Last week the Federal Reserve put out a press release announcing a proposal that would seem to mandate the use of LEIs on certain regulatory reporting forms:
The Federal Reserve Board on Monday announced a proposal that would require banking organizations to include their existing Legal Entity Identifiers (LEIs) on certain regulatory reporting forms. The LEI is a unique reference code to enable easier identification of a firm’s legal entities.
During the financial crisis, regulators and the public were often unable to fully assess the extent of a firm’s exposures across all of its legal entities. The LEI is a 20-character alphanumeric code assigned to a legal entity of a financial or non-financial firm, allowing more effective measurement and monitoring of the exposures of a firm’s legal entities, especially in times of stress.
The Federal Reserve’s proposal builds on the framework introduced by the Financial Stability Board–an international body of financial regulators that monitors and makes recommendations about the global financial system–to implement a global identifier system that would uniquely identify parties to financial transactions. LEIs are assigned by Local Operating Units of the Global LEI System, which are responsible for registering legal entities and assigning LEIs to institutions in local jurisdictions. The Global LEI System was initiated by the Financial Stability Board.
The proposal would require banking organizations to include LEIs for its relevant units on certain reporting forms as of June 30, 2015. Comments on the proposal are requested within 60 days of publication in the Federal Register.
However, if you open the document, the disappointing surprise on page 7 is this:
Current Actions: The Federal Reserve proposes to collect the Legal Entity Identifier (LEI) for all banking and nonbanking legal entities reportable on the Banking, Non-Banking, SLHC, and 4K schedules (not the Branch schedules) of the FR Y-10 and on the Organization Chart section of the FR Y-6 and FR Y-7. The LEI is a 20-character alphanumeric code that is universal and uniquely corresponds to a single legal entity.1 The Federal Reserve is only proposing requiring the reporting of an LEI if one has already been issued for the reportable entity at the time of collection. At this time, the Federal Reserve is not requiring an LEI to be obtained for the sole purpose of reporting the LEI on the FR Y-6, FR Y-7, and FR Y-10.
If the LEI is going to work, the Fed and other regulators will need to “require.”