly and precisely.

What is the LEI in regulatory reporting? ›

The LEI is designed to enable the identification and linking of parties to financial transactions in order to manage counterparty risk. Its goal is to help improve the measuring and monitoring of systemic risk and support more cost- effective compliance with regulatory reporting requirements.

How do I find a LEI code? ›

It can be obtained from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), the body tasked to support the implementation and use of LEI. In India, LEI can be obtained from Legal Entity Identifier India Ltd.

Is the LEI code mandatory? ›

The Reserve Bank of India has mandated the LEI Number for all payment transactions of value ₹50 crore and above undertaken by entities (non-individuals) for Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT).

Is LEI mandatory in the USA? ›

LEI Codes are primarily required by any legal entity who is involved with financial transactions or operating within todays financial system, especially within the US, UK or EU. There are a number of mandates currently in existence which state "no LEI, no trade".

What are the regulatory authority requirements? ›

Regulatory requirements are legally binding rules established by government authorities or delegated bodies to control an industry, process, or sector. Organizations must adhere to these requirements to avoid penalties and ensure responsible conduct.

What is the purpose of the LEI? ›

The purpose of the LEI is, therefore, simple: it helps you to recognize legal entities on a globally accessible database. This results in more security around international transactions, shortcuts to Know Your Customer (KYC) processes, and boosting transparency throughout the global financial system.

Why is an LEI required? ›

The LEI ensures that each of these institutions can be precisely identified, eliminating ambiguities and preventing potential fraudulent activities. For instance, a hedge fund involved in trading on the London Stock Exchange or dealing with other securities would be required to provide its LEI during each transaction.

What are the benefits of LEI? ›

The LEI can simplify and streamline operations by helping financial companies be more efficient at the following:
  • Data collection.
  • Internal reporting.
  • Risk management.
  • Data maintenance.
Jul 17, 2024

How do you check if an entity has an LEI? ›

Easily find any LEI

The GLEIF search tool is the official search tool of the Legal Entity Identifier. ​Use this to find the most accurate, up to date Legal Entity Identifier data. Over 2 million LEIs already registered!

What is LEI number for US companies? ›

A Legal Entity Identifier (LEI) is a 20 digit code that is unique to a legal entity and provides basic information about the entity such as name, address and entity type e.g Limited Company, LLC, Corporation.

What is an example of a LEI number? ›

How is an LEI code structured? The LEI code is based on the ISO 17442 standard and each LEI is assigned only to a single Legal Entity, even across different geographical jurisdictions. Each LEI is a unique 20-character alphanumeric string – for example 529900T8BM49AURSDO55.

Do all funds need an LEI? ›

In summary, whether you are operating a self-managed fund, or it is being managed by a fund manager the fund and counterparty would need an LEI regardless.

How long is an LEI valid for? ›

The validity period of an LEI is 1 year from the issuance date or from the last renewal date going forward. If the LEI is not renewed within the 1 year time period, the registration status will default to Lapsed.

WHO issues LEI numbers? ›

LEIs are issued by "Local Operating Units" (LOUs) of the Global LEI System.

What is regulatory policy used for? ›

Regulatory policy is formulated by governments to impose controls and restrictions on certain specific activities or behavior. Regulation is not only about rules of governing but also a concept in governance.

What is the purpose of the regulatory region? ›

although classically defined in terms of the presence of mutations that affect regulation of gene expression, this is now considered to be the region of a gene where RNA Polymerase and other accessory transcription modulator Proteins bind and interact to control RNA synthesis.

What is the purpose of a regulatory authority inspection? ›

Regulatory inspection means an inspection that is requested to satisfy the requirements of laws that are other than the construction code and that relate to health, safety, or public welfare.

What is the use of Code of Federal Regulations? ›

The Code of Federal Regulations (CFR) is the codification of the general and permanent rules published in the Federal Register by the executive departments and agencies of the Federal Government. It is divided into 50 titles that represent broad areas subject to Federal regulation.

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